Investments – Chapter 15 | Test Bank with Answers – 24th Ed

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Fundamental Accounting Principles, 24e (Wild)

Chapter 15 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) Cash equivalents are investments that are readily converted to known amounts of cash and mature within three months.

6) Short-term investments are intended to be converted into cash within the longer of one year or the operating cycle of the business, and are readily convertible to cash.

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

8) Debt securities are recorded at cost when purchased.

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

10) Any cash dividends received from stock investments with insignificant influence are recorded as Dividend Expense. 

11) When a stock investment with insignificant influence 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.

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

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

14)  A company holds $40,000 of 7% bonds as a held-to-maturity security. 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.

15) If a company has a controlling influence over another company, the controlling investor is called the parent, and the investee company is called the subsidiary.

16) When an investor company owns between 20% and 50% of the voting stock of an investee company, it has a controlling influence. 

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

18) 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.

19) Trading debt securities are reported as long-term assets.

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

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

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

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

24) If the exchange rate for Canadian and U.S. dollars is 0.7382 to 1, this implies that 2 Canadian dollars can be purchased for $1.48 U.S. dollars.

25) Multinational corporations can be U.S. companies with operations in other countries.

26) Foreign exchange rates fluctuate due to many factors including changing political and economic conditions.

27) The price of one currency stated in terms of another currency is called a foreign exchange rate.

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

29) Profit margin is net sales divided by operating income.

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

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

32) 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%.

33) 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%.

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

35) Trading securities are debt securities a company plans to hold long-term, possibly until maturity.

36) Trading debt securities are always reported as current assets.

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

38) Held-to-maturity securities are equity securities a company intends to hold until dividends have been paid.

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 always classified as short-term. 

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) Any unrealized gain or loss for the portfolio of available-for-securities is reported in the equity section of the balance sheet.

45) The account, Fair Value Adjustment—Available-for-Sale, is reported as an adjunct asset on the balance sheet. 

46) When individual AFS securities are sold, the difference between the cost of the individual securities sold and the net proceeds (sale price less fees) is recorded as a gain or loss on sale of debt investments. 

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

51) On May 15, Tumbleweed, Inc. purchased notes of Dansell Corp. for $80,000. This is considered to be an available-for-sale debt investment. This is the company's first and only investment in available-for-sale debt securities. On Tumbleweed's September 30 year-end, the notes had a fair value of $85,000. The $5,000 difference in fair value must be reported on Tumbleweed's income statement as a $5,000 unrealized gain.

52) An investor presumed to have significant influence owns between 20% and 50% of another company's voting stock. 

53) The cost method of accounting, which does not adjust for changes in fair value, is used to account for long-term investments in equity securities with insignificant influence.

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

55) Hamasaki Company owns 30% of CDW Corp. stock and has significant influence. 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.

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

57) To prepare consolidated financial statements when a U.S. parent company has an international subsidiary, the international subsidiary's financial statements must be translated into U.S. dollars.

58) If a U.S. company's credit sale to an international customer allows payment to be made in a foreign currency, the sale transaction is recorded using the exchange rate on the date of sale.

59) If a U.S. Company's credit sale to an international customer allows payment to be made in a foreign currency, the same exchange rate must be used for the date of sale and the cash payment date.

60) Kim Manufacturing purchased on credit £20,000 worth of parts from a British company when the exchange rate was $1.66 per British pound. At the year-end balance sheet date, the exchange rate increased to $1.69. Kim must record a gain of $600.

61) Maroon Company sold supplies in the amount of €15,000 (euros) to a French company when the exchange rate was $1.15 per euro. At the time of payment, the exchange rate decreased to $1.12. Maroon must record a loss of $450.

62) 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.

63) Short-term investments include:

A) Securities that management intends to convert to cash within the longer of one year or the current operating cycle, and are readily convertible to cash.

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

C) Stocks not intended to be converted into cash.

D) Bonds not intended to be converted into cash.

E) Sinking funds not intended to be converted into cash.

64) 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.

65) Long-term investments include:

A) Investments 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.

66) Strickland Corporation has invested in debt securities. Strickland intends to actively buy and sell 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.

