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Exam 15: Investments

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Question 71

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Discuss the reasons companies make investments.

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Companies make investments for several r...

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Question 72

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On September 15,Nolan Company purchases 2,000 shares of Francis Company common stock for $30,000,including $500 of commissions and brokerage fees.This is Nolan's first and only purchase of this type of investment.On November 1,Nolan sold 500 shares of the Francis Company stock for $8,200.On December 31,the fair value of Francis Company common stock was $16 per share.The journal entry to record the sale of stock on November 1 is:

A) Debit Cash,$8,200; Credit Stock Investments - Francis Company,$7,375; Credit Unrealized Gain - Income,$825.
B) Debit Cash,$8,200; Credit Stock Investments - Francis Company,$7,500; Credit Unrealized Gain - Income,$700.
C) Debit Cash,$8,200; Credit Stock Investments - Francis Company,$7,375; Credit Gain on Sale of Stock Investments,$825.
D) Debit Cash,$8,200; Credit Stock Investments - Francis Company,$7,500; Credit Gain on Sale of Stock Investments,$700.
E) Debit Cash,$8,200; Credit Stock Investments - Francis Company,$8,200.

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

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Question 73

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Canberry Corporation had net income of $80,000,beginning total assets of $640,000 and ending total assets of $580,000.Its return on total assets is:

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:

Investments in trading securities are accounted for using the equity method with consolidation.

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.

A company reported net income for Year 1 of $98,000 and $106,000 for Year 2.It also reported net sales of $835,000 in Year 1 and $918,000 in Year 2.The company's average total assets in Year 1 were $1,850,000 and $1,720,000 in Year 2.Calculate the company's profit margin,total asset turnover and return on total assets for Year 1 and Year 2.Comment on the results.

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

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

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

Carpark Services began operations in 20X1 and maintains long-term investments in available-for-sale debt securities.The year-end cost and fair values for its portfolio of these investments follow.The year-end adjusting entry to record the unrealized gain/loss at December 31,20X2 is:

Landmark Corp.buys $300,000 of Schroeter Company's 8%,5-year bonds at par value on September 1.Interest payments are made semiannually.All of the following regarding accounting for the securities are true except:

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

What are the accounting basics for debt securities,including recording their acquisition,interest earned,and their disposal?

Hamasaki Company owns 30% of CDW Corp.stock.Hamasaki received $6,500 in cash dividends from its investment in CDW.The entry to record receipt of these dividends includes a debit to Cash for $6,500 and a credit to Equity Method Investments for $6,500.

If a long-term investment in an equity security gives the investor significant influence over the investee,the investment is classified as available-for-sale.

On January 1,2017,Rickson Corporation purchased 7,500 shares of AutoTech as a long-term investment for a total of $235,000.The 7,500 shares represent 30% of the outstanding (25,000)shares of AutoTech.Prepare the journal entries for Rickson to record the following transactions and events: December 31, 2017: $\quad$ AutoTech reported net income of $\$ 66,000$ for 2014 . February 1, 2018: $\quad$$\quad$ Sold 1,875 of the AutoTech shares for $\$ 34$ per share. In addition, $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\$ 1,350$ in fees and commissions were paid by Rickson on this sale. November 1, 2018: $\quad$$\quad$ Rickson received a $\$ 0.90$ per share cash dividend from AutoTech. December 31, 2018: $\quad$$\quad$ AutoTech reported net loss of $\$ 46,000$ for 2015 .

Marjam Company owns 30,000 shares of MacKenzie Company's 100,000 outstanding shares of common stock.MacKenzie Company pays $25,000 in total cash dividends to its shareholders.Marjam's entry to record this transaction should include a:

The cost method of accounting is used for long-term investments in equity securities with significant influence.

Held-to-maturity securities are: