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Ex. 177 The following transactions were made by White Company. Assume all investments are short-term. June2Purchased 600 shares of Brock Corporation common stock for $45 per share. July1Purchased 210 Damon Corporation bonds for $231,000. 30Received a cash dividend of $2 per share from the Brock Corporation. Sept.15Sold 120 shares of Brock Corporation stock for $50.
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TRUE-FALSE STATEMENTS               1.Corporations purchase investments in debt or equity securities generally for one of two reasons.               2.A reason some companies purchase investments is because they generate a significant portion of their earnings from investment income.               3.Pension funds and mutual funds are corporations that regularly invest for strategic reasons.               4.The purchase.
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              51.Reed Company acquires 80 Holmes 10%, 5 year, $1,000 bonds on January 1, 2012 for $82,000. This includes a brokerage commission of $2,000. If Reed sells all of its Holmes Bonds for $83,200 and pays $2,400 in brokerage commissions, what gain or loss is recognized? a.Gain of $3,200 b.Loss of.
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111.Scott Company owns 30% interest in the stock of Rhodes Corporation. During the year, Rhodes pays $100,000 in dividends to Scott, and reports a net loss of $250,000. Scott Company’s investment in Rhodes will affect Scott net income by a a.$100,000 increase. b.$75,000 increase. c.$75,000 decrease. d.$100,000 decrease.               112.Eusey Company owns 10% interest in.
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121.If the equity method is being used, cash dividends received a.are credited to the Dividend Revenue account. b.require no entry because investee net income has already been recorded at the proper proportion on the investor's books. c.are credited to the Stock Investments account. d.are credited to the Revenue from Investment in Stock account. 122.If the.
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              21.Under the equity method, the receipt of dividends from the investee company results in an increase in the Stock Investments account.               22.Under the equity method, the receipt of dividends from the investee company results in a credit to the Dividend Revenue account.               23.In accounting for stock investments of less.
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COMPLETION STATEMENTS               98.Compound interest is computed on the_____________ and on any _______________ earned that has not been paid or withdrawn.               99.The future value of a ________________ is the value at the future date of a given amount invested, assuming compound interest.               100.Payments or receipts of equal dollar amounts.
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MATCHING 202.Match the items below by entering the appropriate code letter in the space provided. A.Available-for-sale securities              F.              Consolidated financial statements B.Subsidiary company              G.              Controlling interest C.Equity method              H.              Market Adjustment D.Unrealized Gain or Loss—Equity              I.              Vertical acquisition E.Fair value              J.              Long-term investments ____              1.Valuation allowance account. ____              2.Amount for which a security could be sold. ____              3.Ownership of.
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151.Assume that Milner Inc.’s trading securities have a total cost of $200,000 and a total fair value of $215,000 at year end. The related adjusting entry would include a debit to a.Unrealized Gain for $15,000. b.Market Adjustment – Trading for $15,000. c.No adjustment since only realized gains are recorded. d.Market Adjustment – Trading for.
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161.All of the following statements about financial statement gains and losses on investments are true except a.the account "Market Adjustments – Available-For-Sale" is reported on the balance sheet. b.unrealized losses on trading securities are reported on the income statement. c.unrealized losses on available-for-sale securities are reported on the income statement. d.the account "Market Adjustments.
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Ex. 185 Fredrickson Inc. obtained significant influence over Unruh Corporation by buying 40% of Unruh 30,000 outstanding shares common stock at a total cost of $11 per share on January 1, 2012. On June 15 Unruh declared and paid a cash dividend of $35,000. On December 31 Unruh reported a net.
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MULTIPLE CHOICE QUESTIONS               11.Changes in pay rates during employment should be authorized by the a.personnel department. b.payroll department. c.treasurer's department. d.timekeeping department.               12.Which of the following employees would likely receive a salary instead of wages? a.Store clerk b.Factory employee c.Sales manager d.Manual laborer               13.Control over timekeeping does not include a.having one employee punch the time cards for several employees.
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Be. 93 Topper Company is considering purchasing equipment. The equipment will produce the following cash flows: Year 1, $50,000; Year 2, $60,000; Year 3, $75,000. Topper requires a minimum rate of return of 10%. What is the maximum price Topper should pay for this equipment? Be. 94 Haden Railroad Co. is about to.
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Be. 173 On January 1, Ott Company purchased a 25% equity investment in Fife Company for $300,000. At December 31 Fife declared and paid a $20,000 dividend and reported net income of $100,000. Instructions (a)   Journalize the transactions (b)   Determine the amount to be reported as an investment in Fife stock at December 31. Be..
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MULTIPLE CHOICE QUESTIONS               41.Corporations invest in other companies for all of the following reasons except to a.house excess cash until needed. b.generate earnings. c.meet strategic goals. d.increase trading of the other companies’ stock.               42.When investing excess cash for short periods of time, corporations invest in a.stocks of companies in a related industry. b.debt securities. c.low-risk, highly liquid.
