Question 1

If the exchange rate for Canadian and U.S. dollars is 0.7382 to 1, this implies that 2 Canadian dollars will buy about1.48 worth of U.S. dollars.

Accepted Answer

A) True 
 B)False

Question 2

A company had a profit margin of 10.5% and total asset turnover of 1.84. Its return on total assets was:

Accepted Answer

A)   5.71%
B)   8.66%
C)   12.34%
D)   13.61%
E)   19.32%F) C) and D)
G) A) and D)

Question 3

________________________ refers to all changes in equity for a period except for those due to owners' investments and dividends to owners.

Accepted Answer

Comprehens...

Question 4

Foreign exchange rates fluctuate due to changes in:

Accepted Answer

A)   Political conditions.
B)   Economic conditions.
C)   Supply and demand for currencies.
D)   Expectations of future events.
E)   All of these.F) A) and D)
G) All of the above

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. The journal entry to record the purchase should include:

Accepted Answer

A)   A debit to Long-Term Investments-AFS $300,000.
B)   A debit to Short-Term Investments-Trading $300,000.
C)   A debit to Long-Term Investments-HTM $300,000.
D)   A debit to Short-Term Investments-AFS $300,000.
E)   A debit to Cash $300,000.F) All of the above
G) None of the above

Question 6

Six months ago, a company purchased an investment in shares for $65,000. The investment is classified as available-for-sale securities. The current fair value of the shares is $68,500. The company should record a:

Accepted Answer

A)   Debit to Gain on Investment for $3,500.
B)   Credit to Gain on Investment for $3,500.
C)   Debit to Investment Revenue for $3,500.
D)   Credit to Share Capital-Ordinary for $3,500.
E)   Credit to Investment Revenue for $3,500.F) B) and D)
G) None of the above

Question 7

The price of one currency stated in terms of another currency is called a foreign exchange rate.

Accepted Answer

A) True 
 B)False

Question 8

All of the following statements regarding equity securities are except:

Accepted Answer

A)   Equity securities should be recorded at cost when acquired.
B)   Equity securities are valued at fair value if classified as hedl-for-trading securities.
C)   Equity securities are valued at fair value if classified as significant influence securities.
D)   Equity securities are valued at fair value if classified as available-for-sale securities.
E)   Equity securities classified as available-for-sale record the dividend revenue when received.F) A) and E)
G) A) and D)

Question 9

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

Accepted Answer

A)   Debit to Dividends for $97,000.
B)   Debit to Dividends for $38,800.
C)   Debit to Long-Term investments for $97,000.
D)   Credit to Long-Term Investments for $38,800.
E)   Credit to Cash for $97,000.F) D) and E)
G) A) and E)

Question 10

Multinational corporations can be U.S. companies with operations in other countries.

Accepted Answer

A) True 
 B)False

Question 11

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 shares.

Accepted Answer

The equity method of accounting for secu...

Question 12

Texana Inc. imports inventory from Mexico. Prepare the journal entries for Texana to record the following transactions. Include any year-end adjustments.

Accepted Answer

The answer of Texana Inc. imports inventory from Mexico. Prepare...

Question 13

Match the following terms with the appropriate definitions.

Accepted Answer

The answer of Match the following terms with the appropriate...

Question 14

Available-for-sale equity securities:

Accepted Answer

A)   Are recorded at cost when acquired.
B)   May earn dividends that are reported in that year's income statement.
C)   May be classified as either short-term or long-term securities.
D)   Are reported at market value on the balance sheet.
E)   All of these.F) None of the above
G) B) and C)

Question 15

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

Accepted Answer

Available-for-sale securities are record...

Question 16

Doherty Corporation had net income of $30,000, net sales of $1,000,000, and average total assets of $500,000. Its return on total assets is:

Accepted Answer

A)   3%
B)   200%
C)   6%
D)   17%
E)   1.5%F) A) and D)
G) C) and D)

Question 17

Short-term investments are intended to be converted into cash within the longer of one year or the current operating cycle of the business, and are readily convertible to cash.

