Question 1

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Huang Company owns 20,000 of the 50,000 outstanding ordinary shares of Xi Inc.The balance in the investment account at January 1, 2012 was ¥500,000,000.During 2012, Xi earned ¥800,000,000 and paid cash dividends of ¥640,000,000.
-The balance in the Investment in Xi account reported on Huang's December 31, 2012 statement of financial position should be

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Huang...

Question 2

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On January 1, 2010, Bregeut Company, a calendar year corporation, purchased 600 of the $1,000 face value, 9% bonds of Clariant Incorporated, for CHF622,000, including brokerage fees.The bonds, which mature on January 1, 2015, pay interest semiannually on July 1 and January 1.
-The entry on Bregeut's books to record the acquisition will include

Accepted Answer

The entry to record the acquisition of the bonds will be a debit to Debt Investments for the total cost of CHF622,000, which includes brokerage fees. No credit to Bonds Payable or Interest Receivable is necessary since Bregeut is the purchaser of the bonds and not the issuer. Additionally, no premium or discount on bonds payable exists since the purchase price equals the face value of the bonds.

Question 3

Nance Company owns 30% interest in the shares of Finley Corporation.During the year, Finley pays $25,000 in dividends, and reports $100,000 in net income.Nance Company's investment in Finley will increase by

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Question 4

On January 1, 2011, Garner Corporation purchased 25% of the ordinary shares outstanding of Landon Corporation for $250,000.During 2011, Landon Corporation reported net income of $80,000 and paid cash dividends of $40,000.The balance of the Share Investments-Landon account on the books of Garner Corporation at December 31, 2010 is

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Question 5

At December 31, 2010, EI Greco Company has an investment in 1,000 of the €1,000 8% bonds of Dublin Company with a carrying value of €1,060,500.The bonds, which mature on January 1, 2015, pay interest semiannually on July 1 and January 1.After collecting the interest on January 1, 2011, EI Greco sells the bonds for €1,110,000.EI Greco will recognize

Accepted Answer

EI Greco will recognize a gain on the sale of debt investments for €49,500, calculated as follows:
Sale proceeds                €1,110,000
Carrying value             (€1,060,500)
Unamortized premium     (€10,000)
Gain on sale                 € 49,500

Question 6

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Desmond Corporation owns 3,000 of the 10,000 outstanding ordinary shares of Wetmore Corporation.During 2011, Wetmore earned £2,400,000 and paid cash dividends of £800,000.
-Nagen Company had these transactions pertaining to share investments:
Feb. 1 Purchased 3,000 shares of Horton Company (10\%) for $ £ 49,800 $ cash plus brokerage fees of $ £ 1,200 $.
June 1 Received cash dividends of $ £ 2 $ per share on Horton shares.
Oct. 1 Sold 1,200 Horton shares for $ £ 24,000 $ less brokerage fees of $ £ 600 $.
The entry to record the purchase of the Horton shares would include a

Accepted Answer

The entry to record the purchase of the Horton shares would include a debit to Share Investments for £49,800 and a credit to Cash for the same amount. However, brokerage fees of £1,200 should also be added to the Share Investments account, making the total debit £51,000.

Question 7

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Huang Company owns 20,000 of the 50,000 outstanding ordinary shares of Xi Inc.The balance in the investment account at January 1, 2012 was ¥500,000,000.During 2012, Xi earned ¥800,000,000 and paid cash dividends of ¥640,000,000.
-Huang should report investment revenue for 2012 of

Accepted Answer

Huang owns 40% of Xi Inc. (20,000/50,000 shares), so it should recognize 40% of Xi's earnings as investment revenue. 40% of ¥800,000,000 is ¥320,000,000.

Question 8

Decker Corporation purchased 1,000 ordinary shares of Kent at $ \$ 75 $ per share plus $ \$ 3,000 $ brokerage fees as a short-term investment. The shares were subsequently sold at $ \$ 80 $ per share less $ \$ 3,400 $ brokerage fees. The cost of the securities purchased and gain or loss on the sale were

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Question 9

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Desmond Corporation owns 3,000 of the 10,000 outstanding ordinary shares of Wetmore Corporation.During 2011, Wetmore earned £2,400,000 and paid cash dividends of £800,000.
-How much investment revenue should Desmond report in 2011?

