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Category: Business and Industry

Date Submitted: 11/20/2012 06:52 PM

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On January 1, 2011, Bartley Corp. paid $900,000 for 100,000 shares of Maple Company's common stock, which represents 45% of Maple's outstanding common stock. Maple reported income of $300,000 and paid cash dividends of $50,000 during 2011 Bartley should report the investment in Maple Company on its December 31, 2011, balance sheet at

a. $900,000

b. $742,500

c. $922,500

d. $1,012,500

Trading securities are reported on the balance sheet at

a. fair value.

b. cost.

c. cost, adjusted for the effects of interest.

d. lower of cost or market.

Corporations invest in other companies for all of the following reasons except to

a. house excess cash until needed.

b. generate earnings.

c. meet strategic goals.

d. increase trading of the other companies’ stock.

When investing excess cash for short periods of time, corporations invest in

a. stocks of companies in a related industry.

b. debt securities.

c. low-risk, highly liquid securities.

d. stock securities.

Turner Company acquires 100 Holmes 5%, 5 year, $1,000 bonds on January 1, 2011 for $101,250. This includes a brokerage commission of $1,250. The journal entry to record this investment includes a debit to

a. Debt Investments for $100,000.

b. Debt Investments for $101,250.

c. Cash for $101,250.

d. Stock Investments for $100,000.

On January 1, Masters Company purchased as an investment a $1,000, 12% bond for $1,060. The bond pays interest on January 1 and July 1. The bond is sold on September 1 for $1,200 plus accrued interest. Interest has not been accrued since the last interest payment date. What is the entry to record the cash proceeds at the time the bond is sold?

a. Cash 1,060

Debt Investments 1,060

b. Cash 1,220

Debt Investments 1,060

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