Question 1

Seamark buys $300,000 of Eider's 8% five-year bonds payable at par value. Interest payments are made semiannually. All of the following regarding accounting for the securities are True except:

Accepted Answer

The semiannual interest payment amount will be 8% of the bond's par value, which is $300,000, making the semiannual payment $12,000 (300,000 x 0.08 / 2). Therefore, option D is false as the correct interest payment amount is $12,000 and not $24,000. All other options are true, as the debt securities should be recorded at cost, will have a maturity value equal to the purchase price, and interest revenue should be credited when payments are received.

Question 2

On February 15, Seacroft buys 7,000 shares of Kebo common at $28.53 per share plus a brokerage fee of $400. The stock is classified as available-for-sale securities. On March 15, Kebo declares a dividend of $1.15 per share payable to stockholders of record on April 15. Seacroft received the dividend on April 15 and ultimately sells half of the Kebo 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 if $29.50 per share. The amount that Seacroft should report in the asset section of its year-end December 31 balance sheet for its investment in Kebo is:

Accepted Answer

First, we need to calculate the cost of Seacroft's investment in Kebo:
Cost = (7,000 shares x $28.53 per share) + $400 brokerage fee = $200,710

Next, we need to calculate the dividend income received by Seacroft:
Dividend income = 7,000 shares x $1.15 per share = $8,050

Now, we need to calculate the gain on the sale of half the Kebo stock:
Proceeds from sale = (3,500 shares x $29.30 per share) - $250 brokerage fee = $102,450
Cost of sale = 3,500 shares x ($28.53 per share + ($400 + $250)/7,000 shares) = $100,200
Gain on sale = $102,450 - $100,200 = $2,250

Finally, we need to calculate the fair value adjustment for the remaining Kebo stock:
Fair value adjustment = (3,500 shares x $29.50 per share) - Cost of remaining stock
Cost of remaining stock = 3,500 shares x ($28.53 per share + ($400 + $250)/7,000 shares) = $100,200
Fair value adjustment = (3,500 shares x $29.50 per share) - $100,200 = $5,450

The total value of Seacroft's investment in Kebo as of December 31 would be:
$200,710 original cost + $8,050 dividend income + $2,250 gain on sale + $5,450 fair value adjustment = $216,460
However, since the fair value adjustment can only increase the value of the investment and not decrease it, the maximum value that Seacroft can report for its investment in Kebo is $200,710 + $8,050 + $2,250 + $5,440 = $216,450. Rounded to the nearest dollar, the answer is B.

Question 3

Identify the classifications for non-influential investments in securities. What are the accounting basics for non-influential investments in securities, including acquisition, dividends earned, and disposition?

Accepted Answer

The answer of Identify the classifications for non-influential investments in...

Question 4

Seamark buys $300,000 of Eider's 8% five-year bonds payable at par value. Interest payments are made semiannually. Seamark plans to hold the bonds for the five year life. The journal entry to record the purchase should include:

Accepted Answer

Since Seamark plans to hold the bonds for the full five-year life, the investment is classified as held-to-maturity (HTM) and should be recorded as a long-term investment. Therefore, the correct journal entry would be to debit Long-Term Investments-HTM for $300,000 and credit Cash for $300,000. Choices A, B, and D are incorrect because they refer to short-term investments, which do not have a five-year life. Choice E is incorrect because it only records the cash payment, but does not reflect the acquisition of the bond as an investment.

Question 5

Seamark buys $300,000 of Eider's 8% five-year bonds payable at par value. Interest payments are made semiannually. Seamark plans to hold the bonds for the five year life. When the bonds mature, the journal entry to record the proceeds will be:

Accepted Answer

When the bonds mature, Seamark will receive the par value of the bonds, which is $300,000. Therefore, the journal entry to record the proceeds should be a debit to Cash for $300,000 and a credit to the Long-Term Investments-HTM account for $300,000. This represents the return of Seamark's initial investment in the bonds. Option A is incorrect because it would be used to record the initial purchase of the bonds, not the proceeds from their maturity. Option B is incorrect because it would be used to record interest revenue earned on the bonds, not the proceeds from their maturity. Option D is incorrect because it would be used to record the receipt of interest payments, not the proceeds from the maturity of the bonds. Option E is incorrect because it would be used to record the initial issuance of the bonds, not their maturity.

