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Chapter 15:  Investments and Fair Value Accounting 65.Which of the following stock investments should be accounted for using the cost method? a.investments of less than 20% b.investments between 20% and 50% c.investments of less than 20% and investments between 20% and 50% d.all stock investments should be accounted for using the cost method 66.Jarvis Corporation makes.
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Chapter 15:  Investments and Fair Value Accounting 113.  Compare and contrast why companies invest cash in short-term temporary investments vs. long-term investments. 114.  Define debt securities and equity securities.  Include their similarities and differences in your discussion. 115.  On May 1, Knox Inc. purchases $100,000 of 10-year, 6% Madison Corporation bonds dated March.
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Chapter 15:  Investments and Fair Value Accounting 113.  Discuss the appropriate financial treatment when an investor has a greater than 50% ownership in anothercompany. 114.  On January 1, the Valuation Allowance for Trading Investments account has a zero balance.  On December 31,the cost of trading securities portfolio was $64,200, and the fair.
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21.In preparing the statement of cash flows, the correct order of reporting cash activities is financing, operating, andinvesting. a.True b.False 22.A cash flow per share amount should be reported on the statement of cash flows. a.True b.False 23.When using the spreadsheet (work sheet) method to analyzing noncash accounts, no order of analysis is required,but it is.
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158.  Using the following table, what is the present value of $15,000 to be received in 10 years, if the market rate is 5%compounded annually? Periods 5% 6% 7% 10% 1 0.95238 0.94340 0.93458 0.90909 2 0.90703 0.89000 0.87344 0.82645 3 0.86384 0.83962 0.81630 0.75132 4 0.82270 0.79209 0.76290 0.68301 5 0.78353 0.74726 0.71299 0.62092 6 0.74622 0.70496 0.66634 0.56447 7 0.71068 0.66506 0.62275 0.51316 8 0.67684 0.62741 0.58201 0.46651 9 0.64461 0.59190 0.54393 0.42410 10 0.61391 0.55840 0.50835 0.38554 159.  Using the following table, what is the present value of $40,000 to be received in 5 years, if the market rate is 7%compounded annually? Periods 5% 6% 7% 10% 1 0.95238 0.94340 0.93458 0.90909 2 0.90703 0.89000 0.87344 0.82645 3 0.86384 0.83962 0.81630 0.75132 4 0.82270 0.79209 0.76290 0.68301 5 0.78353 0.74726 0.71299 0.62092 6 0.74622 0.70496 0.66634 0.56447 7 0.71068 0.66506 0.62275 0.51316 8 0.67684 0.62741 0.58201 0.46651 9 0.64461 0.59190 0.54393 0.42410 10 0.61391 0.55840 0.50835 0.38554 .
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129.  The net income reported on the income statement for the current year was $210,000.  Depreciation recorded onequipment and a building amount to $62,500 for the year.  Balances of the current asset and current liabilitiesaccounts at the beginning and end of the year are as follows: End of Year Beginning of Year Cash $.
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Chapter 15:  Investments and Fair Value Accounting Match each of the definitions that follow with the appropriate investment term (a–j). debt securities equity securities investor investee cost method trading securities available-for-sale securities held-to-maturity securities equity method business combination 114.  debt and equity securities purchased and sold to earn short-term profits from changes in the market price 115.  preferred and common stock that represent.
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Chapter 15:  Investments and Fair Value Accounting 113.  Journalize the entries to record the following selected equity investment transactions completed by Flurry Companyduring the current year. Flurry’s purchase represents less than 20% of the total outstanding Braxter stock. February 2Purchased for cash 500 shares of Braxter Co. stock for $34 pershare plus.
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112.Net income for the year was $45,500. Accounts receivable increased $5,500, and account payable increased by$11,200. Under the indirect method, the cash flow from operations is a. $51,200 b. $45,500 c. $62,200 d. $28,800 113.Rogers Company reported net income of $35,000 for the year.  During the year, accounts receivable increased by$7,000, accounts payable decreased by.
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Chapter 15:  Investments and Fair Value Accounting 95.The account Unrealized Gain (Loss) on Available-for-Sale Investments should be included on the a.income statement as other revenue (expense) b.balance sheet as an adjustment to the asset account c.balance sheet as an adjustment to stockholders' equity d.statement of retained earnings 96.The account Unrealized Gain (Loss) on Trading Investments should.