67) All of the following statements regarding stock investments with insignificant influence are true except for:

A) They are recorded at cost when acquired.

B) They are valued at fair value.

C) They report realized gain (or loss) in a permanent asset account, Fair Value Adjustment—Stock.

D) They report any unrealized gain (or loss) in the income statement.

E) They are adjusted to fair value at the end of each period.

68) 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.

69) 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.

70) 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.

71) A company has an investment in 9% bonds with a par value of $100,000 that pays 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.

72) 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. Roe's entry to record the receipt of these dividends is:

A) Debit Cash, $8,000; credit Long-Term Investments, $8,000.

B) Debt Long-Term 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 Interest Revenue, $8,000.

73) 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.

74) A company paid $37,800 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.

75) A company paid $37,800 cash to acquire stock investments with insignificant influence (with a par value of $38,325). The correct entry to record the purchase of the investment is:

A) Debit Stock Investments $37,800; credit Cash $37,800.

B) Debit Stock Investments $38,325; credit Cash $38,325.

C) Debit Cash $40,000; credit Stock Investments $40,000.

D) Debit Stock Investments $37,800; debit Investment Expense $525; credit Cash $38,325.

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

76) 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 (assume the semiannual interest was separately recorded):

A) debit Long-Term 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 Long-Term Investments—Trading, $75,000.

77) 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 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 Investments—HTM $160,000; credit Cash $160,000.

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

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

A) debit Cash, $4,000; credit Long-Term Investments—HTM, $4,000.

B) debt Cash, $2,000; credit Long-Term Investments—HTM, $2000.

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.

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

A) Controlling method.

B) Consolidation method.

C) Investor method.

D) Investment method.

E) Trading method.

80) The controlling investor of a long-term investment with controlling interest is called the:

A) Owner.

B) Subsidiary.

C) Parent.

D) Investee.

E) Senior entity.

81) 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.

82) 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%.

83) Long-term investments cannot include:

A) Held-to-maturity debt securities.

B) Securities with maturity dates within three months.

C) Equity securities giving an investor insignificant influence over an investee.

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

E) Available-for-sale debt securities.

84) Consolidated financial statements:

A) Show the financial statements of all entities under the 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 line items for investments in the subsidiaries on the balance sheet.

E) Do not include a balance sheet.

85) 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 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.

86) 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.

87) 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.

88) The price of one currency stated in terms of another currency is called a(n):

A) Foreign exchange rate.

B) Currency transaction.

C) Historical exchange rate.

D) International conversion rate.

E) Currency rate.

89) All of the following statements relating to accounting for international operations are true except:

A) Foreign exchange gains or losses can occur when accounting for international sales transactions.

B) Gains and losses from foreign exchange transactions are accumulated in the Fair Value Adjustment Account and are reported on the balance sheet.

C) Gains and losses from foreign exchange transactions are accumulated in the Foreign Exchange Gain (or Loss) account.

D) The balance in the Foreign Exchange Gain (or Loss) account is reported on the income statement.

E) Foreign exchange gains or losses can occur when accounting for international purchases transactions.

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

A) Political conditions.

B) Economic conditions.

C) Supply and demand for currencies.

D) Expectations of future events.

E) Whether the companies are considered multinational.

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

A) Multinational currency.

B) Price-level-adjusted currency.

C) Specific currency.

D) Reporting currency.

E) Historical cost currency.

92) If the exchange rate for Canadian and U.S. dollars is 0.82777 to 1, this implies that 3 Canadian dollars will buy ________ worth of U.S. dollars.

A) $0.2759

B) $0.82777

C) $1.82777

D) $2.48

E) $1.00

93) Kreighton Manufacturing purchased on credit £50,000 worth of production materials from a British company when the exchange rate was $1.97 per British pound. At the year-end balance sheet date, the exchange rate increased to $2.76. If the liability is still unpaid at that time, Kreighton must record a:

A) gain of $39,500.

B) loss of $39,500.

C) gain of $138,000.

D) loss of $138,000.

E) neither a gain nor loss.

94) Marshall 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. Marshall must record a:

A) gain of $9,750.

