A)
Debit Cash $39,000; debit Loss on Sale of Investment $21,500; credit Long-Term
Investments $60,500.
B)
Debit Cash $39,000; debit Loss on Sale of Investment $8,200; credit Long-Term Investments
$47,280.
C)
Debit Cash $39,000; debit Loss on Sale of Investment $8,880; credit Long-Term Investments
$47,880.
D)
Debit Cash $39,000; credit Gain on Sale of Investment $8,750; credit Long-Term
Investments $30,250.
E)
Debit Cash $39,000; credit Gain on Sale of Investment $2,700; credit Long-Term
Investments $36,300.
128)
On January 4, Year 1, Barber Company purchased 5,000 shares of Convell Company for $59,500
plus a broker’s fee of $1,000. Convell Company has a total of 25,000 shares of common stock
outstanding and it is presumed the Barber Company will have a significant influence over Convell.
During each of the next two years, Convell declared and paid cash dividends of $0.85 per share,
and its net income was $72,000 and $67,000 for Year 1 and Year 2, respectively. What is the book
value of Barber’s investment in Convell at the end of Year 2?
A) $52,000. B) $79,800. C) $88,300. D) $87,300. E) $60,500.
129)
A U.S. company makes a sale to a foreign customer receivable in 30 days in the customer’s
currency. The sale would be recorded by the U.S. company on the date:
A)
Of sale using the current dollar value.
B)
Of sale using the foreign currency value.
C)
Of sale using a 30-day average U.S. dollar value.
D)
When payment is received.
E)
Of sale using a projected estimate of the U.S. dollar value at payment date.
130)
When a U.S. company makes a credit sale to an international customer and the sale terms are for
payment in a foreign currency, the foreign exchange rate used to record the sale is the exchange
rate:
A)
Thirty days from the date of sale.
B)
On the date of the sale.
C)
At the end of the buyer’s fiscal year.
D)
At the end of the seller’s fiscal year.
E)
On the date final payment is made.
131)
On June 18, Wyman Company (a U.S. Company) sold merchandise to the Nielsen Company of
Denmark for €60,000 (Euros), with a payment due in 60 days. If the exchange rate was $1.35 per
euro on the date of sale and $1.14 per euro on the date of payment, Wyman Company should
recognize a foreign exchange gain or loss in the amount of:
A) $12,600 loss.
B) $60,000 gain.
C) $68,400 loss.
D) $12,600 gain.
E) $60,000 loss.
67
132)
On November 12, Higgins, Inc., a U.S. Company, sold merchandise on credit to Kagome of Japan
at a price of 1,500,000 yen. The exchange rate was $0.00837 per yen on the date of sale. On
December 31, when Higgins prepared its financial statements, the exchange rate was $0.00843.
Kagome paid in full on January 12, when the exchange rate was $0.00861. On December 31,
Higgins should prepare the following journal entry:
A)
Debit Foreign Exchange Loss $90; Accounts Receivable-Kagome $90.
B)
Debit Accounts Receivable-Kagome $90; credit Foreign Exchange Gain $90.
C)
Debit Foreign Exchange Loss $90; credit Sales $90.
D)
No journal entry is required until the amount is collected.
E)
Debit Sales $90; credit Foreign Exchange Gain $90.
68
133)
On November 12, Higgins, Inc., a U.S. Company, sold merchandise on credit to Kagome of Japan
at a price of 1,500,000 yen. The exchange rate was $0.00837 on the date of sale. On December 31,
when Higgins prepared its financial statements, the exchange rate was $0.00843. Kagome paid in
full on January 12, when the exchange rate was $0.00861. On January 12, Higgins should prepare
the following journal entry:
A)
Debit Cash $12,645; debit Foreign Exchange Loss $90; credit Accounts Receivable-Kagome
$12,915.
B)
Debit Cash $12,915; credit Accounts Receivable-Kagome $12,645; credit Foreign Exchange
Gain $270.
C)
Debit Cash $12,915; credit Accounts Receivable-Kagome $12,555; credit Foreign Exchange
Gain $360.
D)
Debit Cash $12,555; debit Foreign Exchange Loss $360; credit Accounts Receivable-Kagome
$12,915.
E)
Debit Cash $12,915; credit Accounts Receivable-Kagome $12,645; credit Foreign Exchange
Gain $90.
134)
All of the following statements regarding accounting for noninfluential securities under U.S.
GAAP and IFRS are true except:
A)
Trading securities are accounted for using fair values with unrealized gains and losses
reported in other comprehensive income.
B)
Both systems examine held-to-maturity securities for impairment.
C)
Held-to-maturity securities are accounted for using amortized cost.
D)
Available-for-sale securities are accounted for using fair values with unrealized gains and
losses reported in other comprehensive income.
E)
Trading securities are accounted for using fair values with unrealized gains and losses
reported in net income.
135)
All of the following statements regarding accounting for influential securities under U.S. GAAP
and IFRS are true except:
A)
Under the consolidation method, nonintercompany assets and liabilities are combined
(eliminating the need for an investment account).