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Chapter 15:  Investments and Fair Value Accounting Match each of the definitions that follow with the appropriate investment term (a–j). equity method parent company subsidiary company consolidated financial statements fair value unrealized gain or loss on investments. valuation allowance for investments dividend yield amortized cost cost method 114.  a corporation owning all or the majority of the voting stock of another corporation 115. .
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Chapter 15:  Investments and Fair Value Accounting 113.  Prepare the journal entries for the following transactions for Morgan Co. (a)          Morgan Co. purchased 32,000 shares of the total of 100,000 outstanding shares of GordonCorp. stock for $10 per share plus a $400 commission. (b)         Gordon Corp.'s total earnings for the period are $80,000. (c)         .
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Chapter 15:  Investments and Fair Value Accounting 1.Most companies invest excess cash in bonds as investments in order to profit long-term from the growth of theinvestment. a.True b.False 2.Although marketable securities may be retained for several years, they continue to be classified as temporary,provided they are readily marketable and can be sold for cash.
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92.Cash dividends of $45,000 were declared during the year.  Cash dividends payable were $10,000 at the beginning ofthe year and $15,000 at the end of the year.  The amount of cash for the payment of dividends during the year is a. $50,000 b. $40,000 c. $55,000 d. $35,000 93.On the statement of cash flows, a.
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Match each description below to the appropriate term (a-g). a.  EPS b.  face value c.  callable bond d.  indenture e.  term bond f.   convertible bond g.  serial bond 158.  A measure of income earned by each share of common stock 159.  The entire principal of the bond is paid back on maturity date 160.  The value of a bond stated.
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Chapter 15:  Investments and Fair Value Accounting 113.  Albright Company purchased as a long-term investment $500,000 of Benton Corporation 10-year, 9%bonds.  Present entries to record the following selected transactions: (a)          Purchased bonds at 93 for $465,000. (b)         Sold half the bonds at 98 plus accrued interest of $4,000.  The broker deducted $200 forbrokerage.
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139.  Kennedy, Inc. reported the following data: Net income $118,000 Depreciation expense 15,000 Loss on disposal of equipment (10,000) Gain on sale of building 20,000 Increase in accounts receivable 7,000 Decrease in accounts payable (2,000) Prepare the cash flows from operating activities section of the statement of cash flows using the indirect method. 140.  Lamar Corporation purchased land for $150,000.  Later in the year,.
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Chapter 15:  Investments and Fair Value Accounting 113.  On May 1, Cedar Inc. purchases $150,000 of 10-year, Knox Corporation 8% bonds dated March 1 at 100 plusaccrued interest.  What entry would Cedar record when receiving its semiannual interest on March 1? 114.  On October 1, Marcus Corporation purchased $20,000 of 6% bonds.
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Chapter 15:  Investments and Fair Value Accounting 113.  Journalize the entries to record the following selected equity investment transactions completed by Perry Companyduring the current year.  Perry accounts for this investment using the cost method. February 2 Purchased for cash 900 shares of Dexter Co. stock for $54 pershare plus a $450 brokerage.
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Chapter 15:  Investments and Fair Value Accounting 113.  The cost and fair value of  the trading securities held by Lindy Company as of December 31 are as follows: ? ? Name ? Number of Shares ? Costper Share Fair Valueper Share ? Total Cost ? TotalFair Value Laurie, Inc. 1,200 $10.50 $11.05 Scott Corp. 600 9.00 9.85 Stephanie Company 900 4.10 4.00 Timmer Company 1,400 7.35 6.82 Total (a) Complete the table above to find the total cost and fair value.
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122.Income tax was $175,000 for the year.  Income tax payable was $30,000 and $40,000 at the beginning and end ofthe year, respectively.  Cash payments for income tax reported on the statement of cash flows using the directmethod is a. $175,000 b. $165,000 c. $205,000 d. $215,000 123.Free cash flow is a.all cash in the bank b.cash from.
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62.The last item on the statement of cash flows prior to the schedule of noncash investing and financing activitiesreports a.the increase or decrease in cash b.cash at the end of the year c.net cash flow from investing activities d.net cash flow from financing activities 63.Which of the following is a noncash investing and financing activity? a.payment.
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52.Which of the following is notone of the four basic financial statements? a.balance sheet b.statement of cash flows c.statement of changes in financial position d.income statement 53.Which of the following can be found on the statement of cash flows? a.cash flows from operating activities b.total assets c.total changes in stockholders' equity d.changes in retained earnings 54.On the statement of cash.
