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Exam 25: Investments and International Operations

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Question 21

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An investing company that owns more than ________ of another (investee) company's voting stock is presumed to have controlling influence over the investee.

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Question 22

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On May 1, Franke Co. purchases 2,000 shares of Computech stock for $25,000. This investment is considered to be an available-for-sale investment. On July 31 (Franke's year-end), the stock had a market value of $28,000. Franke should record a credit to Unrealized Gain-Equity for $3,000.

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Question 23

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Micron owns 35% of Martok. Martok pays a total of $47,000 in cash dividends for the period. Micron's entry to record the dividend transaction would include a:

Micron owns 30% of JVT stock. Micron received $6,500 in cash dividends from its investment in JVT. The entry to record receipt of these dividends would include a debit to Cash for $6,500 and a credit to Long-Term Investments for $6,500.

Accounting for long-term investments in equity securities with controlling influence uses the:

When using the equity method of accounting for investments in equity securities, the receipt of cash dividends is recorded as revenue.

IFRS requires uniform accounting policies to be used throughout the group of consolidated subsidiaries.

Explain how transactions (both sales and purchases) in a foreign currency are recorded and reported.

A company has net income of $130,500. Its net sales were $1,740,000 and its total assets were $2,750,000. Its profit margin equals 7.5%.

An increase in the price of the U.S. dollar against other currencies puts U.S. companies in a stronger competitive position internationally.

What are the accounting basics for equity securities, including acquisition, dividends earned and disposition?

Morgan Company purchased 2,000 shares of Asta's common stock for $143,000 as a long-term investment and is considered available-for-sale. The par value of the stock was $1 per share. Morgan paid $375 in commissions on the transaction. The entry to record the transaction would include a:

A company paid $37,800 plus a broker's fee of $525 to acquire 8% bonds with a $40,000 maturity value. The company intends to hold the bonds to maturity. The cash proceeds the company will receive upon the maturity of the bond is:

On June 18, Johnson Company (a U.S. Company) sold merchandise to the Frater Company of Denmark for 60,000 Euros, with a payment due in 60 days. If the exchange rate was $1.14 per euro on the date of sale and $1.35 per euro on the date of payment, Johnson Company should recognize a foreign exchange gain or loss in the amount of:

When an investor company owns more than 25% of the voting stock of an investee company, it has a controlling influence.

____________________________ are debt and equity securities that a company intends to actively manage and trade for a profit.

___________________________ are investments in securities that management intends to convert to cash within the longer of one year or the operating cycle and are readily convertible to cash.

An investor purchased $50,000 of bonds that were held to maturity. The investor's journal entry at maturity of the bonds should include a debit to Cash for $50,000 and a credit to Long-Term Investments for $50,000.

The following information is available from the financial statements of Cosmotropolis: $\begin{array}{lrrr}&2009&2010&2011\\\text { Total assets, December } 31 & \$ 341,585 & \$ 395,412 & \$ 922,357 \\\text { Net income } & 35,550 & 49,512 & 68,149\end{array}$ What is Cosmotropolis' return on total assets for 2010?

Management's intent determines whether an available-for-sale security is classified as long-term or short-term.