Question : 119. Madison Corporation purchased 40% of Jay Corporation for $125,000 January : 1257500

119. Madison Corporation purchased 40% of Jay Corporation for $125,000 on January 1. On June 20 of the same year, Jay Corporation declared total cash dividends of $30,000. At year-end, Jay Corporation reported net income of $150,000. The balance in Madison Corporation’s Long-Term Investment-Jay Corporation account as of December 31 should be: 
A. $ 77,000.
B. $125,000.
C. $173,000.
D. $197,000.
E. $370,000.

120. Pravis Corporation owns 30% of Kuster Corporation. Pravis Corporation received $9,000 in cash dividends from Kuster Corporation. The entry to record receipt of these dividends is: 
A. Debit Cash, $9,000; credit Long-Term Investments, $9,000.
B. Debt Long-Term Investment, $9,000; credit Cash, $9000.
C. Debit Cash, $9,000; credit Interest Revenue, $9,000.
D. Debit Unrealized Gain-Equity, $9,000; credit Cash, $9,000.
E. Debit Cash, $9,000; credit Dividend Revenue, $9,000.

 121. On January 4, Year1, Barber Company purchased 5,000 shares of Convell Company for $59,500 plus a broker’s fee of $1,000. ConvellCompany has a total of 25,000 shares of common stock outstanding and it is presumed the Barber Company will have a significant influence over Convell. During each of the next two years, Convell declared and paid cash dividends of $0.85 per share, and its net income was $72,000 and $67,000 for Year 1 and Year 2, respectively. The January 12, Year 3, entry to record Barber’s sale of 3,000 shares of Convell Company stock, which represents 60% of Barber’s total investment, for $39,000 cash should be: 
A. Debit Cash $39,000; debit Loss on Sale of Investment $8,200; credit Long-Term Investments $47,280.
B. Debit Cash $39,000; debit Loss on Sale of Investment $8,880; credit Long-Term Investments $47,880.
C. Debit Cash $39,000; credit Gain on Sale of Investment $2,700; credit Long-Term Investments $36,300.
D. Debit Cash $39,000; credit Gain on Sale of Investment $8,750; credit Long-Term Investments $30,250.
E. Debit Cash $39,000; debit Loss on Sale of Investment $21,500; credit Long-Term Investments $60,500.

 122. On January 4, Year1, Barber Company purchased 5,000 shares of Convell Company for $59,500 plus a broker’s fee of $1,000. Convell Company has a total of 25,000 shares of common stock outstanding and it is presumed the Barber Company will have a significant influence over Convell. During each of the next two years, Convell declared and paid cash dividends of $0.85 per share, and its net income was $72,000 and $67,000 for Year 1 and Year 2, respectively. What is the book value of Barber’s investment in Convell at the end of Year 2? 
A. $60,500.
B. $79,800.
C. $52,000.
D. $88,300.
E. $87,300.

123. A U.S. company makes a sale to a foreign customer receivable 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.

124. When a U.S. company makes a credit sale to an international customer and the sale terms are for payment in a foreign currency,  the foreign exchange rate used to record the sale is the 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.

125. 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, 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.

126. On November 12, Higgins, Inc., a U.S. Company, sold merchandise on credit to Kagomeof 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 Higgins prepared its financial statements, the exchange rate was $0.00843. Kagomepaid in full on January 12, when the exchange rate was $0.00861. On December 31, Higgins should prepare the following journal entry: 
A. Debit Sales $90; credit Foreign Exchange Gain $90.
B. Debit Foreign Exchange Loss $90; credit Sales $90.
C. Debit Accounts Receivable-Kagome $90; credit Foreign Exchange Gain $90.
D. Debit Foreign Exchange Loss $90; Accounts Receivable-Kagome $90.
E. No journal entry is required until the amount is collected.

127. On November 12, Higgins, Inc., a U.S. Company, sold merchandise on credit to Kagome 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 Higgins prepared its financial statements, the exchange rate was $0.00843. Kagome paid in full on January 12, when the exchange rate was $0.00861. On January 12, Higgins should prepare the following journal entry: 
A. Debit Cash $12,915; credit Accounts Receivable-Kagome $12,555; credit Foreign Exchange Gain $360.
B. Debit Cash $12,555; debit Foreign Exchange Loss $360; credit Accounts Receivable-Kagome $12,915.
C. Debit Cash $12,915; credit Accounts Receivable-Kagome $12,645; credit Foreign Exchange Gain $90.
D. Debit Cash $12,645; debit Foreign Exchange Loss $90; credit Accounts Receivable-Kagome $12,915.
E. Debit Cash $12,915; credit Accounts Receivable-Kagome $12,645; credit Foreign Exchange Gain $270.

128. All of the following statements regarding accounting for noninfluential securities under U.S. GAAP and IFRS are true except: 
A. Trading securities are accounted for using fair values with unrealized gains and losses reported in other comprehensive income.
B. Trading securities are accounted for using fair values with unrealized gains and losses reported in net income.
C. Available-for-sale securities are accounted for using fair values with unrealized gains and losses reported in other comprehensive income.
D. Held-to-maturity securities are accounted for using amortized cost.
E. Both systems examine held-to-maturity securities for impairment.