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              11.Dividends received on stock investments of less than 20% should be credited to the Stock Investments account.               12.Dividends received on investments are accounted for in the same way under the cost and the equity method.               13.Unless there is evidence to the contrary, an investor owning 25% of the stock.
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Ex. 32 Assume that the payroll records of Zephyr Oil Company provided the following information for the weekly payroll ended November 26, 2011. Year-to-Date HourlyFederalEarnings Through EmployeeHours WorkedPay RateIncome TaxUnion Dues  Previous Week  A. Yoke43$50$296$9$101,000 B. Bell431063523,200 C. Call371689—5,100 D. Dyke 4322175749,500 Additional information: All employees are paid overtime at time and a half for hours worked in excess.
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              91.Hagen Company had these transactions pertaining to stock investments Feb. 1Purchased 2,500 shares of Farley Company (10%) for $41,500 cash plus brokerage fees of $1,000. June 1Received cash dividends of $2 per share on Farley stock. Oct. 1Sold 1,000 shares of Farley stock for $20,000 less brokerage fees of $500. Dec. 1Received cash.
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Ex. 180 Kasper Company purchased 42,000 shares of common stock of the Ikerd Corporation as an investment for $1,000,000. During the year, Ikerd Corporation reported net income of $400,000 and paid dividends of $100,000. Instructions (a)Assuming that the 42,000 shares represent a 15% interest in Ikerd Corporation: 1.Prepare the journal entry to record the.
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              61.On January 1, 2012, Dunbar Company purchased at face value, a $1,000 5%, bond that pays interest annually on January 1. Dunbar Company has a calendar year end. The entry for the receipt of interest on January 1, 2013 is a.Cash              50 Interest Revenue                            50 b.Cash              50 Interest Receivable                            50 c.Cash              25 Interest.
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Ex. 178 Ellerman Company had the following transactions pertaining to its short-term stock investments. Jan.1Purchased 900 shares of Elam Company stock for $10,800 cash plus brokerage fees of $1,080. June1Received cash dividends of $0.50 per share on the Elam Company stock. Sept.15Sold 450 shares of the Elam Company stock for $5,300 less brokerage fees.
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COMPLETION STATEMENTS               190.The purchase of a company in the same industry that does the same activity is called a ______________ acquisition.               191.Debt investments are investments in government and _____________ bonds.               192.When an investor owns between 20% and 50% of the common stock of a corporation, it is generally presumed that.
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              31.Unrealized gains and losses on available-for-sale securities are reported on the income statement.               32.The valuation of available-for-sale securities is similar to the procedures followed for trading securities, except that changes in fair value are not recognized in current income.               33.An unrealized gain or loss on trading securities is reported.
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Ex. 188 Sauder Corporation has the following trading portfolio of stock investments as of December 31, 2011. Security    Cost Fair Value A$17,000$16,000 B23,00025,000 C  32,000  28,000 $72,000$69,000 On January 22, 2012, Sauder Corporation sold security C for $30,000. Instructions (a)Prepare the adjusting entry for Sauder Corporation on December 31, 2011 to report the portfolio at fair value. (b)Indicate the balance sheet.
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Ex. 182 Salazar Company had these transactions pertaining to stock investments: Feb1Purchased 2,400 shares of TGY common stock (2% of outstanding shares) for $16,000 cash plus brokerage fees of $500. July1Received cash dividends of $1 per share on TGY common stock. Sept.1Sold 800 shares of TGY common stock for $8,000 less brokerage fees of.
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Ex. 179 Garrison Company had the following transactions pertaining to its short-term stock investments. Jan.1Purchased 2,000 shares of Harlan Company stock for $100,000 cash plus brokerage fees of $1,100. June1Received cash dividends of $3.00 per share on the Harlan Company stock. Sept.15Sold 1,000 shares of the Harlan Company stock for $49,800 less brokerage fees.
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              71.Fisher Company is about to issue $300,000 of 5-year bonds, with a contract rate of interest of 10%, payable semiannually. The discount rate for such securities is 8%. How much can Fisher expect to receive from the sale of these bonds? a.$276,834. b.$300,000. c.$324,332. d.None of the above.               72.If a bond has a.
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              21.FICA taxes do not provide workers with a.life insurance. b.supplemental retirement. c.employment disability. d.medical benefits.               22.Employees claim allowances for income tax withholding on a.Form W-4. b.Form W-2. c.Form 1040. d.Schedule A.               23.The journal entry to record the payroll for a period will include a credit to Wages and Salaries Payable for the gross a.amount less all payroll deductions. b.amount.
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TRUE-FALSE STATEMENTS               1.Internal control over payroll is not necessary because employees will complain if they do not receive the correct amount on their payroll checks.               2.A good internal control feature is to have a written hiring authorization form completed before a new employee is added to the payroll.               3.A good.
