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Exam 29: Investments

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Question 21

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Compare and contrast why companies invest cash in short-term temporary investments vs. long-term investments.

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When companies temporarily have excess c...

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Question 22

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The account Unrealized Gain on Trading Investments should be included on the

A) income statement as other revenue (expense)
B) balance sheet as an adjustment to the asset account
C) balance sheet as an adjustment to stockholders' equity
D) statement of stockholder's equity

E) A) and B)
F) None of the above

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Question 23

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Ramiro Company purchased 40% of the outstanding stock of Marco Company on January 1. Marco reported net income of $95,000 and declared dividends of $35,000 during the year. How much would Ramiro adjust its investment in Marco Company under the equity method?

Yankton Company began the year without an investment portfolio. During the year, it purchased investments classified as trading securities at a cost of $13,000. At the end of the year, the market value of the securities was $11,000. Yankton Company's financial statements for the current year should show

During the first year of operations, Makala Company purchased two trading investments as follows: Assume that as of December 31, the Oceanna Company stock had a market value of $49 per share and Rockledge, Inc. stock had a market value of $20 per share. Makala had 10,000 shares of no-par stock outstanding that was issued for $150,000. For the year ending December 31, Makala had net income of $105,000. No dividends were paid.​ (a)Prepare the current assets section of the balance sheet presentation for the trading securities as of December 31.(b)Explain how the gain or loss would be reported on the income statement.​

On June 1, $40,000 of treasury bonds were purchased between interest dates. The broker commission was $600. The bonds pay interest at 12%, which is paid semiannually on January 1 and July 1. How much interest revenue will be recorded on July 1?

What are the total proceeds from the February 1 sale?

On January 1, the Valuation Allowance for Trading Investments account has a zero balance. On December 31, the cost of trading securities portfolio was $64,200, and the fair value was $67,000.​ Prepare the December 31 adjusting journal entry to record the unrealized gain or loss on trading investments.

The income statement for Dodson Corporation reported net income of $22,400 for the year ended December 31 before considering the following: $\bullet$ During the year the company purchased available-for-sale securities. $\bullet$ At year end, the fair value of the investment portfolio was $2,100 more than cost. $\bullet$ The balance of Retained Earnings was $83,000 on January 1. $\bullet$ Dodson Corporation paid $9,000 in cash dividends during the year.Calculate the balance of Retained Earnings on December 31.

Which of the following statements is not a reason a company may purchase another company's stock?

Which of the following items would not affect the investor's income for the period?

As with other assets, the cost of a bond investment includes all costs related to the purchase.

On January 2, Todd Company acquired 40% of the outstanding stock of McGuire Company for $205,000. For the year ending December 31. McGuire earned income of $48,000 and paid dividends of $14,000.​ Prepare the entries for Todd Company for the purchase of the stock, share of McGuire income, and dividends received from McGuire.

Ruben Company purchased $100,000 of Evans Company bonds at 100. Ruben later sold the bonds at $104,500 plus $500 in accrued interest. The journal entry to record the sale of the bonds would be

On February 12, Addison, Inc. purchased 6,000 shares of Lucas Company at $22 per share plus a $240 brokerage fee. On August 22, Lucas paid a $0.42 dividend per share. On November 10, 4,000 shares of Lucas stock were sold for $28 per share less a $160 brokerage fee. The journal entry for the sale under the fair value method would include a

On May 1, Cedar Inc. purchases $100,000 of 10-year, Madison Corporation 6% bonds dated March 1 at 100 plus accrued interest. What entry would Cedar record when receiving its semiannual interest on September 1?

To record a bond investment made between interest payment dates, Investment in Bonds would be debited and Cash and Interest Revenue would be credited.

On May 1, Knox Inc. purchases $100,000 of 10-year, 6% Madison Corporation bonds dated March 1 at 100 plus accrued interest. What entry would Knox record when purchasing the bonds?

The equity method is usually more appropriate for accounting for investments where the purchaser does not have significant influence over the investee.

Journalize the entries to record the following selected bond investment transactions for Southwest Bank: (a)Purchased $400,000 of Daytona Beach 5% bonds at 100 plus accrued interest of $4,500.(b)Received the first semiannual interest.(c)Sold $250,000 of the bonds at 97, plus accrued interest of $1,800.