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Chapter 15:  Investments and Fair Value Accounting 85.An investor purchased 500 shares of common stock, $25 par, for $19,250. Subsequently, 100 shares were sold for$35 per share.  What is the amount of gain or loss on the sale? a.$3,500 gain b.$350 gain c.$350 loss d.$500 gain 86.When the cost method is used to account for an.
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129.  Identify which section the statement of cash flows (using the indirect method) would present information regardingthe following activities. (Use O for operating, I for investing, or F for financing). Issued common stock Redeemed bonds Issued preferred stock Purchased patents Net income Paid cash dividends Purchased treasury stock Sold long-term investment Sold equipment Purchased buildings Issued bonds 130.  For each of the.
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129.  For each of the following, identify whether it would be disclosed as an operating (O), financing (F), or investing (I)activity on the statement of cash flows under the indirect method.     ____received dividends    ____paid of dividends     ____purchased of equipment    ____net income     ____issued company’s common stock     ____amortization expense 130.  Each of the.
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11.Cash flows from investing activities, as part of the statement of cash flows, would include any receipts from theissuance of bonds payable. a.True b.False 12.There are two alternatives to reporting cash flows from operating activities in the statement of cash flows: (1) thedirect method and (2) the indirect method. a.True b.False 13.The direct method of preparing.
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Chapter 15:  Investments and Fair Value Accounting 113.  Gerardo Company had a net income of $75,000 and other comprehensive income of $12,500 for the year.  OnJanuary 1, the retained earnings balance was $525,000 and the accumulated other comprehensive income balancewas $55,000.  Determine the (a) comprehensive income for the year, (b) retained.
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129.  For each of the following, identify whether it would be disclosed as an operating (O), financing (F), or investing (I)activity on the statement of cash flows under the indirect method. _____purchased buildings _____sold patents _____net income _____issued common stock _____paid cash dividends _____depreciation expense 130.  State the section(s) of the.
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Chapter 15:  Investments and Fair Value Accounting 113.  During the first year of operations, Makala Company purchased two available-for-sale investments as follows: Security Shares Purchased Cost Oceanna Company 700 $29,000 Rockledge, Inc. 1,900 41,000 Assume that as of December 31, the Oceanna Company stock had a market value of $49 per share andRockledge, Inc. stock had a market value of $20.
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Chapter 15:  Investments and Fair Value Accounting 55.Ruben Company purchased $100,000 of Evans Company bonds at 100 plus $1,500 in accrued interest.  The bondinterest rate is 8% and interest is paid semiannually.  The journal entry to record the purchase would be a.debit Investment—Evans Company Bonds, $101,500? credit Cash, $101,500 b.debit Investment—Evans Company Bonds,.
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72.Financing activities include a.lending money b.acquiring investments c.issuing debt d.acquiring long-lived assets 73.Depreciation on factory equipment would be reported in the statement of cash flows prepared by the indirectmethod in a.the cash flows from financing activities section b.the cash flows from investing activities section c.a separate schedule d.the cash flows from operating activities section 74.Which of the following should be.
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82.The following information is available from the current period financial statements: Net income$175,000 Depreciation expense28,000 Increase in accounts receivable16,000 Decrease in accounts payable21,000 The net cash flow from operating activities using the indirect method is a. $166,000 b. $184,000 c. $110,000 d. $240,000 83.On the statement of cash flows, the cash flows from investing activities section would include a.receipts from the.
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Chapter 15:  Investments and Fair Value Accounting 11.An equity investment in less than 20% of another company’s stock is accounted for using the cost method. a.True b.False 12.Ordinarily, a corporation owning a significant portion of the voting stock of another corporation accounts for theinvestment using the equity method. a.True b.False 13.The investor carrying an investment by the.
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Chapter 15:  Investments and Fair Value Accounting 75.Which of the following items would notaffect the investor's income for the period? a.interest received on a temporary investment in bonds b.dividends received on a long-term investment in stock where the investor owns 10% of the investee's stock c.dividends received on a long-term investment in stock where.
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1.The statement of cash flows is notone of the basic financial statements. a.True b.False 2.Cash, as the term is used for the statement of cash flows, could indicate either cash or cash equivalents. a.True b.False 3.The statement of cash flows is an optional financial statement. a.True b.False 4.The statement of cash flows shows the effects on cash of a.
