On January 1, 2015, Carmody Corporation purchased 5% bonds with a face value of $40,000 for $42,000. Carmody Corporation intends to hold the bonds until the maturity date. Interest is paid semiannually on January 1 and July 1. The journal entry on January 1, 2015 is:
A.debit Held-to-Maturity Investment in Bonds for $40,000, debit Premium on Bonds for $2,000 and credit Cash for $42,000.
B.debit Held-to-Maturity Investment in Bonds for $42,000 and credit Cash for $42,000.
C.debit Investment in Bonds for $42,000 and credit Interest Revenue for $42,000.
D.debit Investment in Bonds for $40,000, debit Premium on Bonds for $2,000 and credit Interest Revenue $42,000.
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If an investor owns less than 20% of the common stock of another company as a long-term investment:
A.the equity method of accounting should be used for the investment.
B.the investor has a controlling interest in the investee.
C.the investor usually has little or no influence on the investee.
D.the investor has significant influence on the investee.
For accounting purposes, the method used to account for long-term investments in common stock is determined by:
A.the size of the investor.
B.the size of the investor when compared to the size of the investee.
C.vote by the Board of Directors of the investor.
D.the investor's percentage ownership of the investee's stock.
An investor receives a cash dividend from a long-term available-for-sale investment. Which journal entry is required?
A.a debit to Cash and a credit to Dividend Revenue
B.a debit to Cash and a credit to Interest Revenue
C.a debit to Cash and credit to Investment in Available-for-Sale Securities
D.a debit to Cash and credit to Interest Receivable
A long-term investment in available-for-sale securities was acquired at a cost of $40,000. At year-end, the fair value of the securities is $42,250. The year-end adjusting entry requires a:
A.credit Investment in Available-for-Sale Securities for $2,250.
B.debit Allowance to Adjust Investment in Available-for-Sale Securities to Market for $2,250.
C.credit Allowance to Adjust Investment in Available-for-Sale Securities to Market for $2,250.
D.debit Unrealized Loss on Investment in Available-for-Sale Securities for $2,250.
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