B)
Under the consolidation method, investee and investor revenues and expenses are combined.
C)
Under the equity method, the share of investee’s net income is reported in the investor’s
income in the same period the investee earns that income.
D)
U.S. GAAP companies commonly refer to noncontrolling interests in consolidated
subsidiaries as minority interests whereas IFRS companies use noncontrolling interests.
E)
Under the equity method, the investment account equals the acquisition cost plus the share of
investee income plus the share of investee dividends.
136)
All of the following statements regarding accounting for trading securities under U.S. GAAP are
true except:
A)
Unrealized gains and losses are recorded in a temporary account that is closed to Income
Summary at the end of the period.
B)
The entire portfolio of trading securities is reported at is fair value.
C)
An unrealized gain or loss is recorded with an adjusting entry when the securities are sold.
D)
An unrealized gain or loss from a change in fair value is reported on the income statement.
E)
An unrealized gain or loss is recorded with an adjusting entry at the end of each period.
137)
All of the following statements regarding accounting for trading securities under U.S. GAAP are
true except:
A)
An unrealized gain or loss from a change in fair value is reported on the income statement.
B)
A realized gain or loss is recorded when the securities are sold and reported on the income
statement.
C)
Any prior period fair value adjustment to the portfolio is not used to compute the gain or loss
from sale of individual transactions.
D)
When the period-end fair value adjustment for the portfolio of trading securities is computed,
it includes the cost and fair value of any securities sold.
E)
The entire portfolio of trading securities is reported at fair value.
138)
All of the following statements regarding other comprehensive income are true except:
A)
Other comprehensive income includes pension adjustments.
B)
Other comprehensive income includes unrealized gains and losses on available-for-sale
securities.
C)
Other comprehensive income is not considered when calculating comprehensive income.
D)
Other comprehensive income includes foreign currency adjustments.
E)
Accumulated other comprehensive income is defined as the cumulative impact of other
comprehensive income.
139)
Landmark Corp. buys $300,000 of Schroeter Company’s 8%, 5-year bonds at par value on
September 1. Interest payments are made semiannually. All of the following regarding accounting
for the securities are true except:
A)
The securities will have a maturity value of $300,000.
B)
The debt securities should be recorded at cost, $300,000.
C)
Interest Revenue should be credited when an interest payment is received.
D)
The semiannual interest payment amount is $24,000.
E)
The semiannual interest payment amount is $12,000.
140)
Landmark Corp. buys $300,000 of Schroeter Company’s 8%, 5-year bonds payable at par value on
September 1. Interest payments are made semiannually. Landmark plans to hold the bonds for the
5-year life. The journal entry to record the purchase should include:
A)
A debit to Short-Term Investments-Trading $300,000.
B)
A debit to Long-Term Investments-HTM $300,000.
C)
A debit to Cash $300,000.
D)
A debit to Short-Term Investments-AFS $300,000.
E)
A debit to Long-Term Investments-AFS $300,000.
141)
Landmark buys $300,000 of Schroeter Company’s 8%, 5-year bonds payable at par value on
September 1. Interest payments are made semiannually on March 1 and September 1. The journal
entry Landmark should record to accrue interest earned at year-end December 31 is:
A)
Debit Interest Receivable $12,000, credit Interest Revenue $12,000.
B)
Debit Interest Receivable $8,000, credit Interest Revenue $8,000.
C)
Debit Cash $8,000, credit Interest Revenue $8,000.
D)
Debit Interest Revenue $8,000, credit Interest Receivable $8,000.
E)
Debit Cash $12,000, credit Interest Revenue $12,000.
142)
Landmark Corp. buys $300,000 of Schroeter Company’s 8%, 5-year bonds payable at par value on
September 1. Interest payments are made semiannually. Landmark plans to hold the bonds for the
5-year life. When the bonds mature, the journal entry to record the proceeds will be:
A)
Debit Cash $300,000; credit Long-Term Investments-HTM $300,000.
B)
Debit Long-Term Investments-HTM $300,000; credit Cash $300,000.
C)
Debit Cash $300,000; credit Interest Receivable $300,000.
D)
Debit Cash $300,000; credit Bonds Payable $300,000.
E)
Debit Cash $300,000; credit Interest Revenue $300,000.
143)
On February 15, Jewel Company buys 7,000 shares of Marcelo Corp. common stock at $28.53 per
share plus a brokerage fee of $400. The stock is classified as long-term available-for-sale
securities. This is the company’s first and only investment in available-for-sale securities. On
March 15, Marcelo declares a dividend of $1.15 per share payable to stockholders of record on
April 15. Jewel received the dividend on April 15 and ultimately sells half of the Marcelo stock on
November 17 of the current year for $29.30 per share less a brokerage fee of $250. The journal
entry to record the purchase on February 15 is:
A)
Debit Long-Term Investments-HTM $199,710; credit Cash $199,710.
B)
Debit Long-Term Investments-Trading $200,110; credit Cash $200,110.