B) gain of $20,500.

C) loss of $9,750.

D) loss of $20,500.

E) neither a gain nor loss.

95) 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 the gross margin ratio and debt ratio.

D) A high return on total assets is desirable.

E) Analysis of return on total assets is not beneficial in evaluating profitability.

96) 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%

97) 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%

98) 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%.

99) 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%.

100) 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.

101) 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%

102) 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.

103) 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) Stock investments with insignificant influence.

E) Trading debt securities.

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

A) Available-for-sale securities.

B) Held-to-maturity securities.

C) Trading securities.

D) Realizable securities.

E) Liquid securities.

105) Investments in trading securities:

A) Include only equity securities.

B) Are reported as current assets.

C) Include debt and equity securities.

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

E) Are long-term investments.

106) 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.

107) 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.

108) 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.

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 debt securities follows. 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 Realized 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.

110) 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 debt securities follows. The year-end adjusting entry to record the unrealized gain/loss at December 31, 20X2 is:

A) Debit Unrealized Gain – Equity $10,000; Credit Fair Value Adjustment – Available-for-Sale (LT) $10,000.

B) Debit Fair Value Adjustment – Available-for-Sale (LT) $19,000; Credit Unrealized Loss – Equity $9,000; Credit Unrealized Gain – Equity, $10,000.

C) Debit Fair Value Adjustment – Available-for-Sale (LT) $10,000; Credit Unrealized Gain – Equity, $10,000.

D) Debit Fair Value Adjustment – Available-for-Sale (LT) $10,000; Credit Unrealized Loss – Equity $10,000.

E) Debit Fair Value Adjustment – Available-for-Sale (LT) $19,000; Credit Unrealized Gain – Equity $19,000.

111) Trading (debt) securities are:

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

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

C) Recorded at cost and then reported at fair value on the balance sheet.

D) Intended to be held to maturity.

E) Always classified as Long-Term Investments.

112) All of the following are true for available-for-sale debt securities except for:

A) Recorded at cost when acquired.

B) Earn interest that is reported in the income statement.

C) Classified as either short-term or long-term securities.

D) Reported at fair value on the balance sheet.

E) Actively managed like Trading Securities.

113) J.P. Industries purchased Yang's notes for $143,375 as a long-term investment. The investment is classified as available-for-sale. J.P.'s entry to record the purchase transaction would include a:

A) Credit to Short-Term Investments-AFS for $143,375.

B) Credit to Long-Term Investments-AFS for $143,375.

C) Credit to Notes Payable for $143,375.

D) Debit to Equity Investments-AFS for $143,375.

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

114) Lessington Corporation purchases 4,000 shares of Gonzalez Company common stock for $150,000 cash. Gonzalez has 500,000 shares of stock currently outstanding. Lessington's entry to record the purchase would include a:

A) Debit to Stock Investments for $150,000.

B) Credit to Common Stock for $150,000.

C) Credit Equity Method Investment $150,000.

D) Debit to Long-Term Investments-AFS for $150,000.

E) Debit to Equity Method Investment for $150,000.

115) Six months ago, a company purchased stock investments with insignificant influence for $70,000. This is the company's first and only purchase of stock. The current year-end fair value of the stock is $68,500. The company should record a:

A) Debit to Unrealized Loss—Income for $1,500.

B) Credit to Unrealized Gain—Income for $1,500.

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

D) Credit to Dividend Revenue for $1,500.

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

116) On July 31, Potter Co. purchased 2,000 shares of GigaTech stock for $16,000. GigaTech has 100,000 shares currently outstanding. This is the company's first and only stock investment. On October 31, which is Potter's year-end, the stock had a fair value of $20,000. Potter should record a:

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

B) Credit to Fair Value Adjustment-Stock for $4,000.

C) Credit to Investment Revenue for $4,000.

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

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

117) On March 15, Alan Company purchased 10% of Cameo Corp.'s stock for $35,000. This is the company's first and only stock investment. On Alan's June 30 year-end, the stock had a fair value of $34,000. Alan should do which of the following:

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

B) Record a debit to the Unrealized Loss—Income account.

