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Study Resources (Accounting)

16 - 1 Investments Ex. 162 On February 1, Brutus Company purchased 1,000 shares (2% ownership) of Wynne Company common stock for $25 per share. On March 20, Brutus Company sold 200 shares of Wynne stock for $4,700. Brutus received a dividend of $1.20 per share on April 25. On June 15, Marcus.
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17 - 1 Statement of Cash Flows 107.The following data are available for Sampson Corporation. Net income$200,000 Depreciation expense60,000 Dividends paid90,000 Loss on sale of land15,000 Decrease in accounts receivable30,000 Decrease in accounts payable45,000 Net cash provided by operating activities is: a.$140,000. b.$260,000. c.$160,000. d.$240,000. 108.The following data are available for Alamo Corporation. Sale of land$225,000 Sale of equipment $130,000 Issuance of common stock140,000 Purchase of equipment 70,000 Payment.
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16 - 1 Investments 82.If a company acquires a 40% common stock interest in another company, a.the equity method is usually applicable. b.all influence is classified as controlling. c.the cost method is usually applicable. d.the ability to exert significant influence over the activities of the investee does not exist. 83.If a common stock investment is sold at.
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16 - 1 Investments 102.Short-term stock investments should be valued on the balance sheet at a.the lower of cost or fair value. b.the higher of cost or fair value. c.cost. d.fair value. 103.In recognizing a decline in the fair value of short-term stock investments, an unrealized loss account is debited because a.management intends to realize this loss in.
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15 - 1 Long-Term Liabilities SHORT-ANSWER ESSAY QUESTIONS S-A E  219 Bonds are frequently issued at amounts greater or less than face value. Describe how the market interest rate, relative to the contractual interest rate, affects the selling price of bonds. Also explain the rationale for requiring an investor to pay accrued interest when.
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16 - 1 Investments BRIEF Exercises BE 141 On January 14, Balcom Corporation purchased 20, 11%, $1,000 Eiger Company bonds for $20,000, plus brokerage fees of $400. On November  30, the company sold 10  of the Eiger Company bonds for $11,600. Prepare journal entries for the purchase and sale of the Eiger Company bonds. BE.
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16 - 1 Investments MULTIPLE CHOICE QUESTIONS 32.Corporations invest excess cash for short periods of time in each of the following except a.equity securities. b.highly liquid securities. c.low-risk securities. d.government securities. 33.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. 34.A typical.
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17 - 1 Statement of Cash Flows TRUE-FALSE STATEMENTS 1.The statement of cash flows is a required statement that must be prepared along with an income statement, balance sheet, and retained earnings statement. 2.For external reporting, a company must prepare either an income statement or a statement of cash flows, but not both. 3.A primary.
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16 - 1 Investments S-A E  188 When a year-end adjustment is made to reduce the trading securities portfolio to market, what effect, if any, will the adjustment have on the balance sheet and the income statement? S-A E  189(Ethics) Greyhound Stables, Inc. operates several dog racing tracks throughout the United States. Since most facilities.
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16 - 1 Investments Exercises Ex. 151 Maxim Corporation had the following transactions pertaining to debt investments. Jan. 1Purchased 80, 8%, $1,000 Woodrow Company bonds for $80,000. July 1Sold 20 Woodrow Company bonds for $21,500. Instructions Prepare journal entries for the purchase and sale of the Woodrow Company bonds. Ex. 152 Quagle Company had the following transactions pertaining to debt.
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16 - 1 Investments 72.When an investor owns between 20% and 50% of the common stock of a corporation, it is generally presumed that the investor a.has insignificant influence on the investee and that the cost method should be used to account for the investment. b.should apply the cost method in accounting for the.
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16 - 1 Investments Ex. 166 At December 31, 2014, the trading securities for Wolfe Company are as follows: Security   Cost  Fair Value X$25,000$27,000 Y  45,000  38,000 $70,000$65,000 Instructions Prepare the adjusting entry at December 31, 2014, to report the securities at fair value. Ex. 167 Plotner Corporation has the following trading portfolio of stock investments as of December 31, 2014. Security   .