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102.Accounts receivable from sales to customers amounted to $40,000 and $32,000 at the beginning and end of theyear, respectively. Income reported on the income statement for the year was $110,000. Exclusive of the effect ofother adjustments, the net cash flows from operating activities to be reported on the statement of.
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Chapter 15:  Investments and Fair Value Accounting 113.  Skyline, Inc. purchased a portfolio of available-for-sale securities during the current fiscal year.  The cost and fairvalue of this portfolio on December 31, was as follows: Name Number of Shares Total Cost Total Fair Value Blackstone, Inc. 400 $ 4,000 $ 5,200 Flagler Company 200 3,000 2,700 Patterson Corporation 600 7,500 9,800 Total $14,500 $17,700 (a)  Provide the journal entry to.
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Chapter 15:  Investments and Fair Value Accounting 45.Temporary investments a.are reported as current assets b.include cash equivalents c.do not include equity securities d.all are correct 46.Which of the following is nota reason to invest excess cash in temporary investments? a.earn interest revenue b.influence the operations of another company c.receive dividends d.realize gains from the increase in market value of the.
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41.Cash inflows and outflows are notnetted in the investing or financing sections of the statement of cash flows butare separately disclosed to give the reader full information. a.True b.False 42.There is no difference in the investing and financing sections of the statement of cash flows using the indirect anddirect method. a.True b.False 43.Under the direct method.
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Chapter 15:  Investments and Fair Value Accounting 31.Trading securities are reported on the balance sheet at cost. a.True b.False 32.Any difference between the fair market values of the securities and their cost is a realized gain or loss. a.True b.False 33.Unrealized gains and losses on trading securities are notincluded in the calculation of income from operations. a.True b.False 34.Investments in.
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129.  Indicate whether each of the following would be added to or deducted from net income in determining net cashflow from operating activities by the indirect method: (a)          Increase in prepaid expenses (b)         Amortization of patents (c)          Increase in salaries payable (d)         Gain on sale of fixed assets (e)          Decrease in accounts receivable (f)          Increase in.
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Match each description below to the appropriate term (a-g). a.  contract rate b.  effective rate c.  bond discount d.  bond premium e.  bond f.   bond indenture g.  principal 158.  The face amount of each bond 159.  A form of an interest-bearing note 160.  The return required by the market on the day of issuance 161.  If the contract rate exceeds the.
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31.The declaration and issuance of a stock dividend would be reported on the statement of cash flows. a.True b.False 32.If 800 shares of $40 par common stock are sold for $43,000, the $43,000 would be reported in the cash flows fromfinancing activities section of the statement of cash flows. a.True b.False 33.If $475,000 of bonds payable.
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Chapter 15:  Investments and Fair Value Accounting 113.  Journalize the entries to record the following selected bond investment transactions for Southwest Bank: (a)               Purchased $400,000 of Daytona Beach 5% bonds at 100 plus accruedinterest of $4,500. (b)               Received the first semiannual interest. (c)               Sold $250,000 of the bonds at 97, plus accrued interest of.
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Chapter 15:  Investments and Fair Value Accounting 105.All of the following are factors contributing to the trend for regulators to adopt accounting principles using fair valueconcepts except a.a greater percentage of total assets existing as receivables and securities b.pressure on regulators to adopt an international set of accounting principles and standards c.hybrid measurement methods.
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Indicate the section (operating activities, investing activities, financing activities, or none) in which each of thefollowing would be reported on the statement of cash flows prepared by the indirect method: (a)          gain on sale of fixed assets (b)         net income (c)          retirement of long-term debt (d)         sale of capital stock (e)          distribution of stock dividends (f)         .
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Chapter 15:  Investments and Fair Value Accounting 21.The equity method is usually more appropriate for accounting for investments where the purchaser does nothavesignificant influence over the investee. a.True b.False 22.When bonds held as long-term investments are purchased at a price other than the face value, the premium ordiscount should be amortized over the remaining.
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Chapter 15:  Investments and Fair Value Accounting 113.  (a) Discuss factors contributing to the trend to fair value accounting. (b)  What are some of the disadvantages associated with using fair value? 114.  On April 1, ValueTime, Inc. had a market price per common share of $24. For the previous year, ValueTime paid a 115. .
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139.        Samuel Company’s accumulated depreciation—equipment increased by $6,000, while patents decreased by $2,200between balance sheet dates.  There were no purchases or sales of depreciable or intangible assets during theyear.  In addition, the income statement showed a loss of $3,200 from the sale of investments. Assume no changesin noncash current assets.
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