Appendix C Investments Wild Test Bank Docx

Financial Accounting, 9e (Wild)

Appendix C Investments

1) Long-term investments are usually held as an investment of cash for use in current operations.

2) Land used in the company's operations is reported as a long-term investment.

3) Short-term investments are also called marketable securities.

4) Equity securities reflect a creditor relationship such as investments in notes, bonds, and certificates of deposit.

5) Debt securities reflect a creditor relationship such as investments in notes, bonds, and certificates of deposit.

6) Cash equivalents are investments that are readily converted to known amounts of cash and mature within three months.

7) Short-term investments are intended to be converted into cash within 3 and 12 months and are readily convertible to cash.

8) Long-term investments include investments in land or other assets not used in a company's operations.

9) Debt securities are recorded at cost when purchased.

10) Debt securities are recorded at cost when purchased, and interest revenue for investments in debt securities is recorded when earned.

11) Any cash dividends received from equity securities are recorded as Dividend Expense.

12) When an investment in an equity security is sold, the sale proceeds are compared with the cost, and if the cost is greater than the proceeds, a gain on the sale of the security is recorded.

13) A company received dividends of $0.35 per share on 300 shares of stock it holds as an investment. The journal entry to record this transaction would be to debit Cash for $105 and credit Dividend Revenue for $105.

14) An investor purchased $50,000 of 10-year bonds it intends to hold to maturity at par. The investor's journal entry to record the purchase is a debit to Debt Investments for $50,000 and a credit to Cash for $50,000.

15) A company holds $40,000 of 7% bonds as a held-to-maturity security. The bonds were purchased at par value. The journal entry to record receipt of a semiannual interest payment includes a debit to Cash for $2,800 and a credit to Interest Revenue for $2,800.

16) A controlling investor is called the parent, and the investee is called the subsidiary.

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

18) The equity method with consolidation is used to account for long-term investments in equity securities with controlling influence.

19) 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.

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

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

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

23) Consolidated financial statements show the financial statements of all entities under the parent's control, including all subsidiaries.

24) When consolidated financial statements are prepared, the parent company uses the equity method and reports the investment accounts for the subsidiaries on the balance sheet.

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

26) Return on total assets can be separated into the profit margin ratio and total asset turnover.

27) Profit margin is net sales divided by net income.

28) Profit margin reflects the percent of net income in each dollar of net sales.

29) All companies desire a low return on total assets.

30) A company has net income of $130,500. Its net sales were $1,740,000 and its average total assets were $2,750,000. Its profit margin equals 7.5%.

31) A company has net income of $130,500. Its net sales were $1,740,000 and its average total assets were $2,750,000. Its total asset turnover equals 4.7%.

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

33) The adjustment to fair value of trading securities is included in the calculation of net income.

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

35) Trading securities are always reported as current assets.

36) Unrealized gains and losses on trading securities are reported on the income statement.

37) Held-to-maturity securities are equity securities a company intends and is able to hold until maturity.

38) Held-to-maturity securities are debt securities a company intends and is able to hold until maturity.

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

40) Accounting for long-term investments in held-to-maturity securities requires companies to record interest revenue as it is earned.

41) 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.

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

43) Management's intent determines whether an available-for-sale security is classified as long-term or short-term.

44) Unrealized Loss−Equity and Unrealized Gain−Equity are permanent equity accounts.

45) Both U.S. GAAP and IFRS permit companies to use fair value in reporting available-for-sale and held-to-maturity securities.

46) Other comprehensive income includes unrealized gains and losses on available-for-sale securities.

47) Available-for-sale securities are actively managed like trading securities because the company intends to trade them for profit in the short term.

48) Long-term investments in available-for-sale securities are reported at fair value on the balance sheet.

49) Any unrealized gain or loss for the portfolio of available-for-sale securities is reported on the income statement in the other gain or loss section.

50) Any unrealized gain or loss for the portfolio of available-for-sale securities is reported as a component of other comprehensive income.

51) On May 1, Jorge Co. purchases Radiotech bonds for $25,000. This investment is considered to be an available-for-sale investment. This is the company's first and only investment in available-for-sale securities. On July 31 (Jorge's year-end), the bonds had a market value of $28,000. Jorge should record a credit to Unrealized Gain−Equity for $3,000.

52) On May 15, Tumbleweed, Inc. purchased Dansell Corp. bonds for $80,000. The securities are considered available-for-sale securities. This is the company's first and only investment in available-for-sale securities. On September 30, the bonds had a market value of $85,000. The $5,000 difference must be reported on Tumbleweed's income statement as a $5,000 gain.

53) An investor presumed to have significant influence owns at least 20% but not more than 50% of another company's voting stock.

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

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

56) When using the equity method for investments in equity securities, the investor records the receipt of cash dividends as revenue.

57) When using the equity method for investments in equity securities, the investor records the receipt of cash dividends as a debit to Cash and a Credit to the Equity Method Investment.

58) 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.

59) When using the equity method, receipt of cash dividends increases the carrying (book) value of an investment in equity securities.

60) When an investor owns less than 20% of another company's stock, it is presumed to have insignificant influence.

61) When an investor has insignificant influence over another company's stock, presumably when it owns more than 20%, the stock investment is reported at fair value.

62) When an investor has insignificant influence over another company's stock, presumably when it owns less than 20%, the stock investment is reported at fair value.

63) Stock investments with insignificant influence are classified as short- or long-term based on managers' intent and the stock's marketability.

64) Dividends received from stock investments with insignificant influence are recorded as a reduction in the investment account.

65) Dividends received from stock investments with insignificant influence are recorded as dividend revenue.

66) Unrealized gains and losses on stock investments with insignificant influence are reported on the income statement.

67) Unrealized gains and losses on stock investments with insignificant influence are reported as a component of stockholders' equity.

68) Long-term investments:

A) Are current assets.

B) Can include funds designated for a special purpose, or investments in land not used in the company's operations.

C) Must be readily convertible to cash.

D) Are expected to be converted into cash within one year.

E) Include only equity securities.

69) Short-term investments:

A) Are securities that management intends to convert to cash within the year, and are readily convertible to cash.