Accepted Answer

Desmond Corporation owns 30% (3,000/10,000) of Wetmore Corporation, so their share of Wetmore's earnings is £720,000 (30% of £2,400,000). Investment revenue is earned from the ownership of stocks or investments, so Desmond should report £720,000 as investment revenue for their ownership of Wetmore shares in 2011. The £800,000 dividend payment is not reported as investment revenue, but rather as a separate cash inflow from Wetmore Corporation.

Question 10

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On January 1, 2010, Bregeut Company, a calendar year corporation, purchased 600 of the $1,000 face value, 9% bonds of Clariant Incorporated, for CHF622,000, including brokerage fees.The bonds, which mature on January 1, 2015, pay interest semiannually on July 1 and January 1.
-On July, 2010, Bregeut will make an entry to

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On...

Question 11

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On January 1, 2010, Bregeut Company, a calendar year corporation, purchased 600 of the $1,000 face value, 9% bonds of Clariant Incorporated, for CHF622,000, including brokerage fees.The bonds, which mature on January 1, 2015, pay interest semiannually on July 1 and January 1.
-The December 31, 2010 adjusting entry for the bonds on Bregeut's books will include

Accepted Answer

The adjusting entry on December 31, 2010, will record the interest income earned by Bregeut Company for the six-month period from July 1, 2010, to December 31, 2010. The semiannual interest payment on the bonds is computed as follows: Face value of bonds x Stated interest rate x Time = CHF1,000 x 9% x 6/12 = CHF45. The total interest income earned by Bregeut Company from the 600 bonds for the six-month period is CHF45 x 600 = CHF27,000. Therefore, the adjusting entry will include a credit to Interest Revenue for CHF27,000.

Question 12

Mouns Company owns 30% interest in the shares of Darian Corporation.During the year, Darian pays $20,000 in dividends to Mouns, and reports $100,000 in net income.Mouns Company's investment in Darian will increase Mouns' net income by

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Question 13

Nagen Company had these transactions pertaining to share investments: Feb. 1 Purchased 3,000 shares of Horton Company (10\%) for $ £ 49,800 $ cash plus brokerage fees of $ £ 1,200 $. June 1 Received cash dividends of $ £ 2 $ per share on Horton stock. Oct. 1 Sold 1,200 shares of Horton stock for $ £ 24,000 $ less brokerage fees of $ £ 600 $. The entry to record the sale of the shares would include a

Accepted Answer

The cost per share is $ (£49,800 + £1,200) / 3,000 = £17. $ Selling 1,200 shares at £24,000 less £600 fees gives a net of £23,400. The cost of 1,200 shares is $ 1,200 \times £17 = £20,400 $. The gain is $ £23,400 - £20,400 = £3,000 $.

Question 14

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Desmond Corporation owns 3,000 of the 10,000 outstanding ordinary shares of Wetmore Corporation.During 2011, Wetmore earned £2,400,000 and paid cash dividends of £800,000.
-What balance should Desmond report on its December 31, 2011 statement of financial position for the investment account if the beginning of the year balance in the account was £3,200,000?

Accepted Answer

Desmond owns 30% (3,000/10,000) of Wetmore's outstanding ordinary shares. Therefore, Desmond is entitled to 30% of Wetmore's earnings, which is £720,000 (30% x £2,400,000). Since Desmond owns only ordinary shares in Wetmore and does not have significant influence over its operations, the equity method of accounting is not appropriate. Instead, Desmond should account for its investment using the cost method. Under the cost method, the investment account is initially recorded at cost (£3,200,000) and is subsequently adjusted for dividends received (£800,000) and the investor's share of earnings (£720,000). Therefore, the balance in the investment account at the end of the year should be £3,680,000 (£3,200,000 + £720,000 - £800,000).

Question 15

On January 1, Burkett Company purchased as an investment a $1,000, 7% bond for $1,020.The bond pays interest on January 1 and July 1.What is the entry to record the interest accrual on December 31?