Question 6

All of the following statements regarding accounting for trading securities under U.S. GAAP are True except:

Accepted Answer

An unrealized gain or loss is not recorded with an adjusting entry when the securities are sold. Instead, a realized gain or loss is reported on the income statement.

Question 7

On February 15, Seacroft buys 7,000 shares of Kebo common at $28.53 per share plus a brokerage fee of $400. The stock is classified as available-for-sale securities. On March 15, Kebo declares a dividend of $1.15 per share payable to stockholders of record on April 15. Seacroft received the dividend on April 15 and ultimately sells half of the Kebo 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 Seacroft should report in the equity section of its year-end December 31 balance sheet for its investment in Kebo is:

Accepted Answer

($3,500 * $29.50 = $103,250) - ($200,110 * 1/2) = $3,195

Question 8

On February 15, Seacroft buys 7,000 shares of Kebo common stock at $28.53 per share plus a brokerage fee of $400. The stock is classified as available-for-sale securities. On March 15, Kebo declares a dividend of $1.15 per share payable to stockholders of record on April 15. Seacroft received the dividend on April 15 and ultimately sells half of the Kebo 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 stock on November 17 is:

Accepted Answer

The sale of half of the Kebo stock is recorded as follows:

Debit Cash: 2,900 shares x $29.30 per share = $84,970 
Credit Long-Term Investments-AFS: 2,900 shares x $28.53 per share = $82,767 
Credit Gain on Sale of Long-Term Investments: $2,203 ($2,445 gain - $250 brokerage fee)

Therefore, the journal entry should be: 
Debit Cash $84,970; credit Long-Term Investments-AFS $82,767; credit Gain on Sale of Long-Term Investments $2,203.

Choices A, B, C, and E are incorrect because they either include the wrong account (i.e. Trading instead of AFS) or the wrong amounts.

Question 9

All of the following statements regarding accounting for trading securities under U.S. GAAP are True except:

Accepted Answer

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. This means that the cost and fair value of securities sold during the period must be considered in the fair value adjustment calculation. Therefore, E is False since it excludes the cost and fair value of any securities sold. A, B, and C are True statements regarding accounting for trading securities under U.S. GAAP.

Question 10

All of the following statements regarding accounting for influential securities under U.S. GAAP and IFRS are True except:

Accepted Answer

Under the equity method, the investment account equals the acquisition cost plus the share of investee income minus the share of investee dividends, not plus.

Question 11

On February 15, Seacroft buys 7,000 shares of Kebo common stock at $28.53 per share plus a brokerage fee of $400. The stock is classified as available-for-sale securities. On March 15, Kebo declares a dividend of $1.15 per share payable to stockholders of record on April 15. Seacroft received the dividend on April 15 and ultimately sells half of the Kebo 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:

Accepted Answer

(7,000 * $28.43) + $400 = $200,110

Question 12

Explain how investors report investments in equity securities when the investor has a controlling influence over an investee.

Accepted Answer

The answer of Explain how investors report investments in equity...

Question 13

Seamark buys $300,000 of Eider's 8% five-year bonds payable at par value on September 1. Interest payments are made semiannually on March 1 and September 1. The journal entry to accrue interest earned at year-end December 31 is:

Accepted Answer

Since Seamark bought $300,000 of Eider's 8% five-year bonds, the annual interest earned would be ($300,000 x 8%) = $24,000. Interest payments are made semiannually, so the interest earned for half a year would be ($24,000/2) = $12,000.