129. All of the following statements regarding accounting for influential securities under U.S. GAAP and IFRS are true except: 
A. Under the equity method, the share of investee’s net income is reported in the investor’s income in the same period the investee earns that income.
B. Under the consolidation method, investee and investor revenues and expenses are combined.
C. Under the equity method, the investment account equals the acquisition cost plus the share of investee income plus the share of investee dividends.
D. Under the consolidation method, nonintercompany assets and liabilities are combined (eliminating the need for an investment account).
E. U. S. GAAP companies commonly refer to noncontrolling interests in consolidated subsidiaries as minority interests whereas IFRS companies use noncontrolling interests.

130. All of the following statements regarding accounting for trading securities under U.S. GAAP are true except: 
A. The entire portfolio of trading securities is reported at is fair value.
B. An unrealized gain or loss from a change in fair value is reported on the income statement.
C. An unrealized gain or loss is recorded with an adjusting entry when the securities are sold.
D. An unrealized gain or loss is recorded with an adjusting entry at the end of each period.
E. Unrealized gains and losses are recorded in a temporary account that is closed to Income Summary at the end of the period.

131. All of the following statements regarding accounting for trading securities under U.S. GAAP are true except: 
A. The entire portfolio of trading securities is reported at fair value.
B. An unrealized gain or loss from a change in fair value is reported on the income statement.
C. A realized gain or loss is recorded when the securities are sold and reported on the income statement.
D. When the period-end fair value adjustment for the portfolio of trading securities is computed, it includes the cost and fair value of any securities sold.
E. Any prior period fair value adjustment to the portfolio is not used to compute the gain or loss from sale of individual transactions.

132. All of the following statements regarding other comprehensive income are true except: 
A. Other comprehensive income includes unrealized gains and losses on available-for-sale securities.
B. Other comprehensive income is not considered when calculating comprehensive income.
C. Other comprehensive income includes foreign currency adjustments.
D. Other comprehensive income includes pension adjustments.
E. Accumulated other comprehensive income is defined as the cumulative impact of other comprehensive income.

133. Landmark Corp. buys $300,000 of Schroeter Company’s 8% five-year bonds at par value on September 1. Interest payments are made semiannually. All of the following regarding accounting for the securities are true except: 
A. The debt securities should be recorded at the cost $300,000.
B. The securities will have a maturity value of $300,000.
C. The semiannual interest payment amount is $12,000.
D. The semiannual interest payment amount is $24,000.
E. Interest Revenue should be credited when an interest payment is received.

134. Landmark Corp. buys $300,000 of Schroeter Company’s 8% five-year bonds payable at par value on September 1. Interest payments are made semiannually. Landmark plans to hold the bonds for the five year life. The journal entry to record the purchase should include: 
A. A debit to Long-Term Investments-AFS $300,000.
B. A debit to Short-Term Investments-Trading $300,000.
C. A debit to Long-Term Investments-HTM $300,000.
D. A debit to Short-Term Investments-AFS $300,000.
E. A debit to Cash $300,000.

135. Landmark buys $300,000 of Schroeter Company’s 8% five-year bonds payable at par value on September 1. Interest payments are made semiannually on March 1 and September 1. The journal entry Landmark should record to accrue interest earned at year-end December 31 is: 
A. Debit Interest Receivable $8,000, credit Interest Revenue $8,000.
B. Debit Interest Receivable $12,000, credit Interest Revenue $12,000.
C. Debit Cash $8,000, credit Interest Revenue $8,000.
D. Debit Cash $12,000, credit Interest Revenue $12,000.
E. Debit Interest Revenue $8,000, credit Interest Receivable $8,000.

136. Landmark Corp. buys $300,000 of Schroeter Company’s 8% five-year bonds payable at par value on September 1. Interest payments are made semiannually. Landmark plans to hold the bonds for the five year life. When the bonds mature, the journal entry to record the proceeds will be: 
A. Debit Long-Term Investments-HTM $300,000; credit Cash $300,000.
B. Debit Cash $300,000; credit Interest Revenue $300,000.
C. Debit Cash $300,000; credit Long-Term Investments-HTM $300,000.
D. Debit Cash $300,000; credit Interest Receivable $300,000.
E. Debit Cash $300,000; credit Bonds Payable $300,000.

137.  On February 15, Jewel Company buys 7,000 shares of Marcelo Corp. common stock at $28.53 per share plus a brokerage fee of $400. The stock is classified as available-for-sale securities. On March 15, Marcelo declares a dividend of $1.15 per share payable to stockholders of record on April 15. Jewel received the dividend on April 15 and ultimately sells half of the Marcelo stock on November 17 of the current year for $29.30 per share less a brokerage fee of $250. The journal entry to record the purchase on February 15 is:
A. Debit Long-Term Investments-HTM $199,710; credit Cash $199,710.
B. Debit Long-Term Investments-AFS $199,710; credit Cash $199,710.
C. Debit Long-Term Investments-Trading $199,710; credit Cash $199,710.
D. Debit Long-Term Investments-Trading $200,110; credit Cash $200,110.
E. Debit Long-Term Investments-AFS $200,110; credit Cash $200,110.

138.  On February 15, Jewel Company buys 7,000 shares of Marcelo Corp. common stock 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 journal entry to record the dividend on April 15 is:
A. Debit Cash $7,350; credit Dividend Revenue$7,350.
B. Debit Cash $8,050; credit Dividend Revenue $8,050.
C. Debit Cash $8,050; credit Interest Revenue $8,050.
D. Debit Cash $7,350; credit Interest Revenue $7,350.
E. Debit Cash $8,050; credit Gain on Sale of Investments $8,050.