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Ex. 187 On January 5, 2012, Jensen Company purchased the following stock investments: 300 shares Glenn Corporation common stock for $4,800. 500 shares Kiley Corporation common stock for $10,000. 600 shares Riggs Corporation common stock for $18,000. Assume that Jensen Company cannot exercise significant influence over the activities of the investee companies and that the.
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141.Trading securities are reported on the balance sheet at a.fair value. b.cost. c.cost, adjusted for the effects of interest. d.lower of cost or market. 142.The Market Adjustment account is a(n) a.offset account. b.adjustment account. c.valuation allowance account. d.opposite account.               143.Reporting investments at fair value is a.applicable to equity securities only. b.applicable to debt securities only. c.applicable to both debt and equity securities. d.a.
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SHORT-ANSWER ESSAY QUESTIONS   S-A E 203 1.What are the reasons that corporations invest in securities? S-A E 204 (a)When should a long-term investment in common stock be accounted for by the equity method? (b)When is revenue recognized under the equity method? S-A E 205 If a company has a stock investment that is properly accounted for.
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              71.On January 1, Stuart Company purchased as an investment a $1,000, 6% bond for $1,050. The bond pays interest on January 1 and July 1. The bond is sold on September 1 for $1,100 plus accrued interest. Interest has not been accrued since the last interest payment date. What.
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              81.On January 1, 2012, Duvall industries acquired a 15% interest in Florida Corporation through the purchase of 12,000 shares of Florida Corporation common stock for $320,000. During 2012, Florida Corp. paid $80,000 in dividends and reported a net loss of $120,000. Duvall is able to exert significant influence on.
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  BRIEF Exercises Be. 80 Don Foyle deposited $3,000 in an account paying interest of 5% compounded annually. What amount would be in the account at the end of 4 years? Be. 81 Harvey Company borrowed $80,000 on January 2, 2010. This amount plus accrued interest of 5% compounded annually will be repaid at the.
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Exercises Ex. 31 Caroline Vogt had earned (accumulated) salary of $98,000 through November 30. Her December salary amounted to $9,200. Diane Sago began employment on December 1 and will be paid her first month's salary of $3,800 on December 31. Income tax withholding for December for each employee is as follows: Caroline VogtDiane.
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S-A E 208 The Market Adjustment account is a balance sheet account. Identify the asset account it is related to. Explain how this account is increased and describe the procedure followed when its related asset account is disposed of. S-A E 209 When a year-end adjustment is made to reduce the trading securities.
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BRIEF Exercises Be. 28 Match the codes assigned to the following payroll functions to the procedures listed below: H = Hiring EmployeesPRE = Preparing the Payroll T = TimekeepingPAY = Paying the Payroll               1.____Distribution of checks by the treasurer.               2.____Supervisor approves hours worked.               3.____Posting job openings.               4.____Maintenance of payroll records.               5.____Verification of payroll calculations.              .
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Be. 95 Beltran Company receives a $150,000, 6-year note bearing interest of 6% (paid annually) from a customer at a time when the discount rate is 8%. What is the present value of the note received by Beltran? Be. 96 Redeker Company issued $400,000, 10%, 2-year bonds that pay interest semiannually. Compute the.
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BRIEF Exercises Be. 169 Hoerner Company had the following transactions pertaining to debt securities held as an investment. Jan.1Purchased 60, 8%, $1,000 Bradt Company bonds for $62,500 cash. Interest is payable semiannually on July 1 and January 1. July1Received $2,400 semiannual interest on Bradt Company bonds. Instructions Journalize the purchase and the receipt of interest. Assume.
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Ex. 176 Templeton Company had the following transactions pertaining to debt securities held as an investment. Jan.1Purchased 60, 8%, $1,000 Ritter Company bonds for $60,000 cash plus brokerage fees of $1,100. Interest is payable semiannually on July 1 and January 1. July1Received semiannual interest on Ritter Company bonds. Sept.1Sold 30 Ritter Company bonds for.
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Exercises Ex. 175 Patterson Company had the following transactions pertaining to debt securities held as an investment. Jan.1Purchased 90, 6%, $1,000 Marks Company bonds for $90,000 cash plus brokerage fees of $950. Interest is payable semiannually on July 1 and January 1. July1Received semiannual interest on Marks Company bonds. Oct.1Sold 45 Marks Company bonds for.
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131.When a company owns more than 50% of the common stock of another company a.consolidated financial statements are usually prepared. b.the cost method of accounting is used. c.they are referred to as the subsidiary. d.they recognize revenue when dividends are received. 132.The company whose stock is owned by the parent company is called the a.controlled company. b.subsidiary.
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MATCHING               106.Match the items below by entering the appropriate code letter in the space provided.               A.Compound interestD.Present value of a single amount               B.Future value of a single amountE.Present value of an annuity               C.Future value of an annuity _____1.The value today of a future amount to be received or paid. _____2.The value at.
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