C)
Debit Long-Term Investments-Trading $199,710; credit Cash $199,710.
D)
Debit Long-Term Investments-AFS $199,710; credit Cash $199,710.
E)
Debit Long-Term Investments-AFS $200,110; credit Cash $200,110.
144)
On February 15, Jewel Company buys 7,000 shares of Marcelo Corp. common stock at $28.53 per
share plus a brokerage fee of $400. The stock is classified as available-for-sale securities. This is
the company’s first and only investment in available-for-sale securities. On March 15, Marcelo
Corp. declares a dividend of $1.15 per share payable to stockholders of record on April 15. Jewel
Company received the dividend on April 15 and ultimately sells half of the Marcelo Corp. stock on
November 17 of the current year for $29.30 per share less a brokerage fee of $250. The journal
entry to record the dividend on April 15 is:
A)
Debit Cash $8,050; credit Interest Revenue $8,050.
B)
Debit Cash $7,350; credit Interest Revenue $7,350.
C)
Debit Cash $8,050; credit Gain on Sale of Investments $8,050.
D)
Debit Cash $8,050; credit Dividend Revenue $8,050.
E)
Debit Cash $7,350; credit Dividend Revenue $7,350.
145)
On February 15, Jewel Company buys 7,000 shares of Marcelo Corp. common stock at $28.53 per
share plus a brokerage fee of $400. The stock is classified as available-for-sale securities. This is
the company’s first and only investment in available-for-sale securities. On March 15, Marcelo
Corp. declares a dividend of $1.15 per share payable to stockholders of record on April 15. Jewel
Company received the dividend on April 15 and ultimately sells half of the Marcelo Corp. stock on
November 17 of the current year for $29.30 per share less a brokerage fee of $250. The balance in
the investment account on April 16 is:
A) $191,810. B) $191,660. C) $199,710. D) $200,110. E) $192,060.
146)
On February 15, Jewel Company buys 7,000 shares of Marcelo Corp. common stock at $28.53 per
share plus a brokerage fee of $400. The stock is classified as available-for-sale securities. This is
the company’s first and only investment in available-for-sale securities. On March 15, Marcelo
Corp. declares a dividend of $1.15 per share payable to stockholders of record on April 15. Jewel
Company received the dividend on April 15 and ultimately sells half of the Marcelo Corp. stock on
November 17 of the current year for $29.30 per share less a brokerage fee of $250. The journal
entry to record the sale of the 3,500 shares of stock on November 17 is:
A)
Debit Cash $102,550; credit Long-Term Investments-AFS $100,055; credit Gain on Sale of
Long-Term Investments $2,495.
B)
Debit Cash $102,550; credit Long-Term Investments-Trading $99,855; credit Gain on Sale of
Long-Term Investments $2,645.
C)
Debit Cash $102,300; credit Long-Term Investments-AFS $100,055; credit Gain on Sale of
Long-Term Investments $2,245.
D)
Debit Cash $102,550; credit Long-Term Investments-Trading $99,855; debit Gain on Sale of
Long-Term Investments $2,645.
E)
Debit Cash $102,300; credit Long-Term Investments-AFS $99,855; credit Gain on Sale of
Long-Term Investments $2,445.
147)
On February 15, Jewel Company buys 7,000 shares of Marcelo Corp. common stock at $28.53 per
share plus a brokerage fee of $400. The stock is classified as available-for-sale securities. This is
the company’s first and only investment in available-for-sale securities. On March 15, Marcelo
Corp. declares a dividend of $1.15 per share payable to stockholders of record on April 15. Jewel
Company received the dividend on April 15 and ultimately sells half of the Marcelo Corp. stock on
November 17 of the current year for $29.30 per share less a brokerage fee of $250. The fair value
of the remaining shares is $29.50 per share. The impact on Jewel’s net income as a result of its
investment in Marcelo Corp. was a(n):
A)
Increase to income of $10,295.
B)
Increase to income of $8,050.
C)
Decrease to income of $5,440.
D)
Decrease to income of $3,195.
E)
Increase to income of $2,245.
80
148)
On February 15, Jewel Company buys 7,000 shares of Marcelo Corp. common at $28.53 per share
plus a brokerage fee of $400. The stock is classified as available-for-sale securities. This is the
company’s first and only investment in available-for-sale securities. On March 15, Marcelo Corp.
declares a dividend of $1.15 per share payable to stockholders of record on April 15. Jewel
Company received the dividend on April 15 and ultimately sells half of the Marcelo Corp. stock on
November 17 of the current year for $29.30 per share less a brokerage fee of $250. The fair value
of the remaining shares is $29.50 per share. The amount that Jewel Company should report in the
equity section of its year-end December 31 balance sheet for its investment in Marcelo Corp. is:
A)
Unrealized Gain –Equity; $10,295.
B)
Unrealized Gain – Equity; $6,390.
C)
Realized Gain –Equity; $8,050.
D)
Unrealized Gain –Equity; $3,195.
E)
Unrealized Loss –Equity; $2,245.