C) Report a decrease in the Gain on Sale of Investment income statement account.

D) Report an increase in the asset section of the balance sheet.

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

118) 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.

119) 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 Debt Investments for $232,000.

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

C) Credit to Equity Method Investments for $232,000.

D) Debit to Long-Term Investments-HTM for $232,000.

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

120) 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 cash dividend received from Glesson 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.

121) 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 the cash dividend received from Magnor would 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.

122) McVeigh Corp. owns 40% of Gondor Company's common stock. McVeigh received $41,200 in cash dividends from Gondor. The entry to record the cash dividend received from Gondor would 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.

123) Marjam Company owns 41,000 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 the cash dividend received from MacKenzie would include a:

A) Debit to Dividend Revenue for $10,250.

B) Debit to Interest Revenue for $10,250.

C) Credit to Equity Method Investments for $10,250.

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

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

124) 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's Equity Method Investments—Ferris account at December 31 should be:

A) $80,800.

B) $100,000.

C) $95,200.

D) $119,200.

E) $124,000.

125) 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's Equity Method Investments—Jay Corporation account as of December 31 should be:

A) $77,000.

B) $125,000.

C) $173,000.

D) $197,000.

E) $370,000.

126) 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 Investment, $9,000; credit Cash, $9000.

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

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

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

127) On January 4, Year 1, Barber Company purchased 5,000 shares of Convell Company for $60,500. 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 2, 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 Stock Investment $8,200; credit Equity Method Investments $47,280.

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

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

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

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

128) On January 2, Year 1, Barber Company purchased 5,000 shares of Convell Company for $60,500. 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.

129) A U.S. company makes a sale to a foreign customer receivable in 30 days in the customer's currency. The sale would be recorded by the U.S. company on the date:

A) Of sale using a projected estimate of the U.S. dollar value at payment date.

B) Of sale using a 30-day average U.S. dollar value.

C) Of sale using the current dollar value.

D) Of sale using the foreign currency value.

E) When payment is received.

130) When a U.S. company makes a credit sale to an international customer and the sale terms are for payment in a foreign currency, the foreign exchange rate used to record the sale is the exchange rate:

A) Thirty days from the date of sale.

B) At the end of the seller's fiscal year.

C) At the end of the buyer's fiscal year.

D) On the date final payment is made.

E) On the date of the sale.

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

A) $60,000 gain.

B) $60,000 loss.

C) $68,400 loss.

D) $12,600 gain.

E) $12,600 loss.

132) 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 per yen 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 December 31, Higgins should prepare the following journal entry:

A) Debit Sales $90; credit Foreign Exchange Gain $90.

B) Debit Foreign Exchange Loss $90; credit Sales $90.

C) Debit Accounts Receivable-Kagome $90; credit Foreign Exchange Gain $90.

D) Debit Foreign Exchange Loss $90; Accounts Receivable-Kagome $90.

E) No journal entry is required until the amount is collected.

133) 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:

A) Debit Cash $12,915; credit Accounts Receivable-Kagome $12,555; credit Foreign Exchange Gain $360.

B) Debit Cash $12,555; debit Foreign Exchange Loss $360; credit Accounts Receivable-Kagome $12,915.

C) Debit Cash $12,915; credit Accounts Receivable-Kagome $12,645; credit Foreign Exchange Gain $90.

D) Debit Cash $12,645; debit Foreign Exchange Loss $90; credit Accounts Receivable-Kagome $12,915.

E) Debit Cash $12,915; credit Accounts Receivable-Kagome $12,645; credit Foreign Exchange Gain $270.

134) All of the following statements regarding accounting for equity investments with controlling influence are true except:

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

B) The parent uses the consolidation method.

C) The controlling investor is called the parent.

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

E) An investor who owns more than 50% of a company's voting stock has control over the investee.

135) All of the following statements regarding accounting for stock investments with insignificant influence under U.S. GAAP are true except:

A) When an investor owns less than 20% of voting stock, the investor is presumed to have insignificant influence.

B) Stock investments with insignificant influence are reported at fair value.

C) The investment account equals the acquisition cost plus the share of investee income plus the share of investee dividends.

