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Exam 15: Investments and International Operations

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Question 1

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An investing company that owns more than ________ of another (investee)company's voting stock is presumed to have controlling influence over the investee.

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verified

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Question 2

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Long-term investments in available-for-sale securities are reported at their _______ on the balance sheet.

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fair value

Question 3

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All of the following statements regarding accounting for trading securities under U.S.GAAP are true except:

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

Seamark buys $300,000 of Eider's 8% five-year bonds payable at par value.Interest payments are made semiannually.Seamark plans to hold the bonds for the five year life.When the bonds mature,the journal entry to record the proceeds will be:

Halam Company had the following transactions relating to investments in trading securities during the year.Prepare the required general journal entries for these transactions.

Rosser Company sold supplies in the amount of 25,000 euros to a French company when the exchange rate was $1.21 per euro.At the time of payment,the exchange rate decreased to $0.82.Rosser must record a:

Investments can be classified as:

Equity securities giving an investor significant influence over an investee are always considered short-term investments.

A company should report its portfolio of trading securities at its fair value.

A company had net income of $2,660,000,net sales of $25,000,000,and average total assets of $8,000,000.Its return on total assets equals:

On April 1 of the current year,a company paid $150,000 cash to purchase 7%,10-year bonds with a par value of $150,000; interest is paid semiannually each April 1 and October 1.The company intends to hold these bonds until they mature.Prepare the journal entries to record the bond purchase,the receipt of the first semiannual interest payment on October 1 of the current year,and the accrual of interest for the year-end December 31.

Long-term investments in debt securities not classified as trading or held-to-maturity securities are classified as available-for-sale securities.

When an investor company owns more than 25% of the voting stock of an investee company,it has a controlling influence.

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

On June 18,Johnson Company (a U.S.Company) sold merchandise to the Frater Company of Denmark for 60,000 Euros,with a payment due in 60 days.If the exchange rate was $1.14 per euro on the date of sale and $1.35 per euro on the date of payment,Johnson Company should recognize a foreign exchange gain or loss in the amount of:

The equity method with consolidation is used in accounting for long-term investments in equity securities with controlling influence.

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

Bond sinking funds are examples of short-term investments.

When the cost of a short-term held-to-maturity debt security is different from the maturity value,the difference is amortized over the remaining life of the security.