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15 - 1 Long-Term Liabilities a Ex. 200 On January 1, 2014, Timber Corporation issued $800,000, 6%, 5-year bonds for $735,110. The bonds were sold to yield an effective-interest rate of 8%. Interest is paid semiannually on June 30 and December 31. The company uses the effective-interest method of amortization. Instructions (a)Prepare a bond discount.
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16 - 1 Investments 122.Which one of the following would not be classified as a short-term investment? a.Marketable stock securities b.Equity method investments c.Marketable debt securities d.Short-term paper 123.Short-term investments are securities that are readily marketable and intended to be converted into cash within the next a.year. b.two years. c.year or operating cycle, whichever is shorter. d.year or operating cycle, whichever.
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17 - 1 Statement of Cash Flows MULTIPLE CHOICE QUESTIONS 37.The statement of cash flows should help investors and creditors assess each of the following except the a.entity's ability to generate future income. b.entity's ability to pay dividends. c.reasons for the difference between net income and net cash provided by operating activities. d.cash investing and financing transactions.
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16 - 1 Investments COMPLETION STATEMENTS               171.Debt investments are investments in government and _____________ bonds.               172.Cost of debt investments includes the price paid plus ______________               173.When an investor owns between 20% and 50% of the common stock of a corporation, it is generally presumed that the investor has _______________ influence over the.
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16 - 1 Investments MATCHING 183.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.              Fair Value Adjustment D.Unrealized Gain or Loss—Equity              I.              Parent company E.Fair value              J.              Long-term investments ____              1.Valuation allowance account. ____              2.Amount for which a security could be.
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16 - 1 Investments Ex. 157 Stewart Corporation's balance sheet at December 31, 2013, showed the following: Short-term investments, at fair value$46,500 Stewart Corporation's trading portfolio of stock investments consisted of the following at December 31, 2013:     Stock       Number of Shares    Cost Conn Common Stock200$28,000 Ares Preferred Stock4006,000 Hall Common Stock300    9,000 $43,000 During 2014, the following transactions took place: Feb.5Sold 100.
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16 - 1 Investments Ex. 158 On January 5, 2014, Grouse Company purchased the following stock securities as a long-term investment: 300 shares Bonter Corporation common stock for $4,500. 500 shares Wane Corporation common stock for $10,000. 800 shares Strauss Corporation common stock for $22,800. Assume that Grouse Company cannot exercise significant influence over the activities of.
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16 - 1 Investments BE 145 Jenner Company had the following transactions pertaining to its short-term stock investments. Jan.1Purchased 600 shares of Pork Company stock for $8,420. June1Received cash dividends of $0.60 per share on the Pork Company stock. Sept.15Sold 300 shares of the Pork Company stock for $3,400 Cash. Instructions Journalize the transactions. BE 146 On January 1, 2014,.
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17 - 1 Statement of Cash Flows 87.Starting with net income and adjusting it for items that affected reported net income but which did not affect cash is called the a.direct method. b.indirect method. c.working capital method. d.cost-benefit method. 88.In calculating net cash provided by operating activities using the indirect method, an increase in prepaid expenses during.
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17 - 1 Statement of Cash Flows 77.If a loss of $25,000 is incurred in selling (for cash) office equipment having a book value of $90,000, the total amount reported in the cash flows from investing activities section of the statement of cash flows is a.$65,000. b.$90,000. c.$115,000. d.$25,000. 78.Wilson Company reported net income of $105,000 for.
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16 - 1 Investments TRUE-FALSE STATEMENTS 1.Corporations purchase investments in debt or stock 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.The accounting for short-term debt investments and for long-term debt investments is similar. 4.When debt investments, are.
