Question 1

On January 1,2018,West Coast Boats paid $ 1,850,000 for its 30% investment in East Coast Autos.After the purchase,West Coast Boats has significant influence over East Coast Autos.East Coast Autos earned net income of $30,000,000 and paid cash dividends of $15,000,000 to all outstanding stockholders during 2018.Assume all outstanding stock is voting stock.
Requirement:
1.Journalize all required 2018 transactions related to West Coast Boats' investment in East Coast Autos.Omit explanations.
2.What is the December 31,2018 balance of the investment account? Label your work.

Accepted Answer

The answer of On January 1,2018,West Coast Boats paid $...

Question 2

Trading debt investments are categorized as noncurrent assets.

Accepted Answer

A) True 
 B)False

Question 3

For each of the following scenarios,state the type of investment:
1.Available-for-sale debt investment
2.No significant influence equity investment
3.Trading debt investment
4.Significant influence equity investment
5.Held-to-maturity debt investment
6.Controlling interest equity investment
-
Indicate your answer by placing the correct number next to the scenario.
a._____ Golden Corp.owns a debt security in Yellow Corp.Golden plans on selling the debt after one year.
b._____ Horizon Inc.owns 18% of the voting stock of Sunset Corp.Horizon does not have the ability to participate in the decisions of Sunset.
c._____ Eastern Inc.owns 32% of Western's voting stock.Eastern has the ability to exert influence over Western.

Accepted Answer

The answer of For each of the following scenarios,state the...

Question 4

When a company receives interest revenue on a long-term investment in bonds,________.

Accepted Answer

A)  long-term assets decrease
B)  long-term assets increase
C)  equity increases
D)  current assets decreaseE) B) and C)
F) B) and D)

Question 5

Gaines Corporation invested $114,000 to acquire 24,000 shares of Owens Technologies,Inc.on March 1,2018.On July 2,2019,Owens pays a cash dividend of $3.25 per share.The investment is classified as equity securities with no significant influence.Which of the following is the correct journal entry to record the transaction on July 2,2019?

Accepted Answer

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

Question 6

Which of the following is a condition for recording an available-for-sale debt investment?

Accepted Answer

A)  The investor intends to hold the debt security until it matures.
B)  The investor intends to sell the security in the very near term.
C)  The investment must be a debt security.
D)  The investor has the ability to hold the security until it matures.E) A) and B)
F) None of the above

Question 7

Short Company owns a 2% investment in the common stock of Long Company.The receipt of a cash dividend from Long will have no effect on Short's total equity.

Accepted Answer

A) True 
 B)False

Question 8

Short-term investments ________.

Accepted Answer

A)  are debt and equity securities that the investor expects to hold for more than a year
B)  are investments in debt securities or equity securities in which the investor holds less than 50 percent of the voting stock and that the investor plans to sell two years after the balance sheet date
C)  are investments in debt and equity securities that are readily marketable and that the investor intends to convert to cash within one year
D)  are investments in debt securities that the investor intends to hold until maturityE) C) and D)
F) A) and B)

Question 9

Long-term investments include debt and equity securities that the investor expects to hold longer than one year or debt or equity securities that are not readily marketable.

Accepted Answer

A) True 
 B)False

Question 10

Hometown Resources,Inc.has a 9% rate of return on total assets and the industry average is 12%.How was the 9% rate of return on total assets computed? Comment on this information.

Accepted Answer

The 9% percent rate of return is compute...

Question 11

Amazon Services,Inc.invests its excess cash in Nile Technologies,Inc.and acquires 6000 shares for $61.75 per share.Amazon Services,Inc.owns less than 2% of Nile's voting stock and plans to hold the stock for two years.While preparing the journal entry to record this transaction,________.

Accepted Answer

A)  Equity Investments is debited for $370,500
B)  Common Stock is debited for $370,500
C)  Long-term Investments is credited for $370,500
D)  An equity account is debited for $370,500E) A) and C)
F) A) and D)

Question 12

Which statement regarding investments in equity securities is incorrect?