B) Include funds earmarked for a special purpose such as bond sinking funds.

C) Include stocks not intended to be converted into cash.

D) Include bonds not intended to be converted into cash.

E) Include sinking funds not intended to be converted into cash.

70) Long-term investments are reported in the:

A) Current asset section of the balance sheet.

B) Intangible asset section of the balance sheet.

C) Non-current section of the balance sheet called long-term investments.

D) Plant assets section of the balance sheet.

E) Equity section of the balance sheet.

71) Long-term investments include:

A) Investments in bonds and stocks that are not readily convertible to cash or not intended to be converted to cash in the short term.

B) Investments in marketable stocks that are intended to be converted into cash in the short-term.

C) Investments in marketable bonds that are intended to be converted into cash in the short-term.

D) Only investments readily convertible to cash.

E) Investments intended to be converted to cash within one year.

72) Strickland Corporation has invested in bonds of Nez Corporation. Strickland intends to actively manage this investment for profit. This investment is classified as:

A) an available-for-sale security.

B) a held-to-maturity security.

C) a trading security.

D) a significant influence security.

E) a controlling influence security.

73) All of the following statements regarding debt securities are true except:

A) Debt securities should be recorded at cost when acquired.

B) Debt securities are valued at fair value if classified as trading securities.

C) Debt securities are valued at fair value if classified as held-to-maturity.

D) Debt securities are valued at fair value if classified as available-for-sale securities.

E) Debt securities classified as available-for-sale record the interest revenue when earned.

74) All of the following are true about debt securities except:

A) They can be short-term investments.

B) They can be long-term investments.

C) They can have a cost higher than the maturity value.

D) They can have a cost lower than the maturity value.

E) They reflect an owner relationship.

75) At acquisition, debt securities are:

A) Recorded at their cost, plus total interest that will be received over the life of the security.

B) Recorded at the amount of interest that will be received over the life of the security.

C) Recorded at cost.

D) Not recorded, because no interest is due yet.

E) Recorded at cost plus the amount of dividend income to be received.

76) At the end of the accounting period, the owners of debt securities:

A) Must report the dividend income accrued on the debt securities.

B) Must retire the debt.

C) Must record a gain or loss on the interest income earned.

D) Must record a gain or loss on the dividend income earned.

E) Must record any interest earned on the debt securities during the period.

77) A company has an investment in 9% bonds with a par value of $100,000 that pay interest on October 1 and April 1. The amount of interest accrued on December 31 (the company's year-end) would be:

A) $750.

B) $1,500.

C) $2,250.

D) $4,500.

E) $9,000.

78) Roe Corporation owns 2,000 shares of WRJ Corporation stock. WRJ Corporation has 25,000 shares of stock outstanding. WRJ paid $4 per share in cash dividends to its stockholders. The entry to record the receipt of these dividends by Roe is:

A) Debit Cash, $8,000; credit Debt Investments, $8,000.

B) Debt Debt Investment, $8,000; credit Cash, $8,000.

C) Debit Cash, $8,000; credit Dividend Revenue, $8,000.

D) Debit Unrealized Gain-Equity, $8,000; credit Cash, $8,000.

E) Debit Cash, $8,000; credit Unrealized Gain-Equity, $8,000.

79) A company purchased $60,000 of 5% bonds on May 1 at par value. The bonds pay interest on March 1 and September 1. The amount of interest accrued on December 31 (the company's year-end) would be:

A) $1,000.

B) $500.

C) $1,250.

D) $2,500.

E) $1,500.

80) A company paid $37,800 plus a broker's fee of $525 to acquire 8% bonds with a $40,000 maturity value. The company intends to hold the bonds to maturity. The cash proceeds the company will receive when the bonds mature equal:

A) $37,800.

B) $38,325.

C) $40,000.

D) $40,525.

E) $43,200.

81) A company paid $37,800 plus a broker's fee of $525 to acquire 8% bonds with a $40,000 maturity value as a long-term investment. The company intends to hold the bonds to maturity.  The correct entry to record the purchase of the bond investment is:

A) Debit Debt Investments−HTM $37,800; credit Cash $37,800.

B) Debit Debt Investments−HTM $38,325; credit Cash $38,325.

C) Debit Cash $40,000; credit Debt Investments−HTM $40,000.

D) Debit Debt Investments−HTM $37,800; debit Investment Expense $525; credit Cash $38,325

E) Debit Debt Investments−HTM $37,800; debit Loss on Investment $525; credit Cash $38,325.

82) Kendall Corp. purchased at par value $75,000 of Shrem Company's 8% bonds that mature in three-years. The bonds pay interest semiannually on June 1 and December 1. Kendall plans to hold the bonds until they mature. When the bonds mature, Kendall should prepare the following journal entry:

A) debit Debt Investments−HTM, $75,000; credit Cash, $75,000.

B) debit Cash, $6,000; credit, Unrealized Gain-Equity, $6,000.

C) debit Cash, $75,000; credit Debt Investments−HTM, $75,000.

D) debit Unrealized Gain-Equity, $6,000; credit Cash, $6,000.

E) debit Cash, $75,000; credit Debt Investments−Trading, $75,000.

83) Kendall Corp. purchased at par value $160,000 of Barker Company's 7% bonds that mature in 10 months. The bonds pay interest semiannually on June 1 and December 1. Kendall plans to hold the bonds until they mature. The journal entry to record Kendall's purchase of the bonds is:

A) debit Short-Term Debt Investments−HTM $160,000; credit Cash, $160,000.

B) debit Cash, $169,333; credit, Short-Term Investments−HTM $169,333.

C) debit Cash, $160,000; credit Short-Term Investments−HTM $160,000.

D) debit Long-Term Debt Investments-HTM $160,000; credit Cash $160,000.

E) debit Cash, $160,000; credit Long-Term Debt Investments-HTM $160,000.

84) Barnes Company purchased $50,000 of 8% bonds at par.  The bonds mature in six years and are a held-to-maturity security. Which of the following is the correct journal entry to record the receipt of the semiannual interest payment?

