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Exam 15: Investments and Fair Value Accounting

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Question 81

Multiple Choice

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Temporary investments such as in trading securities are

A) recorded at cost but reported at fair market value
B) recorded at cost and reported at cost
C) recorded at cost but reported at lower of cost or fair market value
D) recorded at fair market value and reported at fair market value

E) All of the above
F) None of the above

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Question 82

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When a bond is purchased for an investment, the purchase price, minus the brokerage commission, plus any accrued interest is recorded.

A) True
B) False

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Question 83

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Prepare the journal entries for the following transactions for Batson Co.Sept. 1Batson Co. purchased 1,200 shares of the total of 100,000 outstanding shares of Michael Corp. stock for $20.75 per share plus a $70 commission.Dec. 31Michael Corp.'s total earnings for the period are $84,000.31Michael Corp.'s paid a total of $40,000 in cash dividends to shareholders of record.

On May 1, Cedar Inc. purchases $100,000 of 10-year, Madison Corporation 6% bonds dated March 1 at 100 plus accrued interest. Journalize the entry to record the semiannual receipt of interest on September 1.

Match each of the definitions that follow with the appropriate investment term (a-j) . -The company whose stock is purchased by another entity

Parker Company owns 83% of the outstanding stock of Tadeo Company. Parker Company is referred to as the

Gerardo Company had a net income of $75,000 and other comprehensive income of $12,500 for the year. On January 1, the retained earnings balance was $525,000 and the accumulated other comprehensive income balance was $55,000. Determine the (a) comprehensive income for the year, (b) retained earnings balance on December 31, and (c) the accumulated other comprehensive income on December 31.

Jacks Corporation purchases $200,000 bonds plus accrued interest for two months of $2,000 from Kennedy Company on March 1. The bonds have an annual interest rate of 6% payable on June 30 and December 31. The entry to record the purchase of the bonds would include a

Jarvis Corporation makes an investment in 100 shares of Saxton Company's common stock. The stock is purchased for $45 a share plus brokerage fees of $280. The entry for the purchase is​

Albright Company purchased as a long-term investment $500,000 of Benton Corporation 10-year, 9% bonds. Present entries to record the following selected transactions:Mar. 1Purchased bonds at their face amount for $500,000.May 1Sold half the bonds at 98 plus accrued interest of $3,750. The broker deducted $200 for brokerage fees and taxes, remitting the balance.

Discuss why companies invest cash in short-term temporary investments vs. long-term investments.

Armando Company owns 17,000 of the 70,000 shares of common stock outstanding of Tito Company and exercises a significant influence over its operating and financial policies. The investment should be accounted for by the

Match each of the definitions that follow with the appropriate investment term (a-j) . -Preferred and common stocks that represent ownership in a company and do not have a fixed maturity date

Financial statements include assets listed at

When long-term investments in bonds are sold before their maturity date, the seller deducts any accrued interest since the last interest payment date from the selling price.

The equity method of accounting for investments requires

Companies may report comprehensive income on each of the following statements except

All of the following are true of the effect of fair value accounting on the financial statements except

The dividend yield is measured as

On May 1, Knox Inc. purchases $100,000 of 10-year, 6% Madison Corporation bonds dated March 1 at 100 plus accrued interest. Journalize the entry to record the bond purchase.