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Exam 15: Investments and International Operations

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Question 51

Multiple Choice

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

A) $60,000 gain.
B) $60,000 loss.
C) $68,400 loss.
D) $12,600 gain.
E) $12,600 loss.

F) A) and D)
G) B) and D)

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Question 52

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Hamasaki Company owns 30% of CDW Corp. stock. Hamasaki received $6,500 in cash dividends from its investment in CDW. The entry to record receipt of these dividends includes a debit to Cash for $6,500 and a credit to Long-Term Investments for $6,500.

A) True
B) False

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Question 53

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_________________________ securities reflect a creditor relationship while ____________________ securities reflect an owner relationship.

Explain how equity securities having significant influence are accounted for and reported in the financial statements. Include a discussion of the criterion for these securities in terms of an investee's voting stock.

All companies desire a low return on total assets.

Identify the classifications for non-influential investments in securities. What are the accounting basics for non-influential investments in securities, including acquisition, dividends earned, and disposition?

________________________ refers to all changes in equity for a period except for those due to investments by and distributions to owners.

On February 15, Jewel Company buys 7,000 shares of Marcelo Corp. common at $28.53 per share plus a brokerage fee of $400. The stock is classified as available-for-sale securities. On March 15, Marcelo Corp. declares a dividend of $1.15 per share payable to stockholders of record on April 15. Jewel Company received the dividend on April 15 and ultimately sells half of the Marcelo Corp. stock on November 17 of the current year for $29.30 per share less a brokerage fee of $250. The fair value of the remaining 3,500 shares is $29.50 per share. The amount that Jewel Company should report in the asset section of its year-end December 31 balance sheet for its investment in Marcelo Corp. is:

Return on total assets is computed by dividing ___________ by __________.

Marjam Company owns 51,000 shares of MacKenzie Company's 100,000 outstanding shares of common stock. MacKenzie Company pays $25,000 in total cash dividends to its shareholders. Marjam's entry to record this transaction should include a:

On May 26, Clark Co. purchased 1,000 of Langston Corporation stock at $20 per share plus a $75 brokerage fee. These shares are categorized as trading securities. Clark received a $1,500 quarterly cash dividend on the Langston shares. The journal entry to record the dividend is:

Explain how to account for available-for-sale debt and equity securities at and after acquisition and how they are reported in financial statements.

Landers, Inc., held 1,500 of Shipman Company common stock with a cost of $36,900. These shares were classified as a long-term available-for-sale investment. It sold the shares on December 13 for $42,100. Prepare Lander's journal entry to record this sale.

Cosmos Corporation had the following long-term investment transactions. Prepare the journal entries Cosmos Corporation should record for these transactions and events.

Available-for-sale securities are actively managed like trading securities because the company intends to trade them for profit in the short term.

Long-term investments are reported in the:

Any cash dividends received from equity securities are recorded as Dividend Expense.

On March 15, Alan Company purchased 10,000 shares of Cameo Corp. stock for $35,000. The investment is classified as available-for-sale securities. On June 30, the stock had a fair value of $34,000. Alan should do which of the following?

______________________ financial statements show the financial position, results of operations, and cash flows of all entities under the parent company's control, including all subsidiaries.

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