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Exam 26: Investments

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Question 41

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On May 1 of the current year,a company paid $200,000 cash to purchase 6%,10-year bonds,with a par value of $200,000; interest is paid semiannually each May 1 and November 1.The company intends to hold these bonds until they mature.Prepare the journal entry to record the receipt of the first semiannual interest payment on November 1.

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Question 42

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Comprehensive income refers to all changes in equity during a period except those from owners' investments and dividends.

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B) False

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Question 43

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Long-term investments in held-to-maturity debt securities are accounted for using the ________.

The controlling investor of a long-term investment with controlling interest is called the:

On January 3,Kostansas Corporation purchased 5,000 shares of Morton,Inc.for $40 per share.These shares represent a 40% ownership in Morton,Inc.Prepare the journal entry Kostansas Corporation should record when Morton reports net income of $52,000 for the year on December 31.

Profit margin is net sales divided by operating income.

Long-term investments are usually held as an investment of cash for use in current operations.

Management's intent determines whether an available-for-sale security is classified as long-term or short-term.

If a U.S.Company's credit sale to an international customer allows payment to be made in a foreign currency,the same exchange rate must be used for the date of sale and the cash payment date.

Explain how to account for available-for-sale debt securities at and after acquisition and how they are reported in financial statements.

Long-term investments cannot include:

Trading securities are debt securities a company plans to hold long-term,possibly until maturity.

An investing company that owns ________ of another (investee)company's voting stock (but not more than 50%)is presumed to have a significant influence over the investee.

A company that is a controlling investor in another company is known as the ________.

Investments in trading securities:

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

If a U.S.company's credit sale to an international customer allows payment to be made in a foreign currency,the sale transaction is recorded using the exchange rate on the date of sale.

________ refers to all changes in equity for a period except for those due to investments by and distributions to owners.

Washington Corp.held 1,500 of Vashon Company common stock with a cost of $74,387.The investment is considered a stock investment with insignificant influence.Washington sold the shares on December 13 for $55,275 cash.Prepare Washington's journal entry to record this sale.

Available-for-sale securities are actively managed like trading securities because the company intends to trade them for profit in the short term.