Question : 101. A company had investments in long-term available-for-sale securities. At the : 1256245

 

 

101. A company had investments in long-term available-for-sale securities. At the end of the current year, the company’s portfolio had a $731,000 cost and $730,000 market value.

What is the current year’s adjustment to market value given the following account balances at the end of the prior year?

 

Market Adjustment Available-for-Sale

 

Unrealized Gain (Loss) Equity

5,000

 

 

 

5,000

 

 

 

 

 

 

A.

Market Adjustment – Available-for-Sale……………

1,000

 

Unrealized Gain Equity……………………………………

 

1,000

B.

Market Adjustment – Available-for-Sale……………

6,000

 

Unrealized Gain Equity……………………………………

 

6,000

C.

Unrealized Gain Equity……………………………………

1,000

 

Market Adjustment – Available-for-Sale……………

 

1,000

D.

Unrealized Gain (Loss) Equity……………………………………

6,000

 

Market Adjustment – Available-for-Sale……………

 

6,000

E.

Unrealized Gain (Loss) Equity…………………………….

4,000

 

Market Adjustment – Available-for-Sale……………

 

4,000

 

 

 

102. Vans purchased 40,000 shares of Skechers common stock for $232,000. This represents 40% of the outstanding stock. The entry to record the transaction includes a: 

A. Debit to Long-Term Investments for $92,800.

B. Debit to Long-Term Investments for $232,000.

C. Credit to Long-Term Investments for $92,800.

D. Credit to Long-Term Investments for $232,000.

E. Debit to Long-Term Investment for $40,000.

 

 

 

 

 

 

 

 

 

103. If a company owns more than 20% of the stock of another company and the stock is being held as a long-term investment, which method would the investor normally use to account for this investment? 

A. Equity method

B. Market value method

C. Historical cost method

D. Straight-line method

E. Effective method

 

 

 

 

 

104. 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: 

A. Credit to Long-Term Investments for $16,450.

B. Debit to Long-Term Investments for $16,450.

C. Debit to Cash for $47,000.

D. Credit to Cash for $16,450.

E. Credit to Investment Revenue for $47,000.

 

 

 

105. Chung owns 40% of Lu’s common stock. Lu pays $97,000 in total cash dividends to its shareholders. Chung’s entry to record this transaction should include a: 

A. Debit to Dividends for $97,000.

B. Debit to Dividends for $38,800.

C. Debit to Long-Term investments for $97,000.

D. Credit to Long-Term Investments for $38,800.

E. Credit to Cash for $97,000.

 

 

 

106. Parris Corporation purchased 40% of Samitz Corporation for $100,000 on January 1. On November 17 of the same year, Samitz Corporation declared total cash dividends of $12,000. At year-end, Samitz Corporation reported net income of $60,000. The balance in the Parris Corporation’s Long-Term Investment in Samitz Corporation at December 31 should be: 

A. $80,800

B. $100,000

C. $95,200

D. $119,200

E. $124,000

 

 

 

 

107. Clark Corporation purchased 40% of IT corporation for $125,000 on January 1. On May 20 of the same year, IT Corporation declared total cash dividends of $30,000. At year-end, IT Corporation reported net income of $150,000. The balance in Clark Corporation’s Long-Term Investment in IT Corporation account as of December 31 should be: 

A. $77,000

B. $125,000

C. $173,000

D. $197,000

E. $370,000

 

 

 

108. On January 4, 2011, Larsen Company purchased 5,000 shares of Warner Company for $59,500 plus a broker’s fee of $1,000. Warner Company has a total of 25,000 shares of common stock outstanding and it is presumed the Larsen Company will have a significant influence over Warner. During each of the next two years, Warner declared and paid cash dividends of $0.85 per share. Its net income was $72,000 and $67,000 for 2011 and 2012, respectively. The January 12, 2013, entry to record the sale of 3,000 shares of Warner Company stock for $39,000 cash should be:

 

A.

Cash…………………………………………………

39,000

 

Loss on Sale of Investments……………….

 

2,400

 

Long-Term Investments……………..

 

41,400

 

B.

Cash…………………………………………………

39,000

 

Loss on Sale of Investments……………….

8,800

 

Long-Term Investments……………….

 

47,880

 

C.

Cash…………………………………………………

39,000

 

Loss on Sale of Investments……………….

60

 

Long-Term Investments………………

 

38,940

 

D.

Cash…………………………………………………

39,000

 

Gain on Sale of Investments…………..

 

8,750

Long-Term Investments………………..

 

30,250

 

 

 

E.