A) debit Cash, $4,000; credit Debt Investments−HTM, $4,000.

B) debt Cash, $2,000; credit Debt Investments−HTM, $2,000.

C) debit Cash, $2,000; credit Interest Revenue, $2,000.

D) debit Unrealized Gain-Equity, $2,000; credit Cash, $2,000.

E) debit Cash, $4,000; credit Unrealized Gain-Equity, $4,000.

85) Accounting for long-term investments in equity securities with controlling influence uses the:

A) Controlling method.

B) Equity method with consolidation.

C) Investor method.

D) Investment method.

E) Consolidated method.

86) The controlling investor is called the:

A) Owner.

B) Subsidiary.

C) Parent.

D) Investee.

E) Senior entity.

87) The investee company in a long term investment with controlling interest is called the:

A) Owner.

B) Subsidiary.

C) Parent.

D) Creditor.

E) Senior entity.

88) A controlling influence over the investee is based on the investor owning voting stock exceeding:

A) 10%.

B) 20%.

C) 30%.

D) 40%.

E) 50%.

89) Long-term investments cannot include:

A) Held-to-maturity debt securities.

B) Securities with maturity dates within one year.

C) Available-for-sale equity securities.

D) Equity securities giving an investor significant influence over an investee.

E) Available-for-sale debt securities.

90) Consolidated financial statements:

A) Show the results of operations, cash flows, and the financial position of all entities under a parent's control, including all subsidiaries.

B) Show the results of operations, cash flows, and the financial position of the parent only.

C) Show the results of operations, cash flows, and the financial position of the subsidiary only.

D) Include the investments in the subsidiaries on the balance sheet.

E) Do not include a balance sheet.

91) Comprehensive income includes all except:

A) Revenues and expenses reported in the income statement.

B) Dividends paid to shareholders.

C) Unrealized gains and losses on long-term available-for-sale debt securities.

D) All changes in equity for a period except those due to investments and distributions to owners.

E) Gains and losses reported in the income statement.

92) Short-term investments in held-to-maturity debt securities are accounted for using the:

A) Fair value method with fair value adjustment to income.

B) Fair value method with fair value adjustment to equity.

C) Cost method with amortization.

D) Cost method without amortization.

E) Equity method.

93) Long-term investments in held-to-maturity debt securities are accounted for using the:

A) Fair value method with fair value adjustment to income.

B) Fair value method with fair value adjustment to equity.

C) Cost method without amortization.

D) Cost method with amortization.

E) Equity method.

94) Select the correct statement from the following:

A) Profit margin reflects a company's ability to produce net sales from total assets.

B) Total asset turnover reflects the percent of net income in each dollar of net sales.

C) Return on total assets can be separated into gross margin ratio and price-earnings ratio.

D) High returns on total assets are desirable.

E) Return on total assets analysis is beneficial in evaluating a company but is not useful for competitor analysis.

95) Cloverton Corporation had net income of $30,000, net sales of $1,000,000, and average total assets of $500,000. Its return on total assets is:

A) 3%

B) 200%

C) 6%

D) 17%

E) 1.5%

96) 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) 13.1%

B) 12.5%

C) 13.8%

D) 800%

E) 725%

97) A company has net income of $250,000, net sales of $2,000,000, and average total assets of $1,500,000. Its return on total assets equals:

A) 12.5%.

B) 13.3%.

C) 16.7%.

D) 75.0%.

E) 600.0%.

98) 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:

A) 3.01%.

B) 10.64%.

C) 32.00%.

D) 33.25%.

E) 300.75%.

99) A company had net income of $43,000, net sales of $380,500, and average total assets of $220,000. Its profit margin and total asset turnover were, respectively:

A) 11.3%; 1.73.

B) 11.3%; 19.5.

C) 1.7%; 19.5.

D) 1.7%; 11.3.

E) 19.5%; 11.3.

100) A company had a profit margin of 10.5% and total asset turnover of 1.84. Its return on total assets was:

A) 5.71%

B) 8.66%

C) 12.34%

D) 13.61%

E) 19.32%

101) A company had net income of $40,000, net sales of $300,000, and average total assets of $200,000. Its profit margin and total asset turnover were respectively:

A) 13.3%; 0.2.

B) 13.3%; 1.5.

C) 2.0%; 1.5.

D) 1.5%; 0.2.

E) 1.5%; 13.3.

102) Investments can be classified as all but which of the following:

A) Intangible investments.

B) Held-to-maturity debt securities.

C) Available-for-sale debt securities.

D) Available-for-sale equity securities.

E) Trading securities.

103) Investments in debt securities that the company actively manages and trades for profit are referred to as short-term investments in:

A) Available-for-sale securities.

B) Held-to-maturity securities.

C) Trading securities.

D) Realizable securities.

E) Liquid securities.

104) Investments in trading securities:

A) Include only equity securities.

B) Are reported as current assets.

C) Include both debt and equity securities.

D) Are reported at their cost, no matter what their market value.

E) Are long-term investments.

105) A decrease in the fair value of a security that has not yet been realized through an actual sale of the security is called a(n):

A) Contingent loss.

B) Realizable loss.

C) Unrealized loss.

D) Capitalized loss.

E) Market loss.

106) Held-to-maturity securities are:

A) Always classified as Short-Term Investments.

B) Always classified as Long-Term Investments.

C) Debt securities that a company intends and is able to hold to maturity.

D) Equity securities that a company intends and is able to hold to maturity.

E) Equity securities where significant influence involved.

107) Available-for-sale debt securities are:

A) Recorded at cost and remain at cost over the life of the investment.

B) Reported at historical cost, adjusted for the amortized amount of any difference between cost and maturity value.

C) Reported at fair value on the balance sheet.

D) Intended to be held to maturity.

E) Always classified as Long-Term Investments.

108) 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, 20X1 is:

A) Debit Unrealized Gain– Equity $9,000; Credit Fair Value Adjustment – Available-for-Sale (LT) $9,000.

B) Debit Unrealized Loss – Equity $9,000; Credit Fair Value Adjustment – Available-for-Sale (LT) $9,000.

