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Exam 15: Investments and International Operations

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Question 41

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Define the foreign exchange rate between two currencies. Explain its effect on business transactions conducted in a foreign currency.

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A foreign exchange rate is the price of ...

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Question 42

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A company reported net income of $225,000, net sales of $2,500,000, and average total assets of $2,100,000 for the current year. Calculate this company's profit margin, total asset turnover, and return on total assets.

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Question 43

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If a U. S. company's credit sale to an international customer allows payment to be made in a foreign currency, the sale transaction is recorded using the exchange rate on the date of sale.

Segmental Manufacturing owns 35% of Glesson Corp stock. Glesson pays a total of $47,000 in cash dividends for the period. Segmental's entry to record the dividend transaction would include a:

Kendall Corp. purchased at par value $160,000 of Barker Company's 7% bonds that mature in 10 months. The bonds pay interest semiannually on June 1 and December 1. Kendall plans to hold the bonds until they mature. The journal entry to record Kendall's purchase of the bonds is:

A company has net income of $250,000, net sales of $2,000,000, and average total assets of $1,500,000. Its return on total assets equals:

Trading securities are always reported as current assets.

On January 3, Kostansas Corporation purchased 5,000 shares of Morton, Inc. for $40 per share plus $700 in broker commissions. These shares represent a 40% ownership in Morton, Inc. Prepare the journal entry Kostansas Corporation should record when Morton reports net income of $52,000 for the year on December 31.

Short-term investments are intended to be converted into cash within the longer of one year or the current operating cycle of the business, and are readily convertible to cash.

A company has an investment in 9% bonds with a par value of $100,000 that pay interest on October 1 and April 1. The amount of interest accrued on December 31 (the company's year-end) would be:

Long-term investments are usually held as an investment of cash for use in current operations.

In the current year, Largo Co. purchased bonds of MacDermott Corp. with a cost of $125,000 and a market value of $127,000. Largo also purchased 1,500 shares of Armistead common stock with a cost of $25,000 and a market value of $24,700. These are classified as long-term available-for-sale securities. Prepare the journal entry to record the market value of the investments as of December 31.

If a U.S. company makes a credit sale to a foreign company, the sales price must be translated into dollars as of the date of _____________.

A company had net income of $2,660,000, net sales of $25,000,000, and average total assets of $8,000,000. Its return on total assets equals:

A company had net income of $350,000 in Year 1 and $520,000 in Year 2. The company had average total assets of $2,500,000 in Year 1 and $3,000,000 in Year 2. Calculate the return on total assets for Year 1 and Year 2. Comment on the results, did the company's performance improve?

___________________________ are investments in securities that management intends to convert to cash within the longer of one year or the operating cycle, and are readily convertible to cash.

Held-to-maturity securities are:

Cloverton Corporation had net income of $30,000, net sales of $1,000,000, and average total assets of $500,000. Its return on total assets is:

A company that is a controlling investor in another company is known as the __________.

A company should report its portfolio of trading securities at its fair value.