190) Cosmos Corporation had the following long-term investment transactions.
Jan 2
Purchased 5,000 shares of Visual, Inc. for $42 per share. These shares
represent a 35% ownership of Visual.
Oct 15
Received Visual, Inc. cash dividend of $2 per share.
Dec 31
Visual reported a net loss of $66,000 for the year.
Prepare the journal entries Cosmos Corporation should record for these transactions and events.
Equity Method Investments
Oct
15
Cash (5,000 * $2)
Dec.
31
Loss from Equity Method Investments
35%)
191) On January 3, Kostansas Corporation purchased 5,000 shares of Morton, Inc. for $40 per
share. These shares represent a 40% ownership in Morton, Inc. Prepare the journal entry
Kostansas Corporation should record for the purchase of this investment.
192) On January 3, Kostansas Corporation purchased 5,000 shares of Morton, Inc. for $40 per
share. These shares represent a 40% ownership in Morton, Inc. Prepare the journal entry
Kostansas Corporation should record for the receipt of cash dividends of $2 per share from
Morton on July 10.
193) On January 3, Kostansas Corporation purchased 5,000 shares of Morton, Inc. for $40 per
share. 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.
194) 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.
195) On January 1, Year 1, Rickson Corporation purchased 7,500 shares of AutoTech as an
equity method 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 Year 2.
Sold 1,875 of the AutoTech shares for $33 per share.
Rickson received a $0.90 per share cash dividend from AutoTech.
AutoTech reported net loss of $46,000 for Year 2.
12/31/Year 1
Equity Method Investments
2/1/Year 2
Cash (1,875 * $33)
Loss on Sale of Equity Method Investment
$63,700
Loss on sale = $63,700 – $61,875 = $1,825
11/1/Year 2
Cash
(7,500 – 1,875) * $0.90
12/31/Year 2
Loss from Equity Method Investment
$46,000 * [(7,500 – 1,875)/25,000]
196) 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)
Oct 30
Accounts Payable
197) 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.
Nov 10
Accounts Receivable (¥10,000,000 * $0.009)
Dec 5
Cash (10,000,000 * $0.0087)
Foreign Exchange Loss
198) 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
Accounts Payable [5,000,000 * ($0.002 – $0.0023)]
Jan 20
Accounts Payable ($10,000 +$1,500)
Foreign Exchange Gain
Cash (5,000,000 * $0.0021)
199) 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 20
Accounts Receivable (60,000 * $0.476)
Dec 31
Accounts Receivable [60,000 * ($0.476 – $0.480)]
Jan 17
Cash (60,000 * $0.495)
200) ________ 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.
201) ________ are investments in securities that are not readily convertible to cash, or are not
intended to be converted to cash in the short-term.
202) ________ securities reflect a creditor relationship while ________ securities reflect an
owner relationship.
203) An investing company that owns more than ________ of another (investee) company’s
voting stock is presumed to have controlling influence over the investee.
204) Short-term investments in held-to-maturity debt securities are accounted for using the
________.
205) Long-term investments in held-to-maturity debt securities are accounted for using the
________.
206) Investments in equity securities where the investor has a significant, but not controlling
influence, are accounted for using the ________ method.
207) Investments in equity securities where the investor has a controlling influence are
accounted for using the ________.
208) ________ refers to all changes in equity for a period except for those due to investments by
and distributions to owners.
209) Foreign exchange rates fluctuate due to changing ________ and ________ conditions.
210) Return on total assets is computed by dividing ________ by ________.
211) ________ are debt securities that a company intends to actively manage and trade for a
profit.
212) Investments in trading securities are always classified as ________ and are reported as
________ on the balance sheet.
213) ________ are debt securities a company intends and is able to hold until the maturity date.
214) Long-term investments in available-for-sale securities are reported at their ________ on the
balance sheet.
215) 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.
216) 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 ________.
217) A company that is a controlling investor in another company is known as the ________.
218) 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 ________.
219) ________ financial statements show the financial statements of all entities under the
parent’s control, including all subsidiaries.