FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 13: Investments and Fair Value Accounting

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 31

Essay

Review LaterAdd Note

Review Later

The income statement for Hudson Company reported net income of $345,000 for the year ended December 31, 2012 before considering the following: During the year the company purchased trading securities. At year end, the fair value of the investment portfolio was $23,000 less than cost. The balance of retained earnings was $823,000 on December 31, 2011. Hudson Company paid $43,000 in cash dividends in 2012. Calculate the balance of retained earnings on December 31, 2012.

Correct Answer

verified

a.
* Because these are tradi...

View Answer

Show Answer

Question 32

True/False

Review LaterAdd Note

Review Later

The corporation owning all or a majority of the voting stock of another corporation is known as the parent company.

A) True
B) False

Correct Answer

verified

Show Answer

Question 33

Essay

Review LaterAdd Note

On May 1, 2012, Chase Inc. purchases $60,000 of 10-year, Manus Corporation 8% bonds dated March 1, 2012 at 100 plus accrued interest. What entry would Chase record when receiving its semiannual interest on March 1, 2013?

Temporary investments are recorded at their cost which would include broker's commissions.

Held to maturity securities

Skyline, Inc. purchased a portfolio of available-for-sale securities during 2012. The cost and fair value of this portfolio on December 31, 2012, was as follows: Required: Provide the journal entry to record the adjustment of the available-for-sale security portfolio to fair value on December 31, 2012. Where will the information from the journal entry be reported on the financial statements?

On June 1, $40,000 of treasury bonds were purchased between interest dates. The broker commission was $600. The bonds pay interest at 12%, which is paid semiannually on January 1 and July 1. How much interest revenue will be recorded on July 1?

On September 1, 2012, Parsons Company purchased $84,000, 10 year, 7% government bonds at 100 plus accrued interest. The semi-annual interest payment dates are June 30 and December 31. Interest calculations are done by the month. Required:

On March 1, 2011, Chase Inc. purchases 35% of the outstanding shares of Glory Corporation stock for $325,000. On December 31, 2011, Glory reports net income of $162,000. On January 15, 2012, Glory pays total dividends to stockholders of $33,000. Required: Journalize the three transactions described above.

Gale Company owns 87% of the outstanding stock of Leonardo Company. Leonardo Company is referred to as the

Journalize the entries to record the following selected equity investment transactions completed by Perry Company during 2012. Perry accounts for this investment using the cost method.:

To record a bond investment between interest payment periods, Investment in Bonds would be debited and Cash and Interest Revenue would be credited.

Discuss the similarities and differences in reporting trading securities, available-for-sale securities and held-to-maturity securities.

Foreign currency translation adjustment is an example of an item that would be included in Other Comprehensive Income.

Held-to-maturity securities are reported on the balance sheet at fair market value.

An equity investment in less than 20% of another company's stock is accounted for using the cost method.

Any gains or losses on the sale of bonds normally would be reported in the Other Income (Loss) section of the income statement.

Comprehensive income is all changes in stockholders' equity during the period except those resulting from dividends and stockholders' investments.

On May 1, 2012, Chase Inc. purchases $60,000 of 10-year, Manus Corporation 8% bonds dated March 1, 2012 at 100 plus accrued interest. What entry would Chase record when receiving its semiannual interest on September 1?

On August 1, 2011, Airport Company sold Paxton Company $1,000,000 of 10-year, 6% bonds, dated July 1 at 100 plus accrued interest. On March 1, 2012, Paxton sold half of the bonds for $520,000 plus accrued interest. Present entries to record the following transactions: