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Magazine Chapter 10: Investments
1TI
Match the key term to the scenario.
1. Available-for-sale debt investments. | a. Jane owns 53% of Richard鈥檚 Roses鈥檚 voting stock. |
2. Controlling interest equity investments. | b. Joe owns debt security in Bones, Inc. and intends to hold it until maturity. |
3. Trading debt investments. | c. Jeannie owns a debt security in Cricket, Inc. and plans on selling the debt after one year. |
4. Held-to-maturity debt investments. | d. Jimenez owns 5% of Delgado, Inc.鈥檚 voting stock but does not have the ability to participate in the decisions of Delgado, Inc. |
5. Significant influence on equity investments. | e. Jacob owns 24% of Pay, Inc.鈥檚 voting stock and has the ability to exert influence over Pay, Inc. |
6. No significant influence on equity investments. | f. Jim owns a debt security in Tag, Inc.鈥檚 and plans on holding the debt for only a week. |
3TI
On May 15, 2018, Mayer Co. invests \(8,000 in John, Inc. stock. John pays Mayer a \)200 dividend on November 15, 2018. Mayer sells the John stock on December 10, 2018, for $7,500. Assume the Mayer Co. does not have significant influence over John, Inc. Journalize the 2018 transactions related to Mayer鈥檚 investment in John stock.
Q19PGA_3
Classifying and accounting for debt and equity investments
Jetway Corporation generated excess cash and invested in securities as follows: 2018
Jul. 2 Purchased 4,200 shares of Pogo, Inc. common stock at \(12.00 per share. Jetway plans to sell the stock within three months, when the company will need the cash for normal operations. Jetway does not have significant influence over Pogo.
Aug. 21 Received a cash dividend of \)0.80 per share on the Pogo stock investment.
Sep. 16 Sold the Pogo stock for \(13.40 per share.
Oct. 1 Purchased a Violet bond for \)20,000 at face value. Jetway classifies the investment as trading and short-term.
Dec. 31 Received a \(100 interest payment from Violet.
31 Adjusted the Violet bond to its market value of \)22,000.
Requirements
Prepare T-accounts for the investment assets, and show how to report the investments on Jetway鈥檚 balance sheet at December 31, 2018.
