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Exam 13: Investments and Fair Value Accounting

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Question 51

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Prepare the journal entries for the following transactions for Morgan Co.

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Question 52

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Growth firms generally pay regular dividends to stockholders.

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B) False

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Question 53

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The income statement for Dodson Corporation reported net income of $22,400 for the year ended December 31, 2012 before considering the following: During the year the company purchased available-for-sale securities. At year end, the fair value of the investment portfolio was $2,100 more than cost. The balance of retained earnings was $83,000 on December 31, 2011. Dobson Corporation paid $9,000 in cash dividends in 2012. Calculate the balance of retained earnings on December 31, 2012.

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

Jacks Corporation purchases $200,000 bonds plus accrued interest for 2 months of $2,000 from Kennedy Company on March 1. The bonds have an annual interest rate of 6% payable on June 30 and December 31. The entry to record the purchase of the bonds would include:

Which of the following would be considered an "Other Comprehensive Income" item?

Pepito Company purchased 40% of the outstanding stock of Reyes Company on January 1, 2012. Reyes reported net income of $75,000 and declared dividends of $15,000 during 2012. How much would Pepito adjust their investment in Reyes Company under the equity method?

What are the total proceeds from the February 1, 2015 sale?

Generally accepted accounting principles (GAAP) require the use of fair value accounting for all assets and liabilities.

The journal entry Stanton will record on June 30, 2014, will include:

Held-to-maturity securities maturing beyond a year are reported as noncurrent assets.

Yankton Company began the year without an investment portfolio. During the year they purchased investments classified as available-for-sale securities at a cost of $13,000. At the end of the year, the market value of the securities was $11,000. The Yankton Company's financial statements for the current year should show

Trading securities are reported on the balance sheet at cost.

The cost method of accounting for stock

Comprehensive income does not affect net income or retained earnings.

On April 1, 2011, Albert Company purchased $50,000 of Tetter Company's 12% bonds at 100 plus accrued interest of $2,000. On June 30, 2011, Albert received its first semiannual interest. On February 1, 2012, Albert sold $40,000 of the bonds at 103 plus accrued interest. The journal entry Albert will record on April 1, 2011 for the purchase of the bonds will include:

The account Valuation Allowance for Trading Securities is found on the:

The equity method of accounting for investments

Ruben Company purchased $100,000 of Evans Company bonds at 100 plus $1,500 in accrued interest. The bond interest rate is 8% and interest is paid semi-annually. The journal entry to record the receipt of interest on the next interest payment date would be:

Unrealized gains and losses on trading securities are not included in the calculation of net income.