C) Debit Unrealized Loss – Income $9,000; Credit Fair Value Adjustment – Available-for-Sale (ST) $9,000.

D) Debit Fair Value Adjustment – Available-for-Sale (LT) $9,000; Credit Unrealized Loss – Equity $9,000.

E) Debit Fair Value Adjustment – Available-for-Sale (LT) $9,000; Credit Unrealized Gain – Equity $9,000.

109) 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:

A) Debit Unrealized Gain – Equity $3,000; Credit Fair Value Adjustment – Available-for-Sale (LT) $3,000.

B) Debit Fair Value Adjustment – Available-for-Sale (LT) $6,000; Credit Unrealized Loss – Equity $6,000.

C) Debit Fair Value Adjustment – Available-for-Sale (LT) $3,000; Credit Unrealized Gain – Equity, $3,000.

D) Debit Fair Value Adjustment – Available-for-Sale (LT) $3,000; Credit Unrealized Loss – Equity $3,000.

E) Debit Fair Value Adjustment – Available-for-Sale (LT) $6,000; Credit Unrealized Gain – Equity $6,000.

110) Trading securities are:

A) Recorded at cost and remain at cost over the life of the investment.

B) Reported at historical cost, adjusted for the amortized amount of any difference between cost and maturity value.

C) Reported at fair value on the balance sheet.

D) Intended to be held to maturity.

E) Always classified as Long-Term Investments.

111) All of the following are true for Available-for-sale equity securities except:

A) Are recorded at cost when acquired.

B) May earn interest that is reported in that year's income statement.

C) May be classified as either short-term or long-term securities.

D) Are reported at market value on the balance sheet.

E) Are actively managed like Trading Securities.

112) J.P. Industries purchased Yang Corporation bonds with a par value of $143,000 for $143,375 as a long-term investment, which included $375 in brokerage fees. The investment is classified as available-for-sale securities. J.P.'s entry to record the purchase transaction would include a:

A) Debit to Brokerage Fees Expense, $375.

B) Credit to Debt Investments-AFS for $143,000.

C) Credit to Debt Investments-AFS for $143,375.

D) Debit to Debt Investments-AFS for $143,000.

E) Debit to Debt Investments-AFS for $143,375.

113) Lessington Corporation purchases Gonzalez Company bonds  for $150,000 as a long-term investment. The investment is classified as available-for-sale securities. Lessington's entry to record the purchase transaction would include a:

A) Debit to Debt Investments-AFS for $150,000.

B) Credit to Debt Investments-AFS for $150,000.

C) Credit Gain on Long-Term Investment $146,000.

D) Debit to Debt Investments-HTM for $150,000.

E) Credit to Debt Investments-HTM for $150,000.

114) Six months ago, a company purchased an investment in debt for $70,000. The investment is classified as available-for-sale securities. This is the company's first and only investment in available-for-sale securities.  The current fair value of the debt is $68,500. The company should record a:

A) Debit to Unrealized Loss−Equity for $1,500.

B) Credit to Unrealized Gain−Equity for $1,500.

C) Debit to Investment Revenue for $1,500.

D) No entry is required.

E) Credit to Investment Revenue for $1,500.

115) On July 31, Potter Co. purchased GigaTech bonds for $16,000. The investment is classified as available-for-sale securities. This is the company's first and only investment in available-for-sale securities.  On October 31, which is Potter's year-end, the bonds had a fair value of $20,000. Potter should record a:

A) Credit to Unrealized Gain-Equity for $4,000.

B) Credit to Market Adjustment−Available-for-Sale for $4,000.

C) Credit to Unrealized Gain-Income for $4,000.

D) Debit to Unrealized Loss-Equity for $4,000.

E) Debit to Unrealized Gain-Equity for $4,000.

116) On March 15, Alan Company purchased bonds of Cameo Corp. for $35,000. The investment is classified as available-for-sale securities. This is the company's first and only investment in available-for-sale securities.  On June 30, the bonds had a fair value of $34,000. Alan should do which of the following:

A) Record a debit to the Fair Value Adjustment-AFS account.

B) Record a debit to the Unrealized Loss−Equity account.

C) Record a credit to the Unrealized Loss−Equity account.

D) Record a debit to the Unrealized Loss−Income account.

E) Record a credit to the Unrealized Gain−Income account.

117) 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?

A) Equity method.

B) Fair value method.

C) Historical cost method.

D) Cost with amortization method.

E) Effective method.

118) MotorCity, Inc. purchased 40,000 shares of Shaw common stock for $232,000. This represents 40% of the outstanding stock. The entry to record the transaction includes a:

A) Debit to Equity Method Investments for $92,800.

B) Debit to Equity Method Investments for $232,000.

C) Credit to Equity Method Investments for $92,800.

D) Debit to Equity Method Investments -HTM for $232,000.

E) Debit to Short-Term Investment-AFS for $232,000.

119) Segmental Manufacturing owns 35% of Glesson Corp. stock. Glesson pays a total of $47,000 in cash dividends for the period. Segmental's entry to record the dividend transaction would include a:

A) Credit to Equity Method Investments for $16,450.

B) Debit to Equity Method Investments for $16,450.

C) Debit to Cash for $47,000.

D) Credit to Cash for $16,450.

E) Credit to Investment Revenue for $47,000.

120) 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:

A) Debit to Dividends for $97,000.

B) Debit to Dividends for $38,800.

C) Debit to Equity Method Investments for $97,000.

D) Credit to Equity Method Investments for $38,800.

E) Credit to Cash for $97,000.

121) McVeigh Corp. owns 40% of Gondor Company's common stock. McVeigh received $41,200 in cash dividends from Gondor. The entry to record this transaction should include a:

A) Debit to Dividends for $103,000.

B) Credit to Equity Method Investments for $41,200.

C) Debit to Dividend Revenue for $41,200.

D) Credit to Equity Method Investments for $103,000.

E) Credit to Cash for $41,200.

122) 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:

A) Credit to Dividend Revenue for $7,500.

B) Credit to Interest Revenue for $25,000.

C) Credit to Equity Method Investments for $7,500.