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

E) Any unrealized gain (or loss) from a change in the fair value of stock investments is reported on the income statement.

136) All of the following statements regarding accounting for trading debt 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 in 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 each period.

137) All of the following statements regarding accounting for trading debt 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 in the income statement.

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

138) 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 is added or subtracted to net income to determine comprehensive income.

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

139) 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 these 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 interest is earned.

140) 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 Debt Investments—Trading $300,000.

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

D) A debit to Stock Investments—HTM $300,000.

E) A debit to Cash $300,000.

141) Landmark buys $300,000 of SRW Company's 8%, 5-year bonds payable, at par value on July 1. Interest payments are made semiannually on December 31 and June 30. The journal entry Landmark should make to record interest earned at year-end December 31 is:

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

B) Debit Cash $24,000, credit Interest Revenue $24,000.

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

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

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

142) 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 Long-Term 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.

143) On February 15, Jewel Company buys notes of Marcelo Corp. for $200,110. The investment is classified as long-term available-for-sale securities. This is the company's first and only investment in available-for-sale securities. The journal entry to record the purchase on February 15 is:

A) Debit Debt Investments—HTM $200,100; credit Cash $200,100.

B) Debit Debt Investments—AFS $200,110; credit Notes Payable $200,100.

C) Debit Debt Investments—Trading $200,100; credit Cash $200,100.

D) Debit Debt Investments—Trading $200,110; credit Notes Payable $200,110.

E) Debit Long-Term Investments—AFS $200,110; credit Cash $200,110.

144) On February 15, Jewel Company buys bonds of Marcelo Corp. for $200,000. The investment is classified as available-for-sale securities. This is the company's first and only investment in available-for-sale securities. On December 31, the bonds had a fair value of $200,300. The entry to record the year-end adjustment is:

A) Debit Cash $300; credit Dividend Revenue $300.

B) Debit Fair Value Adjustment—Available-for-Sale $300; credit Unrealized Gain—Equity $300.

C) Debit Fair Value Adjustment—Available-for-Sale $300; credit Interest Revenue $300.

D) Debit Fair Value Adjustment—Available-for-Sale $300; credit Realized Gain—Income $300.

E) Debit Cash $300; credit Gain on Sale of Investments $300.

145) On February 15, Jewel Company buys bonds of Marcelo Corp. for $200,110 cash. This debt investment is classified as available-for-sale securities. This is the company's first and only investment in available-for-sale securities. Jewel Company sells 40% of the Marcelo Corp. debt investment on November 17 of the current year for $102,200 cash. The entry to record this sale includes a:

A) Debit to Cash for $80,044.

B) Credit to Debt Investments—AFS for $80,044.

C) Debit to Loss on Sale of Debt Investments for $22,156.

D) Debit to Debt Investments—AFS for $80,044.

E) Credit to Loss on Sale of Debt Investments for $22,156.

146) On February 15, Jewel Company buys 7,000 shares of Marcelo Corp. common stock at $28.53 per share. The stock is classified as a stock investment with insignificant influence. This is the company's first and only stock investment. 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. The journal entry to record the sale of the 3,500 shares of stock on November 17 is:

A) Debit Cash $102,550; debit Loss on Sale of Stock Investments $2,445; credit Stock Investments $104,99.

B) Debit Cash $102,550; credit Long-Term Investments—Trading $99,855; debit Gain on Sale of Long-Term Investments $2,695.

C) Debit Cash $102,550; credit Long-Term Investments—AFS $100,055; credit Gain on Sale of Long-Term Investments $2,495.

D) Debit Cash $102,550; credit Stock Investments $99,855; credit Gain on Sale of Stock Investments $2,695.

E) Debit Cash $102,550; credit Long-Term Investments—Trading $99,855; credit Gain on Sale of Long-Term Investments $2,695.

147) On February 15, Jewel Company buys 7,000 shares of Marcelo Corp. at $28.53 per share. The stock is classified as a stock investment with insignificant influence. This is the company's first and only stock investment. 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. The fair value of the remaining shares is $29.50 per share. The impact on Jewel's net income as a result of its investment in Marcelo Corp. was a(n):

A) Increase to income of $14,140.

