Question 1

A company reported net sales of $900,000,net income of $100,000 and average total assets of $425,000.Calculate its return on total assets.

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Question 2

Discuss the reasons companies make investments.

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Question 3

On May 1 of the current year,a company paid $200,000 to purchase 8%,10-year bonds with a par value of $200,000; interest is paid semiannually on March 1 and September 1.The company intends to hold the bonds until they mature.Prepare the journal entries to record (1)the bond purchase,(2)the receipt of the first semiannual interest payment on September 1 of the current year,(3)the accrual of interest for year-end December 31,and (4)the receipt of the second semiannual payment on May 1.

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Question 4

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

3,500 shares * $29.50 = $103,250

Question 5

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

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Question 6

A company paid $500,000 for 12% bonds with a par value of $500,000.The bonds pay 6% interest semiannually on September 1 and March 1.The company intends to hold the bonds until they mature.Prepare the journal entries for the following dates and transactions related to this bond acquisition.
(1)Bonds purchased on September 1.
(2)Year-end adjusting entry,December 31.
(3)Receipt of semiannual interest March 1.
(4)Redemption of the bonds at maturity on August 31.

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Question 7

A company had net income of $450,000 in Year 1 and $620,000 in Year 2.The company had average total assets of $2,500,000 in Year 1 and $3,000,000 in Year 2.Calculate the return on total assets for Year 1and Year 2.Comment on the results,did the company's performance improve?

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Question 8

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?

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Question 9

Explain how to record the sale of trading securities.

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Question 10

On April 1 of the current year,a company paid $150,000 cash to purchase 7%,10-year bonds with a par value of $150,000; interest is paid semiannually each April 1 and October 1.The company intends to hold these bonds until they mature.Prepare the journal entries to record the bond purchase,the receipt of the first semiannual interest payment on October 1 of the current year,and the accrual of interest for the year-end December 31.

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Question 11

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

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Question 12

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

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Question 13

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 14

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

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Question 15

Explain how equity securities having significant influence are accounted for and reported in the financial statements.Include a discussion of the criterion for these securities in terms of an investee's voting stock.

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Question 16

Explain how available-for-sale debt and equity securities are accounted for at and after acquisition and how they are reported in financial statements.

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Question 17

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

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Question 18

Explain how held-to-maturity debt securities are accounted for at and after acquisition and how they are reported in the financial statements.

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Question 19

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

Question 20

Detalo Co.held bonds of Schooner Corp.with a cost of $125,000 and a market value of $127,000.Detalo also held 1,500 shares of Tranco common stock with a cost of $25,000 and a market value of $24,700.These are classified as long-term available-for-sale securities.Prepare the journal entry to record the market value of the investments as of December 31.

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Quiz 15: Investments and International Operations