D) Credit to Equity Method Investments for $25,000.

E) Credit to Dividend Revenue for $25,000.

123) Bharrat Corporation purchased 40% of Ferris Corporation for $100,000 on January 1. On October 17 of the same year, Ferris Corporation declared total cash dividends of $12,000. At year-end, Ferris Corporation reported net income of $60,000. The balance in the Bharrat Corporation's Long-Term Investment-Ferris account at December 31 should be:

A) $80,800.

B) $100,000.

C) $95,200.

D) $119,200.

E) $124,000.

124) Madison Corporation purchased 40% of Jay Corporation for $125,000 on January 1. On June 20 of the same year, Jay Corporation declared total cash dividends of $30,000. At year-end, Jay Corporation reported net income of $150,000. The balance in Madison Corporation's Long-Term Investment-Jay Corporation account as of December 31 should be:

A) $77,000.

B) $125,000.

C) $173,000.

D) $197,000.

E) $370,000.

125) Pravis Corporation owns 30% of Kuster Corporation. Pravis Corporation received $9,000 in cash dividends from Kuster Corporation. The entry to record receipt of these dividends is:

A) Debit Cash, $9,000; credit Equity Method Investments, $9,000.

B) Debt Equity Method Investments, $9,000; credit Cash, $9000.

C) Debit Cash, $9,000; credit Interest Revenue, $9,000.

D) Debit Unrealized Gain-Equity, $9,000; credit Cash, $9,000.

E) Debit Cash, $9,000; credit Dividend Revenue, $9,000.

126) 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. The January 12, Year 3, entry to record Barber's sale of 3,000 shares of Convell Company stock, which represents 60% of Barber's total investment, for $39,000 cash should be:

A) Debit Cash $39,000; debit Loss on Sale of Investment $8,200; credit Equity Method Investments $47,280.

B) Debit Cash $39,000; debit Loss on Sale of Investment $8,880; credit Equity Method Investments $47,880.

C) Debit Cash $39,000; credit Gain on Sale of Investment $2,700; credit Equity Method Investments $36,300.

D) Debit Cash $39,000; credit Gain on Sale of Investment $8,750; credit Equity Method Investments $30,250.

E) Debit Cash $39,000; debit Loss on Sale of Investment $21,500; credit Equity Method Investments $60,500.

127) 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?

A) $60,500.

B) $79,800.

C) $52,000.

D) $88,300.

E) $87,300.

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

A) Trading securities are accounted for using fair values with unrealized gains and losses reported in other comprehensive income.

B) Trading securities are accounted for using fair values with unrealized gains and losses reported in net income.

C) Available-for-sale securities are accounted for using fair values with unrealized gains and losses reported in other comprehensive income.

D) Held-to-maturity securities are accounted for using amortized cost.

E) Both systems examine held-to-maturity securities for impairment.

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

A) Under the equity method, the share of investee's net income is reported in the investor's income in the same period the investee earns that income.

B) Under the consolidation method, investee and investor revenues and expenses are combined.

C) Under the equity method, the investment account equals the acquisition cost plus the share of investee income plus the share of investee dividends.

D) Under the consolidation method, nonintercompany assets and liabilities are combined (eliminating the need for an investment account).

E) U.S. GAAP companies commonly refer to noncontrolling interests in consolidated subsidiaries as minority interests whereas IFRS companies use noncontrolling interests.

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

A) The entire portfolio of trading securities is reported at is fair value.

B) An unrealized gain or loss from a change in fair value is reported on the income statement.

C) An unrealized gain or loss is recorded with an adjusting entry when the securities are sold.

D) An unrealized gain or loss is recorded with an adjusting entry at the end of each period.

E) Unrealized gains and losses are recorded in a temporary account that is closed to Income Summary at the end of the period.

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

A) The entire portfolio of trading securities is reported at fair value.

B) An unrealized gain or loss from a change in fair value is reported on the income statement.

C) A realized gain or loss is recorded when the securities are sold and reported on the income statement.

D) When the period-end fair value adjustment for the portfolio of trading securities is computed, it includes the cost and fair value of any securities sold.

E) Any prior period fair value adjustment to the portfolio is not used to compute the gain or loss from sale of individual transactions.

132) All of the following statements regarding other comprehensive income are true except:

A) Other comprehensive income includes unrealized gains and losses on available-for-sale securities.

B) Other comprehensive income is not considered when calculating comprehensive income.

C) Other comprehensive income includes foreign currency adjustments.

D) Other comprehensive income includes pension adjustments.

E) Accumulated other comprehensive income is defined as the cumulative impact of other comprehensive income.

133) 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:

A) The debt securities should be recorded at cost, $300,000.

B) The securities will have a maturity value of $300,000.

C) The semiannual interest payment amount is $12,000.

D) The semiannual interest payment amount is $24,000.

E) Interest Revenue should be credited when an interest payment is received.

134) Landmark Corp. buys $300,000 of Schroeter Company's 8%, 5-year bonds payable at par value on September 1. Interest payments are made semiannually. Landmark plans to hold the bonds for the 5-year life. The journal entry to record the purchase should include:

A) A debit to Debt Investments-AFS $300,000.

B) A debit to Short-Term Investments-Trading $300,000.

C) A debit to Debt Investments-HTM $300,000.

D) A debit to Short-Term Investments-AFS $300,000.

E) A debit to Cash $300,000.

135) Landmark buys $300,000 of Schroeter Company's 8%, 5-year bonds payable at par value on September 1. Interest payments are made semiannually on March 1 and September 1. The journal entry Landmark should record to accrue interest earned at year-end December 31 is:

A) Debit Interest Receivable $8,000, credit Interest Revenue $8,000.

B) Debit Interest Receivable $12,000, credit Interest Revenue $12,000.

C) Debit Cash $8,000, credit Interest Revenue $8,000.

D) Debit Cash $12,000, credit Interest Revenue $12,000.

E) Debit Interest Revenue $8,000, credit Interest Receivable $8,000.

136) Landmark Corp. buys $300,000 of Schroeter Company's 8%, 5-year bonds payable at par value on September 1. Interest payments are made semiannually. Landmark plans to hold the bonds for the 5-year life. When the bonds mature, the journal entry to record the proceeds will be:

A) Debit Debt Investments-HTM $300,000; credit Cash $300,000.

B) Debit Cash $300,000; credit Interest Revenue $300,000.

C) Debit Cash $300,000; credit Debt Investments-HTM $300,000.

D) Debit Cash $300,000; credit Interest Receivable $300,000.

E) Debit Cash $300,000; credit Bonds Payable $300,000.

137) 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 long-term available-for-sale securities. This is the company's first and only investment in 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:

A) Debit Debt Investments-HTM $199,710; credit Cash $199,710.

B) Debit Debt Investments-AFS $199,710; credit Cash $199,710.

C) Debit Debt Investments-Trading $199,710; credit Cash $199,710.

D) Debit Debt Investments-Trading $200,110; credit Cash $200,110.

E) Debit Debt Investments-AFS $200,110; credit Cash $200,110.

138) 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. This is the company's first and only investment in available-for-sale securities. On March 15, Marcelo Corp. declares a dividend of $1.15 per share payable to stockholders of record on April 15. Jewel Company received the dividend on April 15 and ultimately sells half of the Marcelo Corp. 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 dividend on April 15 is:

A) Debit Cash $7,350; credit Dividend Revenue $7,350.

B) Debit Cash $8,050; credit Dividend Revenue $8,050.

C) Debit Cash $8,050; credit Interest Revenue $8,050.

D) Debit Cash $7,350; credit Interest Revenue $7,350.

E) Debit Cash $8,050; credit Gain on Sale of Investments $8,050.

139) On January 1, Jewel Company buys $200,000 of Marcelo Corp. 12%, 36-month notes.  Interest is paid on the last day of each month.  The notes are classified as available-for-sale securities. This is the company's first and only investment in available-for-sale securities.  On December 31, the notes have a fair value of $204,000. The journal entry on January 1 to record the investment is:

A) Debit Debt Investments – HTM, $200,000; Credit Cash, $200,000.

B) Debit Debt Investments – AFS, $200,000; Credit Cash, $200,000.

C) Debit Debt Investments – HTM, $204,000; Credit Cash, $204,000.

D) Debit Debt Investments – AFS, $204,000; Credit Cash, $204,000.

E) Debit Debt Investments – Trading, $200,000; Credit Cash, $200,000.

140) On January 1, Jewel Company buys $200,000 of Marcelo Corp. 12%, 36-month notes.  Interest is paid on the last day of each month.  The notes are classified as available-for-sale securities. This is the company's first and only investment in available-for-sale securities.  On December 31, the notes have a fair value of $204,000. The journal entry to record the receipt of the monthly interest on January 31 is:

A) Debit Cash $24,000; credit Debt Investments-AFS $24,000.

B) Debit Cash $2,000; credit Debt Investments-AFS $2,000.

C) Debit Cash $2,000; credit Fair Value Adjustment-AFS (LT) $2,000.

D) Debit Cash $2,000; credit Interest Revenue $2,000.

E) Debit Cash $2,000; credit Fair Value Adjustment-AFS (ST) $2,000.

141) On January 1, Jewel Company buys $200,000 of Marcelo Corp. 12%, 36-month notes.  Interest is paid on the last day of each month.  The notes are classified as available-for-sale securities. This is the company's first and only investment in available-for-sale securities.  On December 31, the notes have a fair value of $204,000. The impact on Jewel's net income as a result of its investment in Marcelo Corp. was a(n):

A) Increase to income of $24,000.

B) Increase to income of $28,000.

C) Increase to income of $2,000.

D) Decrease to income of $24,000.

E) Decrease to income of $28,000.

142) On January 1, Jewel Company buys $200,000 of Marcelo Corp. 12%, 36-month notes.  Interest is paid on the last day of each month. The notes are classified as available-for-sale securities. This is the company's first and only investment in available-for-sale securities.  On December 31, the notes have a fair value of $204,000. The amount that Jewel Company should report in the equity section of its year-end December 31 balance sheet for its investment in Marcelo Corp. is:

A) Unrealized Gain – Equity; $28,000.

B) Realized Gain – Equity; $4,000.

C) Unrealized Loss – Equity; $4,000.

D) Unrealized Gain – Equity; $4,000.

E) Unrealized Gain – Equity; $24,000.

143) On January 1, Jewel Company buys $200,000 of Marcelo Corp. 12%, 36-month notes.  Interest is paid on the last day of each month. The notes are classified as available-for-sale securities. This is the company's first and only investment in available-for-sale securities.  On December 31, the notes have a fair value of $204,000. The amount that Jewel Company should report in the investment section of its year-end December 31 balance sheet for its investment in Marcelo Corp. is:

A) $200,000.

B) $204,000.

C) $224,000.

D) $228,000.

E) $208,000.

144) 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 purchase on September 15 is:

A) Debit Stock Investments – Francis Company, $30,000; Credit Cash, $30,000.

B) Debit Stock Investments – Francis Company, $29,500; Credit Cash, $29,500.

C) Debit Trading Securities, $30,000; Credit Cash, $30,000.

D) Debit Investments – HTM, $30,000; Credit Cash, $30,000.

E) Debit Cash, $30,000; Credit Stock Investments – Francis Company, $30,000.

145) 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.

146) 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 adjusting entry to record the fair value of the investments on December 31 is:

A) Debit Unrealized Gain – Income, $1,500; Credit Fair Value Adjustment - Stock, $1,500.

B) Debit Fair Value Adjustment - Stock, $1,500; Credit Unrealized Gain – Income, $1,500.

C) Debit Unrealized Gain – Equity, $1,500; Credit Fair Value Adjustment - Stock, $1,500.

D) Debit Fair Value Adjustment - Stock, $2,000; Credit Unrealized Gain – Income, $2,000.

E) No adjusting entry required.

