FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 12: Investments

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 71

Multiple Choice

Review LaterAdd Note

Review Later

On July 1, 2009, Tremen Corporation acquired 40% of the shares of Delany Company. Tremen paid $3,000,000 for the investment, and that amount is exactly equal to 40% of the book value of identifiable net assets on Delany's balance sheet. Delany recognized net income of $1,000,000 for 2009, and paid dividends to their shareholders of $600,000. After all closing entries are made, Tremen's "investment in Delany Company" account would have a balance of:

A) $3,200,000.
B) $3,160,000.
C) $3,000,000.
D) $3,080,000.$3,000,000 + (40%) (1/2 of the year) ($1,000,000 - $600,000) = $3,080,000

E) A) and B)
F) None of the above

Correct Answer

verified

Show Answer

Question 72

True/False

Review LaterAdd Note

Review Later

All securities considered available for sale should be reported as current assets in a classified balance sheet.

A) True
B) False

Correct Answer

verified

Show Answer

Question 73

Multiple Choice

Review LaterAdd Note

Accumulated Other Comprehensive Income in the shareholders' equity section of the balance sheet reflects changes in the fair value of securities for which type of securities?

On January 1, 2009, Green Corporation purchased 20% of the outstanding voting common stock of Gold Company for $300,000. The book value of the acquired shares was $275,000. The excess of cost over book value is attributable to an intangible asset on Gold's books that was undervalued and had a remaining useful life of five years. For the year ended December 31, 2009, Gold reported net income of $125,000 and paid cash dividends of $25,000. What is the carrying value of Green's investment in Gold at December 31, 2009?

Investments in securities to be held for an unspecified period of time are reported at:

On July 1, 2009, Clearwater Inc. purchased 6,000 shares of the outstanding common stock of Mountain Corporation at a cost of $140,000. Mountain had 30,000 shares of outstanding common stock. Assume the book value and fair value of net assets is $650,000. Both companies have a January through December fiscal year. The following data pertain to Mountain Corporation during 2009: Required: (1.) Prepare the entry to record the original investment in Mountain. (2.) Compute the goodwill (if any) on the acquisition. (3.) Prepare the necessary entries (other than acquisition) for 2009 under the equity method. $\begin{array}{ll}\text { Net income, January } 1 \text { - June } 30 & \$ 14,000 \\\text { Net income, July 1 - December 31 } & \$ 18,000 \\\text { Dividends declared and paid, Jan. 1 - Jun .30 } & \$ 12,000 \\\text { Dividends declared and paid, Jul 1 - Dec. 31 } & \$ 12,000\end{array}$

On January 1, 2009, American Corporation purchased 25% of the outstanding voting shares of Short Supplies common stock for $210,000 cash. On that date, Short's book value and fair value were both $840,000. The equity method is deemed appropriate for this investment. Short's net income reported on December 31, 2009, was $80,000. During 2009, Short also paid cash dividends in the amount of $24,000. Required: Compute the amount that would be reported for the investment on American Corporation's financial statements at December 31, 2009.

Unrealized gains and losses are included in other comprehensive income for securities that are classified as available for sale.

Assume that, on 1/1/09, Matsui Co. paid $1,200,000 for its investment in 60,000 shares of Yankee Inc. Further, assume that Yankee has 200,000 total shares of stock issued. The book value and fair value of Yankee's identifiable net assets were both $4,000,000 at 1/1/09. The following information pertains to Yankee during 2009: What amount would Matsui report in its year-end 2009 balance sheet for its investment in Yankee?

If Dizbert Company concluded that an investment originally classified as available for sale would now more appropriately be classified as held to maturity, Dizbert would:

A weakness of ___(insert from below) ____ is that firms can increase or decrease net income by choosing to sell particular investments with net unrealized gains or unrealized losses:

When available-for-sale securities are sold, the full amount of any gain or loss realized on the sale is included in before-tax net income.

Brewer Inc. is owed $200,000 by Carol Co. under a 10% note with two years remaining to maturity. Dues to financial difficulties Carol Co. did not pay the prior year's interest. Brewer agrees to settle the receivable (and accrued interest) in exchange for a cash payment of $150,000. The journal entry that Brewer would make to record this transaction would include a loss on troubled debt restructuring of:

When investments are treated as available-for-sale, other comprehensive income (OCI) also includes the tax effects associated with unrealized holding gains and losses. As a result:

When the investor's level of influence changes, it may be necessary to change to the equity method from another method. When the level of ownership rises from less than 20% to a range of 20% to 50%, the equity method typically would become appropriate and the investment account balance should be:

Required: How much did Arctic Cat actually receive from the sale of available-for-sale securities during 2005?

If the fair value of a trading security declines for a reason that is viewed as "other than temporary",

When an investor classifies an investment in common stock as securities available for sale, cash dividends are classified by the investor as:

Bloomfield Bakers accounts for its investment in Clor Confectionary under the equity method. Bloomfield carried the Clor investment at $150,000 and $165,000 at December 31 of 2008 and 2009, respectively. During 2009 Clor recognized $80,000 of net income and paid dividends of $30,000. Assuming that Bloomfield owned the same percentage of Clor throughout 2009, their percentage ownership must have been:

Which of the following investment securities held by Zoogle Inc. may be classified as held-to-maturity securities in its balance sheet?