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16 - 1 Investments 92.On January 1, 2014, Dumas Industries acquired a 18% interest in Arlongton Corporation through the purchase of 12,000 shares of Arlongton Corporation common stock for $250,000. During 2014, Arlongton Corp. paid $60,000 in dividends and reported a net loss of $90,000. Dumas is able to exert significant influence.
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16 - 1 Investments SHORT-ANSWER ESSAY QUESTIONS S-A E  184 Distinguish between the cost and equity methods of accounting for investments in stocks. S-A E  185 A consolidated balance sheet reports the financial position of two or more legal entities just as if they were one reporting unit. Explain why all the individual items appearing on.
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16 - 1 Investments Ex. 153 Pincher Company purchased 50 Issac Company 12%, 10-year, $1,000 bonds on January 1, 2014, for $50,000. The bonds pay interest semiannually. On January 1, 2015, after receipt of interest, Pincher Company sold 30 of the bonds for $28,300. Instructions Prepare the journal entries to record the transactions described above. Ex..
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16 - 1 Investments Ex. 164 Presented below are two independent situations. 1.Guo Cosmetics acquired 10% of the 200,000 shares of common stock of Chy Fashion at a total cost of $12 per share on March 18, 2014. On June 30, Chy declared and paid a $50,000 dividend. On December 31, Chy reported net.
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15 - 1 Long-Term Liabilities a Ex. 203 Capital Company issued $600,000, 10%, 20-year bonds on January 1, 2014, at 103. Interest is payable semiannually on July 1 and January 1. Capital uses the straight-line method of amortization and has a calendar year end. Instructions Prepare all journal entries made in 2014 related to the.
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15 - 1 Long-Term Liabilities S-A E 224 Sarah Mongan is discussing the advantages of the effective-interest method of bond amortization with her accounting staff. What do you think Sarah is saying? S-A E  225(Ethics) Ton Janner, a 26-year-old entrepreneur, started Bells & Whistles (B&W), Inc., a firm that specializes in top-of-the-line add-ons for computer.
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16 - 1 Investments 112.The balance sheet presentation of an unrealized loss on an available-for-sale security is similar to the statement presentation of a.treasury stock. b.discount on bonds payable. c.allowance for doubtful accounts. d.prepaid expenses. 113.At the end of its first year, the trading securities portfolio consisted of the following common stocks. Cost                Fair Value Atrium Corporation.
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15 - 1 Long-Term Liabilities MATCHING 218.Match the items below by entering the appropriate code letter in the space provided.               A.Serial bondsG.Straight-line method of amortization               B.Debenture bondsH.Bonds               C.Bond indentureI.Debt to total assets ratio               D.Premium on bonds payableJ.Capital lease               E.Discount on bonds payableK.Operating lease               F.Effective-interest method of amortizationL.              Registered bonds _____              1.A contractual arrangement which.
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17 - 1 Statement of Cash Flows 97.Which of the following adjustments to convert net income to net cash provided by operating activities is incorrect? Add to Net IncomeDeduct from Net Income a.Accounts Receivabledecreaseincrease b.Prepaid Expensesincreasedecrease c.Inventorydecreaseincrease d.Accounts Payableincreasedecrease 98.Which of the following adjustments to convert net income to net cash provided by operating activities is not added.
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16 - 1 Investments 21.If the fair value of an available-for-sale security exceeds its cost, the security should be written up to fair value and a realized gain should be recognized. 22.The Fair Value Adjustment account can only have a credit balance or a zero balance. 23.To be classified as a short-term investment, the.
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16 - 1 Investments Ex. 160 On January 1, Oetry Corporation purchased a 35% equity in Selig Company for $190,000. At December 31, Selig declared and paid a $50,000 cash dividend and reported net income of $80,000. Instructions Prepare the necessary journal entries for Oetry Corporation. Ex. 161 Information pertaining to long-term stock investments in 2014 by.