Cash…………………………………………………

39,000

 

Loss on Sale of Investments……………….

21,500

 

Long-Term Investments……………….

 

60,500

 

 

 

 

109. On January 1, 2011, Posten Company purchased 10,000 shares of Toma Company for $78,000 plus a broker’s fee of $2,000. Toma Company has a total of 40,000 shares of common stock outstanding and it is presumed the Posten Company will have a significant influence over Toma. Toma declared and paid cash dividends of $0.93 per share in 2011 and 2012. Toma’s net income was $190,000 and $270,000 for 2011 and 2012 respectively. The January 1, 2013, entry on the books of Posten Company to record the sale of 4,500 shares of Toma Company stock for $85,000 cash should be:

 

A)

Cash

85,000

 

Loss on Sale of Investments

110,000

 

Long-Term Investments

 

195,000

B)

Cash

85,000

 

Gain on Sale of Investments

 

57,370

Long-Term Investments

 

27,630

C)

Cash

85,000.00

 

Gain on Sale of Investments

 

76,195.75

Long-Term Investments

 

8,804.25

 

D)

Cash

85,000

 

Gain on Sale of Investments

 

5,620

Long–Term Investments

 

79,380

E)

Cash

85,000

 

Gain on Sale of Investments

 

5,000

Long–Term Investments

 

80,000

 

 

 

 

110. The price of one currency stated in terms of another currency is referred to as the: 

A. Historical exchange rate

B. Foreign exchange rate

C. Consolidated exchange rate

D. General exchange rate

E. Multinational exchange rate

 

 

 

 

 

111. A U.S. company makes a sale to a foreign customer payable in 30 days in the customer’s currency. The sale would be recorded by the U.S. company on the date: 

A. Of sale using a projected estimate of the U.S. dollar value at payment date.

B. Of sale using a 30-day average U.S. dollar value.

C. Of sale using the current dollar value.

D. Of sale using the foreign currency value.

E. When payment is received.

 

 

 

112. When a credit sale is denominated in a foreign currency, the foreign exchange rate used to record the sale is the current exchange rate: 

A. Thirty days from the date of sale.

B. At the end of the seller’s fiscal year.

C. At the end of the buyer’s fiscal year.

D. On the date final payment is made.

E. On the date of the sale.

 

 

 

113. 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: 

A. $60,000 gain

B. $60,000 loss

C. $68,400 loss

D. $12,600 gain

E. $12,600 loss

 

 

 

 

114. On November 12, Kendra, Inc., a U.S. Company, sold merchandise on credit to Nakakura Company of Japan at a price of 1,500,000 yen. The exchange rate was $0.00837 per yen on the date of sale. On December 31, when Kendra prepared its financial statements, the exchange rate was $0.00843. Nakakura Company paid in full on January 12, when the exchange rate was $0.00861. On December 31, Kendra should prepare the following journal entry for this transaction: 

 

A.

Sales……………………………..

90

 

Foreign Exchange Gain…..

 

90

 

B.

Foreign Exchange Loss…….

90

 

Sales……………………………….

 

90

 

C.

Accounts Receivable – Nakakura Company………..

90

 

Foreign Exchange Gain…………………………………

 

90

 

D.

Foreign Exchange Gain or Loss…………………..

90

 

Accounts Receivable – Nakakura Company….

 

90

 

E. No journal entry is required until the amount is collected

 

 

 

115. On November 12, Kera, Inc., a U.S. company, sold merchandise on credit to Kakura Company of Japan at a price of 1,500,000 yen. The exchange rate was $0.00837 on the date of sale. On December 31, when Kera prepared its financial statements, the exchange rate was $0.00843. Kakura Company paid in full on January 12, when the exchange rate was $0.00861.

On January 12, Kera should prepare the following journal entry for this transaction: 

 

A.

Cash……………………………………………………….   12,915

Accounts Receivable – Kakura Company..

Foreign Exchange…………………………………

 

12,555

360

 

B.

Cash………………………………………………………

Foreign Exchange Loss………………………..

12,555

360

 

Accounts Receivable – Kakura Company.

 

12,915

 

C.

Cash………………………………………………………

Accounts Receivable – Kakura Company.

12,915

 

12,645

Foreign Exchange Gain………………………..

 

90

 

D.

Cash………………………………………………………     12,645

Foreign Exchange Loss……………………           90

 

Accounts Receivable – Kakura Company…

12,915

 

E.

Cash………………………………………………………..

12,915

 

Foreign Exchange Gain………………………

 

270

Accounts Receivable – Kakura Co….

 

12,645