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Exam 15: Investments

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Question 1

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

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Question 2

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

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Short-term investments are also called marketable securities.

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

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:

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?

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

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

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:

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

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

Profit margin is net sales divided by net income.

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

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.

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

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. Feb.16 Purchased 800 shares of HM Corporation stock at $28 per share plus a $400 brokerage fee. Feb.26 Purchased 500 shares of Sugarland Co.stock at $19 per share plus a $300 brokerage fee. Mar.2 Received a $0.95 per share dividend from the HM Corporation. Mar.28 Sold 200 shares of HM Corporation stock for $31 per share less a $150 brokerage fee. Apr.20 Sold 150 shares of Sugarland Co.stock at $17 per share less a $100 brokerage fee. Apr.30 The company is preparing quarterly financial statements; prepare an adjusting entry for the fair value adjustment on the trading securities.At April 30,the HM stock has a fair value of $30 per share,and the Sugarland stock has a fair value of $16 per share.

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.

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:

Select the correct statement from the following:

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: