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Study Resources (Accounting)

D - 1 Time Value of Money 71.Valente Company is about to issue $3,000,000 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 Valente expect to receive from the sale of these bonds? a.$2,768,338 b.$3,000,000 c.$3,243,315 d.$3,231,660 Solution: ($3,000,000 ? .67556) +.
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E-1 Reporting and Analyzing Investments S-A E 207 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 the separate balance sheets of each of the affiliated companies cannot be added together to.
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E-1 Reporting and Analyzing Investments 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.
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E-1 Reporting and Analyzing Investments BRIEF Exercises Be. 169 Ingles Company had the following transactions pertaining to debt securities held as an investment. Jan.1Purchased 60, 8%, $1,000 Omega Company bonds for $60,000 cash. Interest is payable semiannually on July 1 and January 1. July1Received $2,400 semiannual interest on Omega Company bonds. Instructions Journalize the purchase and the receipt.
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E-1 Reporting and Analyzing Investments Ex. 181 Information pertaining to stock investments in 2012 by Com-ex Corporation follows: Acquired 15% of the 200,000 shares of common stock of Buffalo Company at a total cost of $9 per share on January 1, 2014. On July 1, Buffalo Company declared and paid a cash dividend.
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F - 1 Payroll Accounting MULTIPLE CHOICE QUESTIONS               11.Which one of the following payroll taxes does not result in a payroll tax expense for the employer?               a.FICA tax               b.Federal income tax               c.Federal unemployment tax               d.State unemployment tax               12.Lucie Ball's regular rate of pay is $15 per hour with one and one-half times.
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E-1 Reporting and Analyzing Investments Ex. 187 On January 5, 2012, JBC Company purchased the following stock investments: 300 shares Getz Corporation common stock for $4,800. 500 shares Keller Corporation common stock for $10,000. 600 shares R-tel Corporation common stock for $18,000. Assume that JBC Company cannot exercise significant influence over the activities of the investee companies.
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E-1 Reporting and Analyzing Investments 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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D - 1 Time Value of Money BRIEF EXERCISES Be. 80 David Jones deposited $6,500 in an account paying interest of 5% compounded annually. What amount would be in the account at the end of 4 years? Be. 81 Balentyne Company borrowed $95,000 on January 2, 2014. This amount plus accrued interest of 5% compounded annually.
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E-1 Reporting and Analyzing Investments 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.
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E-1 Reporting and Analyzing Investments 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.
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D - 1 Time Value of Money 41.Present value is based on a.the dollar amount to be received. b.the length of time until the amount is received. c.the interest rate. d.all of these answer choices are correct. 42.Which of the following accounting problems does not involve a present value calculation? a.The determination of the market price of a.
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E-1 Reporting and Analyzing Investments 61.On January 1, 2014, Tri-State Company purchased at face value, a $1,000 7%, bond that pays interest annually on January 1. Tri-State Company has a calendar year end. The entry for the receipt of interest on January 1, 2015 is a.Cash70 Interest Revenue70 b.Cash70 Interest Receivable70 c.Cash35 Interest Revenue35 d.Cash35 Interest Receivable35 62.Vangaurd Co. purchased 50,.
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E-1 Reporting and Analyzing Investments Ex. 182 Sandafor Company had these transactions pertaining to stock investments: Feb1Purchased 2,400 shares of BFF common stock (2% of outstanding shares) for $16,500 cash. July1Received cash dividends of $0.80 per share on BFF common stock. Sept.1Sold 800 shares of BFF common stock for $7,900 Dec.1Received cash dividends of $.80per share.
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E-1 Reporting and Analyzing Investments Ex. 188 Santos Corporation has the following trading portfolio of stock investments as of December 31, 2013. Security    CostFair Value A$17,000$16,000 B23,00025,000 C  32,000  28,000 $72,000$69,000 On January 22, 2014, Santos Corporation sold security C for $30,000. Instructions (a)Prepare the adjusting entry for Santos Corporation on December 31, 2013 to report the portfolio at fair value. (b)Indicate.
