Your Questions About Stocks And Bonds 101

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Joseph asks…

Would like my Accounting homework checked!?

1) Zach company owns 40% of the voting stock of Tomas Corporation and uses the equity method in recording this investment. Tomas Corporation reported $20,000 net loss. Zach’s corporation Entry would include a?
A) Debit to loss of account for $8,000
B)Debit to investment account for $8,000
C)Debit to investment account for $20,000
D)credit to investment account for $8,000

My answer is D

2) The account unrealized Loss on temporary investment in stock should be include in the?
A) Income statement
B)Balance sheet as an addition to temporary investment in stock
C) statement of retained earnings
D) Balance sheet as a deduction in stockholders equity.

My answer is B

3) Which of he following investments below should be accounted for by using the cost method?
A) Long term investment in stock where the investor does have significant influence over the investee
B) Temporary investment in stock
C) Temporary investment in stock and long-term investment in stock where the investor does not have a significant influence over the investee
D) Long-term investment in stock where the investor does not have a significant influence over investee

My answer is C

4) Which of the following is not part of comprehensive income?
A) Unrealized gains or losses
B)Foreign currency items
C) pension liability adjustment
D) restructuring charges

My answer is C

5) Which of the following would be considered an ” Other Comprehensive Income” item?
A)Extraordinary loss related to flood
B) gain on disposal of discontinued operation
C) unrealized loss on available for sale securities
D) Net Income

My answer is C

6) The account investment in bonds is reported
A) At fair market value because that is all that is required
B) At cost as a long term liability along with current portion reported as a current liability
C) At cost as long term asset
D) At cost as a long term less discount on bond investment or plus premium on bonds investment

My answer is B

7) On June 1, $400,000 of bonds were purchased as a long term investment at 101.5 and $500 was paid as the brokerage commission. If the bonds bear interest at 12% which is paid semiannually on January 1st and July 1st. what is the total cost to be debited to the investment account?
A) $406,500
B) $400,000
C) $405,500
D) $ 402,000

My answer is C

8) On June 1, $400,000 of bonds were purchased as long term investment at 97.5 and $500 was paid as the brokerage commission. If the bonds bear interest at 12% which is paid semiannually on January 1 and July 1. what is the total cost to be debited to the investment account?
A) $390,000
B) $390,500
C) $400,500
D) $ 400,000

My answer is C

9) The financial statement resulting from combining parent and subsidiary statement are called consolidated statements?
True or false

My answer is True

10) The Corporation owning all or majority of another corporation is known as the parent company?
True or False

My answer is True

11) The investor carrying an investment by the equity method records cash as dividend receive as an increase in the carrying amount of the investment?
True or false

My answer is False

12) Ordinarily a corporation owning a significant portion of the voting stock of another corporation accounts for the investment using the equity method?
True or False

My answer is True

13) Unrealized gains or losses are reported as other comprehensive income items until the related securities are sold, the gains and losses become realized and are included in determining net income?
True or false

My answer is False

14) Any difference between the fair market values of the securities and their cost is a realized gain or loss?
True or False

My answer is True

15) Available for sale securities that management expect to sale in the future, but not actively traded for profit?
True or False

My answer is False

16) Although marketable securities may be retained for several years, they continue to be classified as temporary, provided they are readily marketable and can be sold for cash at any time?
True or False

My answer is False

17) The cumulative effect of other comprehensive income items is included in retained earnings, on the balance sheet, as accumulated other comprehensive income?
True or False

My answer is True

18) comprehensive income is all changes in stockholder equity during the period except those resulting from dividend and stockholders investment?
True or False

My answer is true

19) The amortization of discount on bonds purchased as long term investment increases the amount of the investment account?
True Or false My answer is True

20) As with other assets, the cost of bonds investment include all costs related to the purchase?
True or False

My answer is True

financi4 answers:

The following are the correct answer. Those not noted were correct.

2) D
3) D
6) C
7) A
8) B
12) Define significant – if more tha 50%, False
13) True
14) False
15) True
16) True
17) False
18) False

George asks…

Prepare a Statement of Cash Flows for the Crosby Corporation.?

Week 1 – Cash Flow Preparation

Prepare a Statement of Cash Flows for the Crosby Corporation. Follow the general
procedures indicated in Table 2-10 on page 38.

Crosby Corporation

INCOME STATEMENT

For the Year-Ended December 31, 2008

Sales
1,917,000

Cost of Goods Sold
1,050,000

Gross Profits
867,000

Selling and Administrative Expense
420,000

Depreciation Expense
150,000

Operating Income
297,000

Interest Expense
90,000

Earnings Before Taxes

207,000

Taxes
80,000

Earnings After Taxes
127,000

Preferred Stock Dividends
16,000

Earning Available to Common Stockholders
111,000

Common Shares Outstanding
122,000

Earnings Per Share
0.91

STATEMENT OF RETAINED EARNINGS

For the Year-Ending December 31, 2008

Retained earnings, balance, January 1
505,000

Add:Earning Available to Common Stockholders
111,000

Deduct:Cash Dividends Declared and Paid
56,000

Retained earnings, balance, December 31
560,000

COMPARATIVE BALANCE SHEETS

For 2007 and 2008

2007
2008
Change
Assets

Current Assets

Cash
72,000
100,000
-28,000

Accounts Receivable (net)
280,000
350,000
-70,000

Inventory
410,000
431,000
-21,000

Prepaid Expenses
50,000
32,000
18,000
Total Current Assets
812,000
913,000
101,000

Investments (long-term)
80,000
70,000
10,000

Plant & Equipment
1,998,000
2,300,000
-302,000

Less: Accumulated Depreciation
1,000,000
1,150,000
-150,000
Net Plant & Equipment
998,000
1,150,000
-152,000
Total Assets
1,890,000
2,133,000
-243,000

Liabilities and Stockholders Equity

Current Liabilities

Accounts Payable
250,000
425,000
175,000

Notes Payable
400,000
400,000
0

Accrued Expenses
70,000
47,500
-22,500
Total Current Liabilities
720,000
872,500
152,500
Long-Term Liabilities

Bonds payable 2012
62,000
120,000
58,000
Total Liabilities
782,000
992,500
210,500

Stockholders Equity

Preferred Stock $100 par value
90,000
90,000
0

Common Stock $1 par value
120,000
120,000
0

Capital paid in excess of par
410,000
410,000
0

Retained Earnings
500,000
604,000
104,000
Total Stockholders Equity
1,120,000
1,224,000
104,000
Total Liabilities and Stockholders Equity
1,902,000
2,216,500
314,500

financi4 answers:

This balance sheet doesn’t balance. For 2007: Total assets $1,890,000; Total Liabilities and Stockholders Equity $1,902,000. With this as your starting point, your cfs will never balance

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