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Question 16

Beneteau Corporation purchased 25,000 ordinary shares of La Brea Corporation for €40 per share on January 2, 2011.During 2011, La Brea Corporation had 100,000 shares of common stock outstanding, paid cash dividends of €60,000, and reported net income of €200,000.Beneteau Corporation should report revenue from this investment for 2011 in the amount of

Accepted Answer

Beneteau Corporation purchased 25,000 ordinary shares out of the total 100,000 shares outstanding of La Brea Corporation, representing a 25% ownership interest. As a result, Beneteau Corporation has significant influence over La Brea Corporation and must use the equity method of accounting.

Under the equity method, Beneteau Corporation must recognize its share of La Brea Corporation's net income and dividends as revenue. Therefore, for 2011, Beneteau Corporation's revenue from this investment would be calculated as follows:

Net income from La Brea Corporation: €200,000 x 25% = €50,000
Share of dividends received from La Brea Corporation: €60,000 x 25% = €15,000

Total revenue from investment in La Brea Corporation for 2011: €50,000 + €15,000 = €65,000
However, the question is asking for the revenue recognized by Beneteau Corporation in 2011, not the total revenue from the investment. Beneteau Corporation only owned the shares for a portion of the year, so its revenue would be calculated as follows:

Revenue recognized by Beneteau Corporation: €65,000 x 25% (portion of the year the shares were owned) = €16,250

Therefore, the answer is C) €50,000

Question 17

Osaka Co.acquired a 10% interest in Chen Corp.on December 31, 2010 for HK$945,000.During 2011, Chen had net income of HK$600,000 and paid cash dividends of HK$150,000.Osaka's 2011 income statement will report

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Question 18

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Desmond Corporation owns 3,000 of the 10,000 outstanding ordinary shares of Wetmore Corporation.During 2011, Wetmore earned £2,400,000 and paid cash dividends of £800,000.
-Elston Corporation sells 200 ordinary shares being held as an investment.The shares were acquired six months ago at a cost of $30 a share.Elston sold the shares for $40 a share.The entry to record the sale is

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Desmond...

Question 19

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Desmond Corporation owns 3,000 of the 10,000 outstanding ordinary shares of Wetmore Corporation.During 2011, Wetmore earned £2,400,000 and paid cash dividends of £800,000.
-Nagen Company had these transactions pertaining to share investments:
Feb. 1 Purchased 3,000 shares of Horton Company (10\%) for $ £ 49,800 $ cash plus brokerage fees of $ £ 1,200 $.
June 1 Received cash dividends of $ £ 2 $ per share on Horton shares.
Oct. 1 Sold 1,200 Horton shares for $ £ 24,000 $ less brokerage fees of $ £ 600 $.
The entry to record the receipt of the dividends on June 1 would include a

Accepted Answer

The receipt of dividends is recorded as a credit to Dividend Revenue, reflecting the income earned from the investment.

Question 20

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Desmond Corporation owns 3,000 of the 10,000 outstanding ordinary shares of Wetmore Corporation.During 2011, Wetmore earned £2,400,000 and paid cash dividends of £800,000.
-Greene Corporation sells 300 ordinary shares being held as an investment.The shares were acquired six months ago at a cost of $50 a share.Greene sold the shares for $40 a share.The entry to record the sale is

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The answer of Use the following information for questions 
Desmond...

Quiz 12: Investments

Nance Company owns 30% interest in the shares of Finley Corporation.During the year, Finley pays $25,000 in dividends, and reports $100,000 in net income.Nance Company's investment in Finley will increase by

Use the following information for questions Desmond Corporation owns 3,000 of the 10,000 outstanding ordinary shares of Wetmore Corporation.During 2011, Wetmore earned £2,400,000 and paid cash dividends of £800,000. -How much investment revenue should Desmond report in 2011?

Mouns Company owns 30% interest in the shares of Darian Corporation.During the year, Darian pays $20,000 in dividends to Mouns, and reports $100,000 in net income.Mouns Company's investment in Darian will increase Mouns' net income by

On January 1, Burkett Company purchased as an investment a $1,000, 7% bond for $1,020.The bond pays interest on January 1 and July 1.What is the entry to record the interest accrual on December 31?

Osaka Co.acquired a 10% interest in Chen Corp.on December 31, 2010 for HK$945,000.During 2011, Chen had net income of HK$600,000 and paid cash dividends of HK$150,000.Osaka's 2011 income statement will report