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Exam 15: Investments and Fair Value Accounting

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Question 61

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Discuss the appropriate financial treatment when an investor has a greater than 50% ownership in another company.

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If an investor purchases more than 50% o...

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Question 62

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Herberto Company had a net income of $74,000 and other comprehensive loss of $8,500 for the year.On January 1,the retained earnings balance was $425,000,and the accumulated other comprehensive income balance was $52,000.Determine the (a)comprehensive income for the year, (b)retained earnings balance on December 31,and (c)the accumulated other comprehensive income on December 31.

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Question 63

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Held-to-maturity securities

Discuss why companies invest cash in short-term temporary investments vs.long-term investments.

Pepito Company purchased 40% of the outstanding stock of Reyes Company on January 1.Reyes reported net income of $75,000 and declared dividends of $15,000 during the current year.How much would Pepito adjust its investment in Reyes Company under the equity method?

Yankton Company began the year without an investment portfolio.During the year,it purchased investments classified as available-for-sale 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

On May 1,Knox Inc.purchases $100,000 of 10-year,6% Madison Corporation bonds dated March 1 at 100 plus accrued interest.Journalize the entry to record the bond purchase.

Generally accepted accounting principles (GAAP)require the use of fair value accounting for all assets and liabilities.

The corporation owning all or a majority of the voting stock of another corporation is known as the parent company.

Which of the following is not a reason to invest excess cash in temporary investments?

Following are data for the available-for-sale securities held by Lindy Company as of December 31:​​ (a)Complete the table above to find the total cost and fair value for the company's available-for-sale securities portfolio. (b)Calculate and record the required December 31 adjustment. (c)Explain how the adjustment from part (b)is reported on Lindy's financial statements.

Match each of the definitions that follow with the appropriate investment term (a-j) . -Securities not held for trading or to maturity or other strategic reasons

On June 1,$50,000 of treasury bonds were purchased between interest dates.The brokerage 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 Investments-Treasury Bonds?

Gale Company owns 87% of the outstanding stock of Leonardo Company.Leonardo Company is referred to as the

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

Journalize the entries to record the following selected bond investment transactions for Southwest Bank:

The valuation allowance for trading investments account is found on the

When shares of stock held as an investment are sold,the difference between the proceeds and the carrying amount of the investment is recorded as a (n)

Companies may report comprehensive income on each of the following statements except

Match each of the definitions that follow with the appropriate investment term (a-j) . -A corporation owning all or the majority of the voting stock of another corporation