1.) Jarvis Corporation makes an investment in 100 shares of Saxton Company\'s co
ID: 2492067 • Letter: 1
Question
1.) Jarvis Corporation makes an investment in 100 shares of Saxton Company's common stock. The stock is purchased for $45 a share plus brokerage fees of $280. The entry for the purchase is
A.) Investments—Saxton Company Stock 4,500
Cash 4,500
B.) Investments—Saxton Company Stock 4,500
Brokerage Fee Expense 280
Cash 4,780
C.) Cash 4,500
Investments—Saxton Company Stock 4,500
D.) Investments—Saxton Company Stock 4,780
Cash 4,780
2.) An investor purchased 500 shares of common stock, $25 par, for $19,250. Subsequently, 100 shares were sold for $35 per share. What is the amount of gain or loss on the sale?
A.) $500 gain
B.) $350 loss
C.) $350 gain
D.) $3,500 gain
3.) The company whose stock is more than 50% owned by another company is called the
A.)investee company
B.) controlling company
C.) subsidiary company
D.) sibling company
4.)Held-to-maturity securities
A.) may be reported as current or noncurrent assets
B.) include stocks as well as bonds
C.) All of these choices are correct.
D.) are reported at fair market value
5.) GAAP requires trading and available-for-sale investments to be recorded
A.)at their historical cost
B.) at their market value
C.) at their net realizable value
D.) at their fair value
6.) Edison Corporation paid a dividend of $10 per share on its $100 par preferred stock and $4 per share on its $20 par common stock. The market value of the common stock is $80 per share. Edison's dividend yield is
A.) 20%
B.) 5%
C.)10%
D.) 25%
Explanation / Answer
1) ans is D, we will increase the investment value with the brokerage cost since it is a cost incurred to acquire the assets, in this case that is shares.
2) Ans is B- Loss of 350 (19250/500=38.5 per share, sale 35 per share, loss on per share = 35-38.5=-3.5, then loss on 100 shares = -3.5*100=-350
Ans 3) C - Susidiary company
Ans 4) B - include stocks as well as bonds
Ans 5) D - At Fair value
Ans 6) Ans is B - 5%
Dividend Yield = Dividend Per share/Price per share
4/80=5%
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