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Exam 15: Investments and International Operations

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Question 61

Multiple Choice

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Everrine Corporation owns 3,000 shares of JRW Corporation. JRW Corporation has 25,000 shares of stock outstanding. JRW paid $4 per share in cash dividends to its stockholders. The entry to record the receipt of these dividends is:

A) Debit Cash, $12,000; credit Long-Term Investments, $12,000.
B) Debt Long-Term Investment, $12,000; credit Cash, $12,000.
C) Debit Cash, $12,000; credit Dividend Revenue, $12,000.
D) Debit Unrealized Gain-Equity, $12,000; credit Cash, $12,000.
E) Debit Cash, $12,000; credit Unrealized Gain-Equity, $12,000.

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Question 62

Multiple Choice

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A company paid $37,800 plus a broker's fee of $525 to acquire 8% bonds with a $40,000 maturity value. The company intends to hold the bonds to maturity. The cash proceeds the company will receive when the bonds mature equal:

A) $37,800.
B) $38,325.
C) $40,000.
D) $40,525.
E) $43,200.

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Question 63

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Define the return on total assets and explain how it is used to measure a company's financial performance.

Short-term investments in held-to-maturity debt securities are accounted for using the:

Long-term investments include investments in land or other assets not used in a company's operations.

If a long-term investment in an equity security gives the investor significant influence over the investee, the investment is classified as available-for-sale.

Explain how held-to-maturity debt securities are accounted for at and after acquisition and how they are reported in the financial statements.

If a U.S. company makes a credit sale to a foreign company, the sales price must be translated into dollars as of the date of ____________

Investments in trading securities are always classified as ______________ and are reported as _______________ on the balance sheet.

Golden Age Co. exports Native American artwork to Japan. Prepare journal entries for the following transactions.

The cost method of accounting is used for long-term investments in equity securities with significant influence.

Consolidated statements are prepared as if a company is organized as one entity, with the amounts allocated for subsidiaries reported in the investment accounts.

Consolidated financial statements:

Equity securities reflect a creditor relationship such as investments in notes, bonds, and certificates of deposit.

Long-term investments are reported in the:

All of the following statements regarding accounting for noninfluential securities under U.S. GAAP and IFRS are True except:

A company reported net income of $275,000, net sales of $2,500,000, and average total assets of $2,100,000 for the current year. Calculate this company's profit margin, total asset turnover, and return on total assets.

On May 1 of the current year, a company paid $200,000 to purchase 8%, 10-year bonds with a par value of $200,000; interest is paid semiannually on March 1 and September 1. The company intends to hold the bonds until they mature. Prepare the journal entries to record 1) the bond purchase, (2) the receipt of the first semiannual interest payment on September 1 of the current year, (3) the accrual of interest for year-end December 31, and (4) the receipt of the second semiannual payment on May 1.

An investor purchased $50,000 of bonds and holds them to maturity. The investor's journal entry to record the proceeds should include a debit to Cash for $50,000 and a credit to Long-Term Investments for $50,000.

Kramer Corporation had the following long-term investment transactions. Prepare the journal entries Kramer Corporation should record for these transactions and events.