191.
Draft Co. purchased 14,000 shares of Hamburg Corporation’s 40,000 shares of common
stock on January 1. This represented 35% of Hamburg’s outstanding shares and gave Draft
Co. significant influence over Hamburg’s management and operations. On October 11,
Hamburg declared and paid cash dividends of $30,000. On December 31, Hamburg
reported net income of $125,000 for the year. Prepare the journal entries Draft Co. should
record to account for the dividends received and the earnings reported by Hamburg
Corporation.
192.
On January 1, 2014, Rickson Corporation purchased 7,500 shares of AutoTech as a long–
term investment for a total of $235,000. The 7,500 shares represent 30% of the
outstanding (25,000) shares of AutoTech. Prepare the journal entries for Rickson to record
the following transactions and events:
AutoTech reported net income of
$66,000 for 2014.
Sold 1,875 of the AutoTech shares for
$34 per share. In addition, $1,350 in
fees and commissions were paid by
Rickson on this sale.
Rickson received a $0.90 per share
cash dividend from AutoTech.
AutoTech reported net loss of $46,000
for 2015.
Long-Term Investments
Earnings from Long-Term
Loss on sale = $63,700 –
$62,400 = $1,300
Long-Term Investment
[(7,500 – 1,875) * $0.90]
193.
Rainier Importers purchases automotive parts from Austria. Prepare journal entries for the
following transactions of Rainier.
Oct 1
Purchased inventory from Klossner Co. for 12,000
euros, terms n/30. The exchange rate was $1.15
per euro.
Oct 30
Paid Klossner Co. for the October 1 purchase.
The exchange rate was $1.13 per euro.
Oct 1
Merchandise Inventory (12,000
euros * $1.15/euro)
Accounts Payable
Oct 30
Accounts Payable
Cash (12,000 euros *
Long-Term Investment
$46,000 * [(7,500 –
194.
Silver Era Co. exports Southwestern artwork to Japan. Prepare journal entries for the
following transactions.
Nov 10
Sold artwork to Ito Company for 10,000,000,
terms n/30. The exchange rate was $0.009 per
yen.
Dec 5
Received payment from Ito Company for the
November 10 sale. The exchange rate was
$0.0087 per yen.
Accounts Receivable (10,000,000
195.
Arkansana Inc. imports inventory from Costa Rica. Prepare the journal entries for
Arkansana to record the following transactions. Include any year-end adjustments.
Dec 21
Purchased inventory from Rojas Co. for
5,000,000 Costa Rican colon. The exchange rate
was $0.002 per colon. The credit terms were
n/30.
Dec 31
The exchange rate was $0.0023 per colon.
Jan 20
Paid Rojas Co. for the December 21 purchase.
The exchange rate was $0.0021 per colon.
Dec 21
Merchandise Inventory (5,000,000
colon * $0.002)
Accounts Payable
Dec 31
Foreign Exchange Loss
Jan 20
Accounts Payable ($10,000 +
Foreign Exchange Gain
Cash (5,000,000 * $0.0021)
196.
FreshFoods, Inc. sells American gourmet foods to merchandisers in Singapore. Prepare
the journal entries for FreshFoods, to record the following transactions. Include any year–
end adjustments.
Dec 20
Sold items to Tan, Inc., for 60,000 Singapore
dollars. The exchange rate was $0.476 per
Singapore dollar. The purchase terms were
n/30.
Dec 31
The exchange rate was $0.480 per Singapore
dollar.
Jan 17
Received payment from Tan for the December
20 sale. The exchange rate was $0.495 per
Singapore dollar.
Dec 31
Accounts Receivable [60,000 *
Fill in the Blank Questions
197.
___________________________ 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.
198.
__________________________ are investments in securities that are not readily convertible
to cash, or are not intended to be converted to cash in the short–term.
199.
_________________________ securities reflect a creditor relationship while
____________________ securities reflect an owner relationship.
200.
An investing company that owns more than ________ of another (investee) company’s
voting stock is presumed to have controlling influence over the investee.
201.
Short-term investments in held–to–maturity debt securities are accounted for using the
______________________.
202.
Long-term investments in held–to-maturity debt securities are accounted for using the
___________________________.
203.
Investments in equity securities where the investor has a significant, but not controlling
influence, are accounted for using the _______________ method.
204.
Investments in equity securities where the investor has a controlling influence are
accounted for using the ________________________________.
205.
________________________ refers to all changes in equity for a period except for those due
to investments by and distributions to owners.
206.
Foreign exchange rates fluctuate due to changing _______________ and ___________
conditions.
207.
Return on total assets is computed by dividing ___________ by __________.
208.
____________________________ are debt and equity securities that a company intends to
actively manage and trade for a profit.
209.
Investments in trading securities are always classified as ______________ and are reported
as _______________ on the balance sheet.
210.
_________________ are debt securities a company intends and is able to hold until the
maturity date.
211.
Long-term investments in available–for-sale securities are reported at their _______ on the
balance sheet.
212.
An investing company that owns _________ of another (investee) company’s voting stock
(but not more than 50%) is presumed to have a significant influence over the investee.
213.
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 _____________.
214.
A company that is a controlling investor in another company is known as the __________.
215.
When one company owns more than 50% of another company’s voting stock and has
control over the investee company, the investee is called the _______________________.
216.
______________________ financial statements show the financial position, results of
operations, and cash flows of all entities under the parent company’s control, including all
subsidiaries.