Intermediate multiple choice

debit to debt investments

An available for sale debt security is purchased as a discount. The entry to record the amortization of the discount includes a

$983800=(950000*1.02)+14800

Blossom company purchased bonds with a face amount of $950000 between interest payment dates. Blossom purchased the bonds as 102, paid brokerage costs of $14800, and paid accrued interest for three months of $24800. The amount to record as the cost of this long-term investment in bonds is

$804000 = (30000/50000)*1340000

Carla Vista Company owns 30000 of the 50000 outstanding shares of Taylor, Inc. common stock. During 2018, Taylor earns $1340000 and pays cash dividends of $1065000. Carla Vista should report investment revenue for 2018 of

$244400 = (4700/10000)*520000

Carla Vista Company owns 4700 of the 10000 outstanding shares of Penn Corporation common stock. During 2018, Penn earns $520000 and pays cash dividends of $157000. Carla Vista should report investment revenue for 2018 of

$-3300 = 1357200-1360500

Cullumber Company purchased $1320000 of 8%, 5-year bonds from Carlin, Inc. on January 1, 2018, with interest payable on July 1 and January 1. The bonds sold for $1368696 at an effective interest rate of 7%. Using the effective interest method, Cullumber Company decreased the Available-for-Sale Debt Securities account for the Carlin, Inc. bonds on July 1, 2018 and December 31, 2018 by the amortized premiums of $5448 and $5592, respectively. At February 1, 2019, Cullumber Company sold the Carlin bonds for $1357200. After accruing for interest, the carrying value of the Carlin bonds on February 1, 2019 was $1360500. Assuming Cullumber Company has a portfolio of available-for-sale debt investments, what should Cullumber Company report as a gain (or loss) on the bonds?

$97118

Cullumber Company purchased $950000 of 10% bonds of Scott Company on January 1, 2018, paying $882375. The bonds mature January 1, 2028; interest is payable each July 1 and January 1. The discount of $78625 provides an effective yield of 11%. Cullumber Company uses the effective-interest method and plans to hold these bonds to maturity. For the year ended December 31, 2018, Cullumber Company should report interest revenue from the Scott Company bonds of:

effective interest method of allocation should be used, but other methods can be applied if there is no material difference in the results obtained

GAAP specifies that, regarding the amortization of a premium or discount on a debt security, the

20 periods and 4% from the present value of table 1.

Jordan company purchased 10 year, 10% bonds that pay interest semiannually. The bonds are sold to yield 8%. One step in calculating the issue price of the bonds is to multiply the principal by the table value for

a reduction of the carrying value of the investment

Koehn corporation accounts for its investment in the common stock of Sells Company under the equity method. Koehn Corporation should ordinarily record a cash dividend received from Sells as

$793,600 = [((19000/50000)*1120000)-((19000/50000)*900000)+710000]

Sandhill Company owns 19000 of the 50000 outstanding shares of Taylor, Inc. common stock. During 2018, Taylor earns $1120000 and pays cash dividends of $900000. If the beginning balance in the investment account was $710000, the balance at December 31, 2018 should be

$-7440 = 3490000-3497440

Sandhill Company purchased $3400000 of 8%, 5-year bonds from Ritter, Inc. on January 1, 2018, with interest payable on July 1 and January 1. The bonds sold for $3516740 at an effective interest rate of 7%. Using the effective-interest method, Sandhill Company decreased the Available-for-Sale Debt Securities account for the Ritter, Inc. bonds on July 1, 2018 and December 31, 2018 by the amortized premiums of $11420 and $11780, respectively. At April 1, 2019, Sandhill Company sold the Ritter bonds for $3490000. After accruing for interest, the carrying value of the Ritter bonds on April 1, 2019 was $3497440. Assuming Sandhill Company has a portfolio of Available-for-Sale Debt Securities, what should Sandhill Company report as a gain or loss on the bonds?

municipal bonds

Securities which would be classified as held to maturity

$3919

Sunland Company purchased $1800000 of 9% bonds of Scott Company on January 1, 2018, paying $1698375. The bonds mature January 1, 2028; interest is payable each July 1 and January 1. The discount of $101625 provides an effective yield of 10%. Sunland Company uses the effective-interest method and plans to hold these bonds to maturity. On July 1, 2018, Sunland Company should increase its Debt Investments account for the Scott Company bonds by

a debit to debt investments at $315,000

Watt Company purchased $300,000 of bonds for $315,000. If what intends to hold the securities until maturity , the entry to record the investment includes

the investor should use the equity method to account for its investment unless circumstances indicate that it is unable to exercise "significant influence" over the investee

When a company holds between 20% and 50% of the outstanding stock of the investee, which of the following statements applies?

loans receivable

Which of the following is not a debt security

they are held with the intention of selling them in a short period of time, unrealized holding gains or losses are reported as part of net income, and any discount or premium is amortized (all choices are correct)

Which of the following is not correct in regard to trading securities

$78660 = (363000 - (3574740-11520-11880))

Wildhorse Company purchased $3450000 of 7%, 5-year bonds from Ritter, Inc. on January 1, 2018, with interest payable on July 1 and January 1. The bonds sold for $3574740 at an effective interest rate of 6%. Using the effective-interest method, Wildhorse Company decreased the Available-for-Sale Debt Securities account for the Ritter, Inc. bonds on July 1, 2018 and December 31, 2018 by the amortized premiums of $11520 and $11880, respectively. At December 31, 2018, the fair value of the Ritter, Inc. bonds was $3630000. What should Wildhorse Company report as other comprehensive income and as a separate component of stockholders' equity?

$103400 = (22000/100000)*470000

Wildhorse Corporation purchased 22000 shares of common stock of the Sherman Corporation for $37 per share on January 2, 2017. Sherman Corporation had 100000 shares of common stock outstanding during 2018, paid cash dividends of $147000 during 2018, and reported net income of $470000 for 2018. Wildhorse Corporation should report revenue from investment for 2018 in the amount of

ability to hold the security to maturity, positive intent, security must be a debt security

a requirement for a security to be classified as held-to-maturity is

available-for-sale debt securities

debt securities acquired by a corporation which are accounted for by recognizing unrealized holding gains or losses that are included as other comprehensive income and as a separate component of stockholders equity are

held-to-maturity debt securities

debt securities that are accounted for at amortized cost, not fair value, are

securities where a company has holdings of less than 20%

equity securities acquired by a corporation which are accounted for by recognizing unrealized holding gains or losses are (fair value method)

acquisition cost plus amortization of discount

held-to-maturity debt securities are reported at

equity method

if a parent company owns 90% of the subsidiary company's outstanding common stock, the company should generally account for the income of the subsidiary under the

any discount or premium is amortized

in accounting for investments in debt securities

cost including brokerage and other fees

investments in debt securities are generally recorded at

market value plus brokerage fees and other costs incident to the purchase

investments in debt securities should be recorded on the date of acquisition at

are accounted for at fair value for all transfers

transfers between categories

earnings are reported by the investee in its financial statements

under the equity method of accounting for investments, an investor recognizes its share of the earnings in the period in which the

trading debt securities

unrealized holding gains and losses which are recognized in income are from debt securities classified as (reported at fair value)

a varying amount being recorded as interest income from period to period

use of the effective interest method in amortizing bond premiums and discounts results in

the accrued interest is credited to interest revenue

when investments in debt securities are sold between interest payment dates, preferably the