However, since Seamark bought the bonds payable at par value on September 1, they would have already received the interest payment on September 1. Therefore, the accrued interest would only be for the period from September 1 to December 31, which is half of the semiannual interest payment, or $12,000/2 = $6,000.

The journal entry to accrue the interest earned at year-end December 31 would be:
Debit Interest Receivable $6,000
Credit Interest Revenue $6,000

Therefore, the closest answer is A, which reflects the correct amount of interest earned and the correct accounts to debit and credit.

Question 14

All of the following statements regarding other comprehensive income are True except:

Accepted Answer

Other comprehensive income is actually included when calculating comprehensive income.

Question 15

Explain the difference between short-term and long-term investments. Cite examples of each.

Accepted Answer

The answer of Explain the difference between short-term and long-term...

Question 16

What is comprehensive income and how is it usually reported in the financial statements?

Accepted Answer

The answer of What is comprehensive income and how is...

Question 17

Discuss the reasons companies make investments.

Accepted Answer

The answer of Discuss the reasons companies make investments....

Question 18

On February 15, Seacroft buys 7,000 shares of Kebo common stock at $28.53 per share plus a brokerage fee of $400. The stock is classified as available-for-sale securities. On March 15, Kebo declares a dividend of $1.15 per share payable to stockholders of record on April 15. Seacroft received the dividend on April 15 and ultimately sells half of the Kebo 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:

Accepted Answer

The dividend received is $1.15 per share and Seacroft owns 7,000 shares of Kebo. Therefore, the total dividend received is 7,000 x $1.15 = $8,050. The journal entry to record the dividend is to debit Cash for $8,050 and credit Dividend Revenue for $8,050.

Question 19

What are the accounting basics for debt securities, including recording their acquisition, interest earned, and their disposal?

Accepted Answer

The answer of What are the accounting basics for debt...

Question 20

On February 15, Seacroft buys 7,000 shares of Kebo common stock at $28.53 per share plus a brokerage fee of $400. The stock is classified as available-for-sale securities. On March 15, Kebo declares a dividend of $1.15 per share payable to stockholders of record on April 15. Seacroft received the dividend on April 15 and ultimately sells half of the Kebo 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 Seacroft should report on its year-end December 31 income statement related to the investment in Kebo is:

Accepted Answer

(7,000 * $1.15 = $8,050) + [(3,500 x $29.30) - $250] - ($200,110 x 1/2) =
$8,050 + $2,245 = $10,295

Quiz 15: Investments and International Operations

Seamark buys $300,000 of Eider's 8% five-year bonds payable at par value. Interest payments are made semiannually. All of the following regarding accounting for the securities are True except:

Identify the classifications for non-influential investments in securities. What are the accounting basics for non-influential investments in securities, including acquisition, dividends earned, and disposition?

Seamark buys $300,000 of Eider's 8% five-year bonds payable at par value. Interest payments are made semiannually. Seamark plans to hold the bonds for the five year life. The journal entry to record the purchase should include:

Seamark buys $300,000 of Eider's 8% five-year bonds payable at par value. Interest payments are made semiannually. Seamark plans to hold the bonds for the five year life. When the bonds mature, the journal entry to record the proceeds will be:

All of the following statements regarding accounting for trading securities under U.S. GAAP are True except:

All of the following statements regarding accounting for trading securities under U.S. GAAP are True except:

All of the following statements regarding accounting for influential securities under U.S. GAAP and IFRS are True except:

Explain how investors report investments in equity securities when the investor has a controlling influence over an investee.

Seamark buys $300,000 of Eider's 8% five-year bonds payable at par value on September 1. Interest payments are made semiannually on March 1 and September 1. The journal entry to accrue interest earned at year-end December 31 is:

All of the following statements regarding other comprehensive income are True except:

Explain the difference between short-term and long-term investments. Cite examples of each.

What is comprehensive income and how is it usually reported in the financial statements?

Discuss the reasons companies make investments.

What are the accounting basics for debt securities, including recording their acquisition, interest earned, and their disposal?