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Exam 27: Investments and International Operations

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Question 61

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A company reported net income for 2012 of $98,000 and $106,000 in 2013.It also reported net sales of $735,000 in 2012 and $798,000 in 2013.The company's average total assets in 2012 were $1,850,000 and $1,720,000 in 2013.Calculate this company's profit margin,total asset turnover,and return on total assets for 2012 and 2013.Comment on the results.

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Question 62

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On May 15,Briar Company purchased 10,000 shares of Broder Corp.for $80,000.On September 30,the stock had a market value of $85,000.The $5,000 difference must be reported on the income statement as a $5,000 gain.

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Question 63

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Net profit margin reflects the percent of net income in each dollar of net sales.

On April 1 of the current year,a company paid $150,000 to purchase 7%,10-year bonds that had a par value of $150,000 and paid interest semiannually on October 1 and April 1.The company intends to hold the bonds until they mature.Prepare the journal entry to recognize accrued interest as of December 31 of the current year.

Accounting for long-term investments in held-to-maturity securities requires companies to record interest revenue as it accrues.

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:

Long-term investments in debt securities not classified as held-to-maturity securities are classified as available-for-sale securities.

An increase in the price of the U.S.dollar against other currencies puts U.S.companies in a stronger competitive position internationally.

Match the following item with the appropriate accounting system components

Long-term investments include investments in land or other assets not used in a company's operations.

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:

Consolidated financial statements show the financial position,results of operations,and cash flows of all entities under the parent's control.

On April 1 of the current year,a company paid $150,000 cash to purchase 7%,10-year bonds that had a par value of $150,000 and paid interest semiannually each April 1 and October 1.The company intends to hold these bonds until they mature.Prepare the journal entry to record the purchase of the bond.

On April 1 of the current year,a company paid $150,000 to purchase 7%,10-year bonds that had a par value of $150,000 and paid interest semiannually on October 1 and April 1.The company intends to hold the bonds until they mature.Prepare the journal entry to record the receipt of the semiannual interest payment on April 1 of the following year.

Held-to-maturity securities are ____________ securities a company intends and is able to hold until maturity.

Equity securities are:

Micron owns 30% of JVT stock.Micron received $6,500 in cash dividends from its investment in JVT.The entry to record receipt of these dividends would include a debit to Cash for $6,500 and a credit to Long-Term Investments for $6,500.

Match the following definitions with the appropriate term

Long-term investments are reported in the:

What are the accounting basics for debt securities,including recording their acquisition,interest earned and their disposal?