147) On December 31 of the prior year, Anna Company owned 1,000 shares of Egert Company common stock with a cost of $12,000 and a fair value of $11,000.  This is the only investment held by Anna.  On June 1 of the current year, Anna sells 500 of the Egert company shares for $7,200.  On December 31 of the current year, the fair value of Egert Company common stock was $13 per share.  Anna made no other purchases or sales of investments during the current year.  The journal entry to record the sale of the shares on June 1 is:

A) Debit Cash, $7,200; Credit Stock Investments – Egert Company, $6,000; Credit Unrealized Gain – Income, $1,200.Combined financial statements

B) Debit Cash, $7,200; Credit Stock Investments – Egert Company, $5,500; Credit Gain on Sale of Stock Investments, $1,700.

C) Debit Cash, $7,200; Credit Stock Investments – Egert Company, $6,000; Credit Gain on Sale of Stock Investments, $1,200.

D) Debit Cash, $7,200; Debit Unrealized Gain – Income, $500; Credit Stock Investments – Egert Company, $5,000; Credit Gain on Sale of Stock Investments, $1,700.

E) Debit Cash, $7,200; Credit Unrealized Loss – Income, $500; Credit Stock Investments – Egert Company, $6,000; Credit Gain on Sale of Stock Investments, $700.

148) On December 31 of the prior year, Anna Company owned 1,000 shares of Egert Company common stock with a cost of $12,000 and a fair value of $11,000.  This is the only investment held by Anna.  On June 1 of the current year, Anna sells 500 of the Egert company shares for $7,200.  On December 31 of the current year, the fair value of Egert Company common stock was $11 per share.  Anna made no other purchases or sales of investments during the current year.  The adjusting entry to record the fair value of the investments on December 31 is:

A) Debit Unrealized Gain – Income, $500; Credit Fair Value Adjustment - Stock, $500.

B) Debit Fair Value Adjustment - Stock, $500; Credit  Unrealized Gain – Income, $500.

C) Debit Fair Value Adjustment - Stock, $1,500; Credit Unrealized Gain – Equity, $1,500.

D) Debit Fair Value Adjustment - Stock, $1,500; Credit Unrealized Gain – Income, $1,500.

E) No adjusting entry required.

149) Financial statements that show the financial position, results of operations, and cash flows of all entities under the parent company's control, including all subsidiaries are known as:

A) Combined financial statements

B) Consolidated financial statements

C) Equity financial statements

D) Statement of owner's equity

E) Investor financial statements

150) The two business entities involved in an investment in securities with controlling influence, for which consolidated financial statements are prepared, are known as:

A) Parent and Investor

B) Subsidiary and Investee

C) Consolidator and Parent

D) Parent and Subsidiary

E) Both are referred to as partners.

Match the following terms with the appropriate definitions.

A) Available-for-sale securities

B) Long-term investments

C) Consolidated financial statements

D) Equity method

E) Unrealized gain (loss)

F) Parent company

G) Subsidiary

H) Trading securities

I) Return on total assets

J) Held-to-maturity securities

151) Investments in debt securities that are not readily convertible to cash or are not intended to be converted to cash in the short term.

152) A corporation controlled by another company when the controlling company owns more than 50% of the investee's voting stock.

153) Change in market value that is not yet realized through an actual sale.

154) Financial statements that show the financial position, results of operations, and cash flows of all entities under the parent's control, including those of any subsidiaries.

155) A company that owns a more than 50% controlling interest in a subsidiary.

156) Debt securities not classified as trading or held-to-maturity.

157) Debt securities that a company intends and is able to hold until maturity.

158) Debt securities that a company intends to actively manage and trade for profit.

159) A measure of operating efficiency, computed as net income divided by average total assets.

160) An accounting method for long-term investments in equity when the investor has significant influence over the investee.

161) Explain the difference between short-term and long-term investments. Cite examples of each.

162) Discuss the reasons companies make investments.

163) Identify the classifications for non-influential investments in securities.What are the accounting basics for non-influential investments in securities, including acquisition, dividends earned, and disposition?

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

165) What is comprehensive income and how is it usually reported in the financial statements?

166) Explain how investors report investments in equity securities when the investor has a controlling influence over an investee.

167) Define the return on total assets and explain how it is used to measure a company's financial performance.

168) Explain how to record the sale of non-influential equity securities.

169) Explain how to account for held-to-maturity debt securities at and after acquisition and how they are reported in the financial statements.

170) Explain how to account for available-for-sale debt securities at and after acquisition and how they are reported in financial statements.

171) Explain how equity securities having significant influence are accounted for and reported in the financial statements. Include a discussion of the criterion for these securities in terms of an investee's voting stock.

172) 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.

173) On May 1 of the current year, a company paid $200,000 cash to purchase 6%, 10-year bonds with a par value of $200,000; interest is paid semiannually each May 1 and November 1. The company intends to hold these bonds until they mature. Prepare the journal entry to record the receipt of the first semiannual interest payment on November 1.

174) On May 1 of the current year, a company paid $200,000 cash to purchase 6%, 10-year bonds with a par value of $200,000; interest is paid semiannually each May 1 and November 1. The company intends to hold these bonds until they mature. Prepare the journal entry for the accrual of interest for the year-end December 31.

175) A company paid $600,000 for 10% bonds with a par value of $600,000 on September 1. The bonds pay 5% interest semiannually on September 1 and March 1. The company intends to hold the bonds until they mature. Prepare the journal entries for the following dates and transactions related to this bond acquisition.

(1) Bonds purchased on September 1.

(2) Year-end adjusting entry, December 31.

(3) Receipt of semiannual interest March 1.

(4) Redemption of the bonds at maturity on August 31.

176) On May 1 of the current year, a company paid $200,000 to purchase 7%, 10-year bonds with a par value of $200,000; interest is paid semiannually on May 1 and November 1. The company intends to hold the bonds until they mature. Prepare the journal entries to record (1) the bond purchase, (2) the receipt of the first semiannual interest payment on November 1 of the current year, (3) the accrual of interest for year-end December 31, and (4) the receipt of the second semiannual payment on May 1.

177) A company reported net sales of $850,000, net income of $200,000 and average total assets of $575,000. Calculate its return on total assets.

