FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 15: Investments and Fair Value Accounting

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 71

Multiple Choice

Review LaterAdd Note

Review Later

Zach Company owns 45% of the voting stock of Tomas Corporation and uses the equity method in recording this investment. Tomas Corporation reported a $20,000 net loss. Zach Company's entry would include a

A) Credit to cash for $9,000
B) Debit to the investment account for $9,000
C) Credit to the investment account for $9,000
D) Credit to a loss account for $9,000

E) A) and B)
F) B) and C)

Correct Answer

verified

Show Answer

Question 72

True/False

Review LaterAdd Note

Review Later

The amount of interest paid when buying a bond as an investment should be credited to Interest Revenue.

A) True
B) False

Correct Answer

verified

Show Answer

Question 73

Essay

Review LaterAdd Note

Mangrill, Inc. reported net income for the year ending December 31, 2012 of $483,500. Dividends paid during the year totaled $42,900. The company holds available-for-sale securities with an original cost of $162,000 and a fair value of $171,000 at the end of the year. They also hold trading securities with an original cost of $150,000 and a fair value of $147,000. Retained Earnings on January 1, 2012 was $736,400 and Accumulated Other Comprehensive Income on January 1, 2012 was $16,200. Required: Calculate the following balances to be reported in the financial statements dated December 31, 2012. (1) Valuation Allowance for Available-for-Sale securities (2) Comprehensive Income (3) Retained Earnings (4) Accumulated Other Comprehensive Income

Foreign currency translation adjustment is an example of an item that would be included in Other Comprehensive Income.

The income statement for Dodson Corporation reported net income of $22,400 for the year ended December 31, 2012 before considering the following: During the year the company purchased available-for-sale securities. At year end, the fair value of the investment portfolio was $2,100 more than cost. The balance of retained earnings was $83,000 on December 31, 2011. Dobson Corporation paid $9,000 in cash dividends in 2012. Calculate the balance of retained earnings on December 31, 2012.

On January 1, 2012, Valuation Allowance for Available-for-Sale Investments had a zero balance. On December 31, 2012, the cost of the available-for-sale securities was $48,700, and the fair value was $39,200. Prepare the adjusting entry to record the unrealized gain or loss for available-for-sale investments on December 31, 2012.

The investor carrying an investment by the equity method records cash dividends received as an increase in the carrying amount of the investment.

Held-to-maturity securities are reported on the balance sheet at fair market value.

Any gains or losses on the sale of bonds normally would be reported in the Other Income (Loss) section of the income statement.

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:

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

Financial statements in which financial data for two or more companies are combined as a single entity are called

On June 1, $50,000 of treasury bonds were purchased between interest dates. The broker commission was $500. The bonds pay interest at 12%, which is paid semiannually on January 1 and July 1. What is the total cost to be debited to the Investment - Treasury Bonds account?