B) Increase to income of $8,050.

C) Increase to income of $10,745.

D) Decrease to income of $8,050.

E) Decrease to income of $5,440.

148) On February 15, Jewel Company buys 7,000 shares of Marcelo Corp. at $28.53 per share. The purchase is classified as a stock investment with insignificant influence. This is the company's first and only stock investment. 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 30 and ultimately sells half of the Marcelo Corp. stock on November 17 of the current year for $29.30 per share. The fair value of the remaining shares is $29.50 per share at year-end. The amount that Jewel Company should report in the current-year income statement from its investment in Marcelo Corp. is:

A) Unrealized Gain—Income; $10,295.

B) Realized Gain—Income; $3,395.

C) Unrealized Loss—Equity; $3,395.

D) Unrealized Gain—Income; $3,395.

E) Unrealized Loss—Income; $3,395.

149) On February 15, Jewel Company buys 7,000 shares of Marcelo Corp. at $28.53 per share. The stock is classified as a stock investment with insignificant influence. This is the company's first and only stock investment. 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. The fair value of the remaining 3,500 shares is $29.50 per share. The amount that Jewel Company should report in the asset section of its year-end December 31 balance sheet for its investment in Marcelo Corp. is:

A) $200,110.

B) $103,250.

C) $2,245.

D) $3,195.

E) $5,440.

150) Financial statements that show the financial statements of all entities under the parent's control, including all subsidiaries are called:

A) Comprehensive financial statements

B) Consolidated financial statements

C) Equity financial statements

D) Statement of owner's equity

E) Investor financial statements

151) 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.

152) Match the following terms with the appropriate definitions.

A. Equity method

B. Available-for-sale securities

C. Subsidiary

D. Long-term investments

E. Parent company

F. Return on total assets

G. Consolidated financial statements

H. Held-to-maturity securities

I. Trading securities

J. Unrealized gain (loss)

_______ (1) Investments in equity and debt securities that are not readily convertible to cash or are not intended to be converted to cash in the short term.

_______ (2) A corporation controlled by another company when the controlling company owns more than 50% of the investee's voting stock.

_______ (3) Change in fair value that is not yet realized through an actual sale.

_______ (4) Financial statements that show the financial statements of all entities under the parent's control, including all subsidiaries.

_______ (5) A company that owns more than 50% controlling interest in a subsidiary.

_______ (6) Debt securities not classified as trading or held-to-maturity.

_______ (7) Debt securities that a company intends and is able to hold until maturity.

_______ (8) Debt securities that a company intends to actively manage and trade for profit.

_______ (9) A measure of financial performance, computed as net income divided by average total assets.

_______(10) An accounting method for long-term investments in equity when the investor has significant influence over the investee.

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

154) Discuss the reasons companies make investments.

155) Identify the classifications for debt investments in securities.What are the accounting basics for debt investments, including acquisition, interest earned, and disposition?

156) What are the accounting basics for equity securities, including classification and accounting method?

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

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

159) Define the foreign exchange rate between two currencies. Explain its effect on business transactions conducted in a foreign currency.

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

161) Explain how to record the sale of trading securities.

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

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

164) 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.

165) Explain how transactions (both sales and purchases) in a foreign currency are recorded and reported.

166) On January 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 on June 30 and December 31. The company intends to hold these bonds until they mature. Prepare the journal entries to record the bond purchase and receipt of the semiannual interest payments on June 30 and December 31 of the current year.

167) 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 bond purchase.

168) 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.

169) On January 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 June 30 and December 31. The company intends to hold these bonds until they mature. Prepare the journal entry for the interest received on December 31 of the current year.

170) A company paid $600,000 for 1-year, 10% bonds with a par value of $600,000 on July 1. The bonds pay 5% interest semiannually on December 31 and June 30. 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 July 1.

(2) Receipt of semiannual interest only on December 31.

(3) Receipt of semiannual interest only on June 30.

(4) Redemption of the bonds at maturity on June 30.