178) A company had net income of $350,000 in Year 1 and $520,000 in Year 2. The company had average total assets of $2,500,000 in Year 1 and $3,000,000 in Year 2. Calculate the return on total assets for Year 1 and Year 2. Comment on the results, did the company's performance improve?

179) 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.

180) A company reported net income of $225,000, net sales of $2,500,000, and average total assets of $2,100,000 for the current year. Calculate this company's profit margin, total asset turnover, and return on total assets.

181) 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.

182) A company had net income of $86,000 in Year 1 and $118,000 in Year 2. Its net sales were $640,000 in Year 1 and $611,000 in Year 2. Its average total assets in Year 1 were $1,670,000 and $1,712,000 in Year 2. Calculate the profit margin, total asset turnover and return on total assets for both years. Comment on the results.

183) Hubbard Company had the following trading securities in its portfolio at December 31. The Fair Value Adjustment–Trading account had a balance of zero prior to year-end adjustment. Prepare the appropriate adjusting journal entry.

184) Element Company had the following long-term available-for-sale securities in its portfolio at December 31 for each of the years listed. The year-end cost and fair values for its portfolio follow. Beginning with Year 1, prepare the appropriate journal entry to record each year-end market adjustment for these securities.

185) Scotsland Company had the following transactions relating to investments in non-influential equity securities during the year. Prepare the required general journal entries for these transactions.

186) Mire Corporation had the following transactions involving investments in non-influential securities during the year. Prior to these transactions, Mire had never had any investments in securities. Prepare the required general journal entries to record these transactions.

187) On October 31, Augustas Co. received cash dividends of $0.15 per share from its investment in Lamb Corp.'s common stock. Augustas owned 1,200 shares of Lamb Corp.'s stock on October 31. The investment is considered non-influential. Prepare the investor's journal entry to record the receipt of the cash dividends.

188) Landers, Inc., held 1,500 of Shipman Company common stock with a cost of $36,900. It sold the shares on December 13 for $42,100. Prepare Lander's journal entry to record this sale.

189) Washington Corp. held 1,500 of Vashon Company common stock with a cost of $74,387. It sold the shares on December 13 for $55,275. Prepare the journal entry to record Washington's sale.

190) In its first year of operations, Logic Co. purchased bonds of Waterford Co. with a cost of $125,000 and a year-end fair value of $123,700. Logic also purchased bonds of Jasper Co. with a cost of $25,000 and a year-end fair value of $26,100. These are classified as long-term available-for-sale securities. Prepare the journal entry to record the market value of the investments as of its December 31 year-end.

191) In its first year of operations, Largo Co. purchased bonds of MacDermott Corp. with a cost of $125,000 and a market value of $127,000. Largo also purchased bonds of Armistead with a cost of $25,000 and a market value of $24,700. These are classified as long-term available-for-sale securities. Prepare the journal entry to record the market value of the investments as of December 31.

192) Barzetti had no investments prior to the current year. It had the following transactions involving available-for-sale and held-to-maturity securities during the year. The stock purchases are considered short-term, non-influential securities. Prepare Barzetti's journal entries to record the transactions and events associated with the investment purchases.

193) Weston Company had the following long-term equity securities in its portfolio at December 31, Year 1. Weston had several long-term investment transactions during the next year. After analyzing the effects of each transaction, (1) determine the amount Weston should report on its December 31, Year 1 balance sheet for its long-term investments in available-for-sale securities, (2) determine the amount Weston should report on its December 31, Year 2 balance sheet for its long-term investments in equity securities, (3) prepare the necessary adjusting entry to record the fair value adjustment at December 31, Year 2.

194) On January 2, Froxel Company purchased 10,000 shares of Sandia Corp. common stock at $19 per share plus a $3,000 commission. This represents 30% of Sandia Corp.'s outstanding stock. On August 6, Sandia Corp. declared and paid cash dividends of $1.75 per share, and on December 31 it reported net income of $150,000. Prepare the necessary entries for Froxel to account for these transactions and events.

195) Cosmos Corporation had the following long-term investment transactions.

Prepare the journal entries Cosmos Corporation should record for these transactions and events.

196) On January 3, Kostansas Corporation purchased 5,000 shares of Morton, Inc. for $40 per share plus $700 in broker commissions. These shares represent a 40% ownership in Morton, Inc. Prepare the journal entry Kostansas Corporation should record for the investment transaction.

197) On January 3, Kostansas Corporation purchased 5,000 shares of Morton, Inc. for $40 per share plus $700 in broker commissions. These shares represent a 40% ownership in Morton, Inc. Prepare the journal entry Kostansas Corporation should record for the receipt of cash dividends of $2 per share from Morton on July 10.

198) On January 3, Kostansas Corporation purchased 5,000 shares of Morton, Inc. for $40 per share plus $700 in broker commissions. These shares represent a 40% ownership in Morton, Inc. Prepare the journal entry Kostansas Corporation should record when Morton reports net income of $52,000 for the year on December 31.

199) 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.

200) 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:

201) ________ are investments in securities that management intends to convert to cash within the year, and are readily convertible to cash.

202) ________ are investments in securities that are not readily convertible to cash, or are not intended to be converted to cash in the short-term.

203) ________ securities reflect a creditor relationship while ________ securities reflect an owner relationship.

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

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

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

207) Investments in equity securities where the investor has a significant, but not controlling influence, are accounted for using the ________ method.

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

209) ________ refers to all changes in equity for a period except for those due to investments by and distributions to owners.

210) Return on total assets is computed by dividing ________ by ________.

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

212) Investments in trading securities are always classified as ________ and are reported as ________ on the balance sheet.

213) ________ are debt securities a company intends and is able to hold until the maturity date.

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

215) An investing company that owns ________ of another (investee) company's voting stock (but not more than 50%) is presumed to have a significant influence over the investee.

216) A company that is a controlling investor in another company is known as the ________.

217) When one company owns more than 50% of another company's voting stock and has control over the investee company, the investee is called the ________.

218) ________ financial statements show the financial position, results of operations, and cash flows of all entities under the parent company's control, including all subsidiaries.