Question :
56. Ruben Company purchased $100,000 of Evans Company bonds at 100. : 1226751
56. Ruben Company purchased $100,000 of Evans Company bonds at 100. Ruben later sold the bonds at $104,500 plus $500 in accrued interest. The journal entry to record the sale of the bonds would be:
A. Debit: Cash $105,000; Credit: Investment in Bonds $104,500 and Interest Revenue $500
B. Debit: Cash $105,000; Credit: Investment in Bonds $100,000 and Gain on Sale of Investments $5,000
C. Debit: Cash $104,500 and Interest Receivable $500; Credit: Investment in Bonds $100,000, Gain on Sale of Investments $4,500 and Interest Revenue $500
D. Debit: Cash $105,000; Credit: Investment in Bonds $100,000; Gain on Sale of Investments $4,500 and Interest Revenue $500
57. Jarvis Corporation makes an investment in 100 shares of Saxton Company’s common stock. The stock is purchased for $40 a share plus brokerage fees of $300. The entry for the purchase is:
A. Cash 4,000
Stock Investments – Saxton Company 4,000
B. Stock Investments – Saxton Company 4,300
Cash 4,300
C. Stock Investments – Saxton Company 4,000
Brokerage Fee Expense 300
Cash 4,300
D. Stock Investments – Saxton Company 4,000
Cash 4,000
58. Jacks Corporation purchases $200,000 bonds plus accrued interest for 2 months of $2,000 from Kennedy Company on March 1. The bonds have an annual interest rate of 6% payable on June 30 and December 31. The entry to record the purchase of the bonds would include:
A. Interest Receivable debit $2,000
B. Investment in Bonds debit $202,000.
C. Cash credit $200,000
D. Interest Revenue credit $2,000.
59. On April 1, 2011, Albert Company purchased $50,000 of Tetter Company’s 12% bonds at 100 plus accrued interest of $2,000. On June 30, 2011, Albert received its first semiannual interest. On February 1, 2011, Albert sold $40,000 of the bonds at 103 plus accrued interest. The journal entry Albert will record on April 1, 2011 for the purchase of the bonds will include:
A. a credit to Interest Payable for $2,000.
B. a debit to Investments – Tetter Company for $52,000.
C. a credit for Cash of $50,000.
D. a debit to Investments – Tetter Company for $50,000.
60. On May 1, 2011, Stanton Company purchased $50,000 of Harris Company’s 12% bonds at 100 plus accrued interest of $2,000. On June 30, 2011, Stanton received its first semiannual interest. On February 1, 2012, Stanton sold $40,000 of the bonds at 103 plus accrued interest.
The journal entry Stanton will record on June 30, 2011, will include:
A. a credit to Interest Revenue for $2,000.
B. a debit to Cash for $3,000.
C. a debit to Cash for $2,000.
D. a credit to Interest Receivable for $1,000.
61. On May 1, 2011, Stanton Company purchased $50,000 of Harris Company’s 12% bonds at 100 plus accrued interest of $2,000. On June 30, 2011, Stanton received its first semiannual interest. On February 1, 2012, Stanton sold $40,000 of the bonds at 103 plus accrued interest.
The journal entry Stanton will record on February 1, 2012, will include:
A. a credit to Interest Revenue for $1,200.
B. a credit to Gain on Sale of Investments for $1,200.
C. a debit to Cash for $41,200.
D. a credit to Interest Receivable for $500.
62. On May 1, 2011, Stanton Company purchased $50,000 of Harris Company’s 12% bonds at 100 plus accrued interest of $2,000. On June 30, 2011, Stanton received its first semiannual interest. On February 1, 2012, Stanton sold $40,000 of the bonds at 103 plus accrued interest.
What are the total proceeds from the February 1, 2012 sale?
A. $42,000
B. $41,700
C. $40,600
D. $41,600
63. Which of the following stock investments should be accounted for using the cost method?
A. investments of less than 20%
B. investments between 20 % and 50%
C. investments of less than 20% and investments between 20% and 50%
D. all stock investments should be accounted for using the cost method
64. Which of the following statements below is not a reason a company may purchase another company’s stock?
A. earning a return on excess cash
B. sustain the other company’s stock price
C. gaining control of another company’s operations
D. developing or maintaining business relationships
65. The cost method of accounting for stock
A. recognizes dividends as income
B. is only appropriate as part of a consolidation
C. requires the investment be increased by the reported net income of the investee
D. requires the investment be decreased by the reported net income of the investee
