Question

MC Qu. 143 On February 15, Jewel Company...

On February 15, Jewel Company buys 6,100 shares of Marcelo Corp. common stock at $28.72 per share plus a brokerage fee of $495. The stock is classified as long-term available-for-sale securities. This is the company’s first and only investment in available-for-sale securities. On March 15, Marcelo declares a dividend of $1.34 per share payable to stockholders of record on April 15. Jewel received the dividend on April 15 and ultimately sells half of the Marcelo stock on November 17 of the current year for $29.49 per share less a brokerage fee of $345. The journal entry to record the purchase on February 15 is:

Multiple Choice

-Debit Long-Term Investments-Trading $175,687; credit Cash $175,687.

-Debit Long-Term Investments-Trading $175,192; credit Cash $175,192.

-Debit Long-Term Investments-AFS $175,192; credit Cash $175,192.

-Debit Long-Term Investments-HTM $179,889; credit cash $179,889.

-Debit Long-Term Investments-AFS $175,687; credit Cash $175,687.

MC Qu. 83 Long-term investments cannot...

Long-term investments cannot include:

Multiple Choice

-Held-to-maturity debt securities.

-Available-for-sale debt securities.

-Securities with maturity dates within one operating cycle.

-Equity securities giving an investor significant influence over an investee.

-Available-for-sale equity securities.

MC Qu. 94 Marshall Company sold...

Marshall Company sold supplies in the amount of €15,000 (euros) to a French company when the exchange rate was $1.11 per euro. At the time of payment, the exchange rate decreased to $.72. Marshall must record a:

Multiple Choice

-neither a gain nor loss.

-gain of $10,800.

-loss of $10,800.

-gain of $5,850.

-loss of $5,850.

Answer 1

MC Q 143 - The journal entry to record the purchase on February 15 is:

Debit Long-Term Investments-AFS $175,687; credit Cash $175,687.

In recording securities purchase which is classified as Avialable for sale (AFS), transaction cost (i.e brokerage cost) is included in its purchase price. (6100*28.72+495).

MC Q83 - Long-term investments cannot include...

Securities with maturity dates within one operating cycle.

Because Long term investments are those which have maturity dates exceeding one operating cycle (i.e is usually one year, but it vary as per business).

MC Qu. 94 - Marshall Company sold supplies in the amount of €15,000 (euros) to a French company when the exchange rate was $1.11 per euro. At the time of payment, the exchange rate decreased to $.72. Marshall must record a

Loss of $ 5850 (15000 * (1.11-0.72).