Accepted Answer

A) True 
 B)False

Question 18

Vans purchased 40,000 shares of Skechs ordinary shares for $232,000. This represents 40% of the outstanding shares. The entry to record the transaction includes a:

Accepted Answer

A)   Debit to Long-Term Investments for $92,800.
B)   Debit to Long-Term Investments for $232,000.
C)   Credit to Long-Term Investments for $92,800.
D)   Debit to Long-Term Investments-HTM for $232,000.
E)   Debit to Short-Term Investment-AFS for $232,000.F) A) and B)
G) B) and E)

Question 19

If a U. S. company's credit sale to an international customer allows payment to be made in a foreign currency, the transaction is recorded using the exchange rate on the date of sale.

Accepted Answer

A) True 
 B)False

Question 20

On July 31, Beatrice Co. purchased 2,000 shares of SimmTech shares for $16,000. The investment is classified as available-for-sale securities. On October 31, which is Beatrice's year-end, the shares had a fair value of $20,000. Beatrice should record a:

Accepted Answer

A)   Credit to Gain on Investment for $4,000.
B)   Credit to Share Capital-Ordinary for $4,000.
C)   Credit to Investment Revenue for $4,000.
D)   Debit to Investment Revenue for $4,000.
E)   Debit to Gain on Investment for $4,000.F) B) and C)
G) A) and E)

Exam 15: Investments and International Operations

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

Correct AnswerverifiedShow Answer

If the exchange rate for Canadian and U.S. dollars is 0.7382 to 1, this implies that 2 Canadian dollars will buy about1.48 worth of U.S. dollars.

Correct AnswerverifiedShow Answer

Vans purchased 40,000 shares of Skechs ordinary shares for $232,000. This represents 40% of the outstanding shares. The entry to record the transaction includes a:

Correct AnswerverifiedShow Answer

________________________ refers to all changes in equity for a period except for those due to owners' investments and dividends to owners.

Correct AnswerverifiedComprehens...View AnswerShow Answer

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 shares.

Correct AnswerverifiedThe equity method of accounting for secu...View AnswerShow Answer

All of the following statements regarding equity securities are except:

Correct AnswerverifiedShow Answer

Available-for-sale equity securities:

Correct AnswerverifiedShow Answer

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:

Correct AnswerverifiedShow Answer

Foreign exchange rates fluctuate due to changes in:

Correct AnswerverifiedShow Answer

The price of one currency stated in terms of another currency is called a foreign exchange rate.

Correct AnswerverifiedShow Answer

If a U. S. company's credit sale to an international customer allows payment to be made in a foreign currency, the transaction is recorded using the exchange rate on the date of sale.

Correct AnswerverifiedShow Answer

Multinational corporations can be U.S. companies with operations in other countries.

Correct AnswerverifiedShow Answer

Short-term investments are intended to be converted into cash within the longer of one year or the current operating cycle of the business, and are readily convertible to cash.

Correct AnswerverifiedShow Answer

Texana Inc. imports inventory from Mexico. Prepare the journal entries for Texana to record the following transactions. Include any year-end adjustments.

Correct AnswerverifiedShow Answer

Doherty Corporation had net income of $30,000, net sales of $1,000,000, and average total assets of $500,000. Its return on total assets is:

Correct AnswerverifiedShow Answer

Six months ago, a company purchased an investment in shares for $65,000. The investment is classified as available-for-sale securities. The current fair value of the shares is $68,500. The company should record a:

Correct AnswerverifiedShow Answer

Match the following terms with the appropriate definitions.

Correct AnswerverifiedShow Answer

On July 31, Beatrice Co. purchased 2,000 shares of SimmTech shares for $16,000. The investment is classified as available-for-sale securities. On October 31, which is Beatrice's year-end, the shares had a fair value of $20,000. Beatrice should record a:

Correct AnswerverifiedShow Answer

A company had a profit margin of 10.5% and total asset turnover of 1.84. Its return on total assets was:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedAvailable-for-sale securities are record...View AnswerShow Answer

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Comprehens...
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The equity method of accounting for secu...
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Available-for-sale securities are record...
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