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Exam 15: Investments and International Operations

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Question 71

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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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Question 72

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Trading securities are securities that are purchased by trading securities with other companies rather than by paying cash.

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Question 73

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____________________________ are debt and equity securities that a company intends to actively manage and trade for a profit.

Foreign exchange rates fluctuate due to changes in all but which of the following?

If a company owns more than 20% of the stock of another company and the stock is being held as a long-term investment, which method would the investor normally use to account for this investment?

Six months ago, a company purchased an investment in stock for $70,000. The investment is classified as available-for-sale securities. The current fair value of the stock is $68,500. The year-end adjusting entry for this investment should include a:

On January 4, Year 1, Barber Company purchased 5,000 shares of Convell Company for $59,500 plus a broker's fee of $1,000. Convell Company has a total of 25,000 shares of common stock outstanding and it is presumed the Barber Company will have a significant influence over Convell. During each of the next two years, Convell declared and paid cash dividends of $0.85 per share, and its net income was $72,000 and $67,000 for Year 1 and Year 2, respectively. What is the book value of Barber's investment in Convell at the end of Year 2?

Landmark Corp. buys $300,000 of Schroeter Company's 8% five-year bonds payable at par value on September 1. Interest payments are made semiannually. Landmark plans to hold the bonds for the five year life. The journal entry to record the purchase should include:

A company had net income of $45,000, net sales of $390,000, and average total assets of $450,000 for the current year. Calculate the company's profit margin, total asset turnover, and return on total assets.

Zhang Corp. owns 40% of Magnor Company's common stock. Magnor pays $97,000 in total cash dividends to its shareholders. Zhang's entry to record this transaction should include a:

Arkansana Inc. imports inventory from Costa Rica. Prepare the journal entries for Arkansana to record the following transactions. Include any year-end adjustments.

The currency in which a company presents its financial statements is known as the:

On November 12, Higgins, Inc., a U.S. Company, sold merchandise on credit to Kagome of Japan at a price of 1,500,000 yen. The exchange rate was $0.00837 on the date of sale. On December 31, when Higgins prepared its financial statements, the exchange rate was $0.00843. Kagome paid in full on January 12, when the exchange rate was $0.00861. On January 12, Higgins should prepare the following journal entry:

Investments in equity securities where the investor has a controlling influence are accounted for using the ________________________________.

Comprehensive income includes all except:

On January 4, Barber Company purchased 5,000 shares of Convell Company for $59,500 plus a broker's fee of $1,000. Convell Company has a total of 25,000 shares of common stock outstanding and it is presumed the Barber Company will have a significant influence over Convell. During the next years, Convell declared and paid cash dividends of $0.85 per share, and its net income was $72,000. What is the book value of Barber's investment in Convell at the end of this first year?

Draft Co. purchased 14,000 shares of Hamburg Corporation's 40,000 shares of common stock on January 1. This represented 35% of Hamburg's outstanding shares and gave Draft Co. significant influence over Hamburg's management and operations. On October 11, Hamburg declared and paid cash dividends of $30,000. On December 31, Hamburg reported net income of $125,000 for the year. Prepare the journal entries Draft Co. should record to account for the dividends received and the earnings reported by Hamburg Corporation.

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

On February 15, Jewel Company buys 7,000 shares of Marcelo Corp. common stock at $28.53 per share plus a brokerage fee of $400. The stock is classified as available-for-sale securities. On March 15, Marcelo declares a dividend of $1.15 per share payable to stockholders of record on April 15. Jewel received the dividend on April 15 and ultimately sells half of the Marcelo stock on November 17 of the current year for $29.30 per share less a brokerage fee of $250. The journal entry to record the purchase on February 15 is:

Investments in held-to-maturity debt securities are always current assets.