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E-1 Reporting and Analyzing Investments 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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E-1 Reporting and Analyzing Investments 111.Eglin Company owns 30% interest in the stock of Bosco Corporation. During the year, Rhodes pays $10,000 in dividends to Eglin, and reports a net loss of $250,000. Eglin Company’s investment in Bosco will affect Eglin net income by a a.$10,000 increase. b.$75,000 increase. c.$75,000 decrease. d.$10,000 decrease. 112.FTX Company owns 10%.
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E-1 Reporting and Analyzing Investments APPENDIX E REPORTING AND ANALYZING INVESTMENTS 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.
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E-1 Reporting and Analyzing Investments 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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D - 1 Time Value of Money 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.
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E-1 Reporting and Analyzing Investments 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 Fair Value 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.
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D - 1 Time Value of Money 31.All of the following are necessary to compute the future value of a single amount except the a.interest rate. b.number of periods. c.principal. d.maturity value. 32.If $10,000 is put in a savings account paying interest of 4% compounded annually, what amount will be in the account at the end of.
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E-1 Reporting and Analyzing Investments 91.Hardin Park Company had these transactions pertaining to stock investments Feb. 1Purchased 2,500 shares of Raley Company (10%) for $44,500 cash. June 1Received cash dividends of $1 per share on Raley stock. Oct. 1Sold 1,000 shares of Raley stock for $19,500. Dec. 1Received cash dividends of $2 per share on Raley.
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E-1 Reporting and Analyzing Investments Be. 171 Cupcake Company had the following transactions pertaining to its temporary stock investments. Jan.1Purchased 600 shares of La Crema Company stock for $7,050 cash . June1Received cash dividends of $0.40 per share on the La Crema Company stock. Sept.15Sold 300 shares of the La Crema Company stock for $3,400 cash. Instructions Journalize.
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E-1 Reporting and Analyzing Investments 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.
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F - 1 Payroll Accounting APPENDIX F payroll accounting TRUE-FALSE STATEMENTS               1.FICA taxes and federal income taxes are levied on employees' earnings without limit.               2.FICA taxes withheld and federal income taxes withheld are mandatory payroll deductions.               3.An employee earnings record is a cumulative record of each employee's gross earnings, deductions, and net pay during.
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E-1 Reporting and Analyzing Investments Ex. 178 Eaton Company had the following transactions pertaining to its short-term stock investments. Jan.1Purchased 900 shares of Stafford Company stock for $11,880 cash. June1Received cash dividends of $0.60 per share on the Stafford Company stock. Sept.15Sold 450 shares of the Stafford Company stock for $5,200. Dec.1Received cash dividends of $0.60 per.
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E-1 Reporting and Analyzing Investments 81.On January 1, 2014, Orleans industries acquired a 15% interest in Florida Corporation through the purchase of 12,000 shares of Florida Corporation common stock for $320,000. During 2014, Florida Corp. paid $80,000 in dividends and reported a net loss of $100,000. Orleans is able to exert significant.
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E-1 Reporting and Analyzing Investments 101.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.
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D - 1 Time Value of Money Be. 84 Winek Company deposited $12,500 annually for 6 years in an account paying 5% interest compounded annually. What is the balance of the account at the end of the 6th year? Be. 85 Toub Company issued $4,000,000, 10-year bonds and agreed to make annual deposits of $303,500.
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E-1 Reporting and Analyzing Investments 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.
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E-1 Reporting and Analyzing Investments Exercises Ex. 175 Le Tourneau Company had the following transactions pertaining to debt securities held as a I short – term investment. Jan.1Purchased 90, 6%, $1,000 Lido Company bonds for $90,000 cash. Interest is payable semiannually on July 1 and January 1. July1Received semiannual interest on Lido Company bonds. Oct.1Sold 45 Lido.
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E-1 Reporting and Analyzing Investments 161.All of the following statements about financial statement gains and losses on investments are true except a.the account "Fair Value Adjustment – 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.
