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Exam 25: Investments and International Operations

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Question 41

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When using the equity method, receipt of cash dividends increases the carrying value of an investment in equity securities.

A) True
B) False

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Question 42

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Cash equivalents are investments that are readily converted to known amounts of cash that mature within three months.

A) True
B) False

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Question 43

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The price of one currency stated in terms of another currency is called a(n) :

A controlling influence over the investee is based on the investor owning voting stock exceeding:

Define the foreign exchange rate between two currencies. Explain its effect on business transactions conducted in a foreign currency.

Rhone Importers purchases automotive parts from Germany. Prepare journal entries for the following transactions of Rhone.

Explain how to record the sale of trading securities.

A company reported net income of $275,000, net sales of $2,500,000 and average total assets of $2,100,000 for the current year. Calculate this company's profit margin, total asset turnover and return on total assets.

On October 31, Mayfair Co. received cash dividends of $0.15 per share from its investment in Carter Corp.'s common stock. Mayfair owned 1,200 shares of Carter Corp.'s stock on October 31. The investment is considered available for sale. Prepare the investor's journal entry to record the receipt of the cash dividends.

Trading securities are securities that are purchased by trading other securities rather than by paying cash.

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.

Chung owns 40% of Lu's common stock. Lu pays $97,000 in total cash dividends to its shareholders. Chung's entry to record this transaction should include a:

A company had net income of $43,000, net sales of $380,500 and average total assets of $220,000. Its profit margin and total asset turnover were, respectively:

A company owns $400,000 of 7% bonds that pay interest on October 1 and April 1. The amount of interest accrued on December 31 (the company's year-end) would be:

A company had net income of $82,000, net sales of $781,000 and average total assets of $300,000. Its profit margin and total asset turnover were respectively:

Investments in equity securities where the investor has a significant, but not controlling influence, are accounted for using the _______________ method.

Golden Age Co. exports Native American artwork to Japan. Prepare journal entries for the following transactions.

Equity securities reflect a creditor relationship such as investments in notes, bonds and certificates of deposit.

Define the return on total assets and explain how it is used to measure a company's financial performance.

Sanuk purchased on credit ?20,000 worth of parts from a British company when the exchange rate was $1.66 per British pound. At the year-end balance sheet date the exchange rate increased to $1.69. Sanuk must record a gain of $600.