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Exam 15: Investments and International Operations

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Question 41

True/False

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Net profit margin reflects the percent of net income in each dollar of net sales.

A) True
B) False

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Question 42

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Available-for-sale securities are:

A) Recorded at cost and remain at cost over the life of the investment.
B) Reported at historical cost, adjusted for the amortized amount of any difference between cost and maturity value.
C) Reported at fair value on the balance sheet.
D) Intended to be held to maturity.
E) Always classified with Long-Term Liabilities.

F) B) and D)
G) C) and D)

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Question 43

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Mian sells American gourmet foods to merchandisers in Singapore. Prepare the journal entries for Mian to record the following transactions. Include any year-end adjustments.

A company had net income of $76,000 in Year 1 and $88,000 in Year 2. Its net sales were $640,000 in Year 1 and $611,000 in Year 2. Its average total assets in Year 1 were $670,000 and $712,000 in Year 2. Calculate the profit margin, total asset turnover and return on total assets for both years. Comment on the results.

Unrealized gains and losses on trading securities are reported on the income statement.

On May 1, Franke Co. purchases 2,000 shares of Computech for $25,000. This investment is considered to be an available-for-sale securities. On July 31 (Franke's year-end), these shares had a market value of $28,000. Franke should record a credit to Gain on Investment for $3,000.

____________________________ are equity securities that a company intends to actively manage and trade for a profit.

To prepare consolidated financial statements when a U. S. parent company has an international subsidiary, the international subsidiary's financial statements must be translated into U.S. dollars.

Long-term investments include:

Explain how transactions (both sales and purchases) in a foreign currency are recorded and reported.

NSC Corporation has invested in 10% of the outstanding shares of VC Corporation. NSC intends to actively manage this investment for profit. This investment is classified as:

Accounting for long-term investments in held-to-maturity securities requires companies to record interest revenue as it is earned.

Long-term investments are reported in the:

All companies desire a low return on total assets.

If the exchange rate for Canadian and U.S. dollars is 0.82777 to 1, this implies that 3 Canadian dollars will buy ____ worth of U.S. dollars.

A company reported net sales of $900,000, net income of $100,000 and average total assets of $425,000. Calculate its return on total assets.

All of the following statements regarding other comprehensive income are EXCEPT:

A controlling investor is called the parent, and the investee company is called the subsidiary.

A company should report its portfolio of held-for-trading securities at its fair value.

Explain how held-to-maturity debt securities are accounted for at acquisition and how to record the interest.