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E-1 Reporting and Analyzing Investments Ex. 184 Ultra Cosmetics acquired 10% of the 200,000 shares of common stock of Kardashian Fashion at a total cost of $14 per share on March 18, 2014. On June 30 Kardashian declared and paid a $96,000 dividend. On December 31 Kardashian reported net income of $244,000 for.
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D - 1 Time Value of Money Be. 96 Beaufort Company issued $400,000, 10%, 2-year bonds that pay interest semiannually. Compute the amount at which the bonds would sell if investors required a rate of return of 8%. Be. 97 SBB Company issued 11%, 5-year, $600,000 face value bonds that pay interest semi-annually on October.
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D - 1 Time Value of Money 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.
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E-1 Reporting and Analyzing Investments S-A E 211(Ethics) High Country Stables, Inc., operates several dog-racing tracks throughout the United States. Since most facilities are outdoor tracks only, most of the cash receipts for High Country are received from April through October. These funds are usually invested in temporary, very liquid investments, such as.
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E-1 Reporting and Analyzing Investments 51.Mazzeo Company acquires 80 Dodd’s 10%, 5 year, $1,000 bonds on January 1, 2014 for $80,000. If Mazzeo sells all of its Dodd’s Bonds for $78,400 what gain or loss is recognized? a.Loss of $9,600 b.Loss of $1,600 c.Gain of $1,600 d.Gain of $9,600 52.At the time of acquisition of a.
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E-1 Reporting and Analyzing Investments 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.              Fair Value 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. ____             .
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E-1 Reporting and Analyzing Investments Ex. 180 Crespo Company purchased 42,000 shares of common stock of the Paive Corporation as an investment for $1,000,000. During the year, Paive 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 Paive Corporation: 1.Prepare the journal entry.
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E-1 Reporting and Analyzing Investments Ex. 177 The following transactions were made by Coral Company. Assume all investments are short-term. June2Purchased 600 shares of Schmidt Corporation common stock for $45 per share. July1Purchased 210 Dantzler Corporation bonds for $210,000. 30Received a cash dividend of $2.25 per share from the Schmidt Corporation. Sept.15Sold 120 shares of Schmidt Corporation.
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E-1 Reporting and Analyzing Investments 71.On January 1, Bay View Company purchased as an investment a $1,000, 6% bond for $1,000. The bond pays interest on January 1 and July 1. The bond is sold on September 1 for $1,050 plus accrued interest. Interest has not been accrued since the last interest.
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D - 1 Time Value of Money 51.The present value of $10,000 to be received in 5 years will be smaller if the discount rate is a.increased. b.decreased. c.not changed. d.equal to the stated rate of interest. 52.Mango Madness Company is considering purchasing equipment. The equipment will produce the following cash flows: Year 1$40,000 Year 2$30,000 Mango Madness requires a.
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F - 1 Payroll Accounting               21.The tax that is paid equally by the employer and employee is the               a.federal income tax.               b.federal unemployment tax.               c.state unemployment tax.               d.FICA tax.               22.The effective federal unemployment tax rate is usually               a.6.2%.               b.0.8%.               c.5.4%.               d.8.0%.               23.Changes in pay rates during employment should be authorized by.
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E-1 Reporting and Analyzing Investments 151.Assume that Chapman’s Inc.’s trading securities have a total cost of $185,000 and a total fair value of $215,000 at year end. The related adjusting entry would include a debit to a.Unrealized Gain for $30,000. b.Fair Value Adjustment – Trading for $30,000. c.No adjustment since only realized gains are recorded. d.Fair.
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E-1 Reporting and Analyzing Investments Be. 173 On January 1, Ollinger Company purchased a 25% equity investment in Fava Company for $300,000. At December 31 Fava declared and paid a $20,000 dividend and reported net income of $120,000. Instructions (a)  Journalize the transactions (b) Determine the amount to be reported as an investment in Fava stock.
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