171) On July 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 June 30 and December 31. 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 December 31 of the current year, and (3) the receipt of the second semiannual payment on June 30.

172) 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.

173) 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. Did the company's performance improve? Explain.

174) 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.

175) 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.

176) 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. Did the company's return on total assets improve? What component(s) might explain this change?

177) 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.

178) 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 any year-end adjustment. Prepare the appropriate adjusting journal entry for this portfolio.

179) 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.

180) Scotsland Company had the following transactions relating to stock investments with insignificant influence during the year. Prepare the required journal entries for these transactions.

181) Mire Corporation had the following transactions involving stock investments with insignificant influence during the year. Prior to these transactions, Mire had never had any investments. Prepare the required journal entries to record these transactions.

182) 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 and the investment is considered a stock investment with insignificant influence. Prepare the investor's journal entry to record the receipt of the cash dividends.

183) Landers, Inc., held 1,500 of Shipman Company common stock with a cost of $36,900. The investment is considered a stock investment with insignificant influence. Landers sold the shares on December 13 for $42,100 cash. Prepare Lander's journal entry to record this sale.

184) Washington Corp. held 1,500 of Vashon Company common stock with a cost of $74,387. The investment is considered a stock investment with insignificant influence. Washington sold the shares on December 13 for $55,275 cash. Prepare Washington's journal entry to record this sale.

185) In the current year, Logic Co. purchased stock of Waterford Co. with a cost of $125,000 and a year-end fair value of $123,700. Logic also purchased 1,500 shares of Jasper Co. common stock with a cost of $25,000 and a year-end fair value of $26,100. These investments are considered stock investments with insignificant influence. Prepare the journal entry to record any necessary fair value adjustment to the stock investments as of its December 31 year-end.

186) In the current year, Largo Co. purchased bonds of MacDermott Corp. with a cost of $125,000 and a year-end fair value of $127,000. These are classified as long-term available-for-sale debt securities. Prepare the journal entry to record any necessary fair value adjustment to the debt investments as of December 31.

187) Barzetti had no investments prior to the current year. It had the following transactions during the year involving stock investments with insignificant influence and also held-to-maturity debt securities. Prepare Barzetti's journal entries to record the transactions and events associated with these investment purchases.

188) Weston Company had the following stock investments with insignificant influence in its portfolio at December 31, Year 1. Weston had several investment transactions during year 2.

(1) Determine the amount Weston should report on its December 31, Year 1 balance sheet for its stock investments.

(2) Determine the amount Weston should report on its December 31, Year 2 balance sheet for its stock investments.

(3) Prepare the necessary adjusting entry to record the fair value adjustment at December 31, Year 2.

189) On January 2, Froxel Company purchased 10,000 shares of Sandia Corp. common stock at $19 per share. 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.

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

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

191) On January 3, Kostansas Corporation purchased 5,000 shares of Morton, Inc. for $40 per share. These shares represent a 40% ownership in Morton, Inc. Prepare the journal entry Kostansas Corporation should record for the purchase of this investment.

192) On January 3, Kostansas Corporation purchased 5,000 shares of Morton, Inc. for $40 per share. 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.

193) On January 3, Kostansas Corporation purchased 5,000 shares of Morton, Inc. for $40 per share. 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.

194) 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.

195) On January 1, Year 1, Rickson Corporation purchased 7,500 shares of AutoTech as an equity method 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:

196) Rainier Importers purchases automotive parts from Austria. Prepare journal entries for the following transactions of Rainier.

197) Silver Era Co. exports Southwestern artwork to Japan. Prepare journal entries for the following transactions.

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

199) FreshFoods, Inc. sells American gourmet foods to merchandisers in Singapore. Prepare the journal entries for FreshFoods, to record the following transactions. Include any year-end adjustments.

200) ________ are investments in securities that management intends to convert to cash within the longer of one year or the operating cycle, and are readily convertible to cash.

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

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

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

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

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

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

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

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

209) Foreign exchange rates fluctuate due to changing ________ and ________ conditions.

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) If a U.S. company makes a credit sale to a foreign company, the sales price must be translated into dollars as of the date of ________.

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

218) 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 ________.

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