Accepted Answer

A)  Significant influence equity investments are always reported as long-term assets on the balance sheet.
B)  Significant influence equity investments are consolidated into the investor's financial statements.
C)  Investments in equity securities are classified into three specific types based on the investor's level of influence over the investee company.
D)  Generally,no significant influence exists if there is an ownership interest of less than 20% of the investee's voting stock.E) All of the above
F) A) and B)

Question 13

Which of the following is true of the comparison between equity securities and debt securities?

Accepted Answer

A)  Debt securities represent stock ownership in a company whereas equity securities represent a credit relationship with the company.
B)  Equity securities may earn dividend revenue whereas debt securities earn interest revenue.
C)  Neither debt securities nor equity securities mature at a stated date.
D)  Both debt securities and equity securities pay interest.E) A) and B)
F) A) and C)

Question 14

Equity securities in which the investor lacks the ability to participate in the decisions of the investee company are classified as ________ investments.

Accepted Answer

A)  controlling interest equity
B)  no significant influence equity
C)  significant influence equity
D)  available-for-sale equityE) None of the above
F) A) and C)

Question 15

When applying the rules of the equity method,the Equity Investments account is credited for the receipt of a cash dividend because ________.

Accepted Answer

A)  the dividend decreases the investor's investment
B)  the dividend is treated as earnings rather than a return of capital
C)  there is a decrease in the dividend liability
D)  the dividend increases the total assetsE) None of the above
F) A) and D)

Question 16

Under the equity method,dividend revenue is treated as ________.

Accepted Answer

A)  a debit to revenue from investments
B)  dividend revenue
C)  a return of capital
D)  a credit to current assetsE) A) and B)
F) B) and C)

Question 17

Regarding debt securities,which of the following statements is incorrect?

Accepted Answer

A)  Debt securities include Treasury bills.
B)  Debt securities represent a credit relationship with another company or governmental entity.
C)  Debt securities typically pay interest for a fixed period.
D)  Debt securities include common and preferred stock.E) B) and C)
F) A) and B)

Question 18

National Financial Services,Inc.invested $21,000 to acquire 6250 shares of Stonebridge Investments,Inc.on March 15,2015.This investment represents less than 20% of the investee's voting stock.On May 7,2018,National Financial Services,Inc.sells 3000 shares for $19,250.When the journal entry to record the sale is made,________.

Accepted Answer

A)  Gain on Disposal will be credited
B)  Equity Investments will be debited
C)  Cash will be credited
D)  Loss on Disposal will be debitedE) A) and B)
F) A) and C)

Question 19

For no significant influence equity investments,provide the following:
a.Accounting method:
b.Balance Sheet effects:
c.Income Statement effects:

Accepted Answer

a.Accounting method: Fair Value: Unreali...

Question 20

Marley Investments,Inc.purchased 45% of the common stock of Beige Corporation on January 1,2019.Beige Corporation reports a net income of $720,000 for the 2019 year.Which of the following is the correct journal entry?

Accepted Answer

A)  
B)  
C)  
D)  E) C) and D)
F) A) and B)

Exam 10: Investments

Correct Answer
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Amazon Services,Inc.invests its excess cash in Nile Technologies,Inc.and acquires 6000 shares for $61.75 per share.Amazon Services,Inc.owns less than 2% of Nile's voting stock and plans to hold the stock for two years.While preparing the journal entry to record this transaction,________.

Correct Answer
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Marley Investments,Inc.purchased 45% of the common stock of Beige Corporation on January 1,2019.Beige Corporation reports a net income of $720,000 for the 2019 year.Which of the following is the correct journal entry?

Correct Answer
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Equity securities in which the investor lacks the ability to participate in the decisions of the investee company are classified as ________ investments.

Correct Answer
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Which statement regarding investments in equity securities is incorrect?

Correct Answer
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When a company receives interest revenue on a long-term investment in bonds,________.

Correct Answer
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Short-term investments ________.

Correct Answer
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Correct Answer
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Which of the following is true of the comparison between equity securities and debt securities?

Correct Answer
verified

Hometown Resources,Inc.has a 9% rate of return on total assets and the industry average is 12%.How was the 9% rate of return on total assets computed? Comment on this information.

Correct Answer
verified
The 9% percent rate of return is compute...
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Short Company owns a 2% investment in the common stock of Long Company.The receipt of a cash dividend from Long will have no effect on Short's total equity.

Correct Answer
verified

Long-term investments include debt and equity securities that the investor expects to hold longer than one year or debt or equity securities that are not readily marketable.

Correct Answer
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Regarding debt securities,which of the following statements is incorrect?

Correct Answer
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Which of the following is a condition for recording an available-for-sale debt investment?

Correct Answer
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Under the equity method,dividend revenue is treated as ________.

Correct Answer
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Correct Answer
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Trading debt investments are categorized as noncurrent assets.

Correct Answer
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When applying the rules of the equity method,the Equity Investments account is credited for the receipt of a cash dividend because ________.

Correct Answer
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For no significant influence equity investments,provide the following: a.Accounting method: b.Balance Sheet effects: c.Income Statement effects:

Correct Answer
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a.Accounting method: Fair Value: Unreali...
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Exam 10: Investments

Correct AnswerverifiedShow Answer

Amazon Services,Inc.invests its excess cash in Nile Technologies,Inc.and acquires 6000 shares for $61.75 per share.Amazon Services,Inc.owns less than 2% of Nile's voting stock and plans to hold the stock for two years.While preparing the journal entry to record this transaction,________.

Correct AnswerverifiedShow Answer

Marley Investments,Inc.purchased 45% of the common stock of Beige Corporation on January 1,2019.Beige Corporation reports a net income of $720,000 for the 2019 year.Which of the following is the correct journal entry?

Correct AnswerverifiedShow Answer

Equity securities in which the investor lacks the ability to participate in the decisions of the investee company are classified as ________ investments.

Correct AnswerverifiedShow Answer

Which statement regarding investments in equity securities is incorrect?

Correct AnswerverifiedShow Answer

When a company receives interest revenue on a long-term investment in bonds,________.

Correct AnswerverifiedShow Answer

Short-term investments ________.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following is true of the comparison between equity securities and debt securities?

Correct AnswerverifiedShow Answer

Hometown Resources,Inc.has a 9% rate of return on total assets and the industry average is 12%.How was the 9% rate of return on total assets computed? Comment on this information.

Correct AnswerverifiedThe 9% percent rate of return is compute...View AnswerShow Answer

Short Company owns a 2% investment in the common stock of Long Company.The receipt of a cash dividend from Long will have no effect on Short's total equity.

Correct AnswerverifiedShow Answer

Long-term investments include debt and equity securities that the investor expects to hold longer than one year or debt or equity securities that are not readily marketable.

Correct AnswerverifiedShow Answer

Regarding debt securities,which of the following statements is incorrect?

Correct AnswerverifiedShow Answer

Which of the following is a condition for recording an available-for-sale debt investment?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Under the equity method,dividend revenue is treated as ________.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Trading debt investments are categorized as noncurrent assets.

Correct AnswerverifiedShow Answer

When applying the rules of the equity method,the Equity Investments account is credited for the receipt of a cash dividend because ________.

Correct AnswerverifiedShow Answer

For no significant influence equity investments,provide the following: a.Accounting method: b.Balance Sheet effects: c.Income Statement effects:

Correct Answerverifieda.Accounting method: Fair Value: Unreali...View AnswerShow Answer

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The 9% percent rate of return is compute...
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a.Accounting method: Fair Value: Unreali...
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