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16 - 1 Investments Ex. 155 On April 1, Sign Company buys 4,000 shares of Polk common stock for $61,500. On October 1, Sign sells 1,000 shares of Polk stock for $20,500.. Instructions Prepare journal entries for the purchase and sale of the Polk common stock. Ex. 156 Hungh Company had the following transactions pertaining to short-term.
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17 - 1 Statement of Cash Flows 47.The cash effects of transactions that create revenues and expenses are a.financing activities. b.investing activities. c.operating activities. d.processing activities. 48.The acquisition of land by issuing common stock is a.a noncash transaction which is not reported in the body of a statement of cash flows. b.a cash transaction and would be reported in.
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17 - 1 Statement of Cash Flows 31.The statement of cash flows classifies cash receipts and cash payments into two categories:  operating activities and nonoperating activities. 32.Financing activities include the obtaining of cash from issuing debt and repaying the amounts borrowed. 33.The adjusted trial balance is the only item needed to prepare the Statement.
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15 - 1 Long-Term Liabilities COMPLETION STATEMENTS               205.Bonds that mature at a single specified future date are called _______________ bonds, whereas bonds that mature in installments are called ________________ bonds.               206.The terms of a bond issue are set forth in a formal legal document called a bond ________________.               207.Unsecured bonds that are.
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16 - 1 Investments Ex. 168 The following information is available for Lewis Corporation's available-for-sale securities at December 31, 2014. Security  Cost  Fair Value X$34,000$30,000 Y  24,000  32,000 $58,000$62,000 Instructions Prepare the adjusting entry to record the securities at fair value at December 31, 2014. Ex. 169 At January 1, 2014, the available-for-sale securities portfolio held by Hyde Corporation consisted of.
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17 - 1 Statement of Cash Flows 57.Of the items below, the one that appears first on the statement of cash flows is a.noncash investing and financing activities. b.net increase (decrease) in cash. c.cash at the end of the period. d.cash at the beginning of the period. 58.Which of the following transactions does not affect cash during.
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16 - 1 Investments 132.An unrealized loss on available-for-sale securities is a.reported under Other Expenses and Losses in the income statement. b.closed-out at the end of the accounting period. c.reported as a separate component of stockholders' equity. d.deducted from the cost of the investment. 133.Securities bought and held primarily for sale in the near term to generate.
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16 - 1 Investments Ex. 159 Rosco Company purchased 35,000 shares of common stock of Paxton Corporation as a long-term investment for $900,000. During the year, Paxton Corporation reported net income of $300,000 and paid dividends of $100,000. Instructions (a)Assuming that the 35,000 shares represent a 10% interest in Paxton Corporation: 1.Prepare the journal entry to.
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17 - 1 Statement of Cash Flows 67.Vision Company purchased treasury stock with a cost of $16,000 during 2014. During the year, the company paid dividends of $20,000 and issued bonds payable for proceeds of $860,000. Cash flows from financing activities for 2014 total a.$840,000 net cash inflow. b.$856,000 net cash inflow. c.$860,000 net cash.
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16 - 1 Investments 11.The Stock Investments account is debited at acquisition under both the equity method and cost method of accounting for investments in common stock. 12.Under the equity method, the investment in common stock is initially recorded at cost, and the Stock Investments account is adjusted annually. 13.Under the equity method, the.
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16 - 1 Investments 62.Gayton Corporation purchased 1,000 shares of Smart common stock ($50 par) at $80 per share as a short-term investment. The shares were subsequently sold at $78 per share. The cost of the securities purchased and gain or loss on the sale were Cost                  Gain or Loss a.$50,000              $2,000 gain b.$50,000             .
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16 - 1 Investments 52.Tempest Co. purchased 60, 6% Urich Company bonds for $60,000 cash. Interest is payable semiannually on July 1 and January 1. If 30 of the securities are sold on July 1 for $32,000, the entry would include a credit to Gain on Sale of Debt Investments for a.$1,600. b.$1,750. c.$1,800. d.$2,000. 53.On January.
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