Question 1

As with other assets, the cost of a bond investment includes all costs related to the purchase.

Accepted Answer

A) True 
 B)False  True

Question 2

Cash is used for all of the following activities except

Accepted Answer

A)  supporting current operating activities 
B)  replacing worn-out machinery 
C)  expanding current operations 
D)  bribing government officials 
A)  supporting current operating activities 
B)  replacing worn-out machinery 
C)  expanding current operations 
D)  bribing government officials D

Question 3

Match each of the definitions that follow with the appropriate investment term a-j).
-measurement of the rate of return to stockholders based on cash dividends

Accepted Answer

A) equity method 
B) parent company 
C) subsidiary company 
D) consolidated financial statements 
E) fair value
F)unrealized gain or loss on investments.
G)valuation allowance for investments
H)dividend yield
I)amortized cost
J)cost method 
A) equity method 
B) parent company 
C) subsidiary company 
D) consolidated financial statements 
E) fair value
F)unrealized gain or loss on investments.
G)valuation allowance for investments
H)dividend yield
I)amortized cost
J)cost method H

Question 4

The equity method is usually more appropriate for accounting for investments where the purchaser does not have significant influence over the investee.

Accepted Answer

A) True 
 B)False

Question 5

The investor carrying an investment by the equity method records cash dividends received as an increase in the carrying amount of the investment.

Accepted Answer

A) True 
 B)False

Question 6

Trading securities are

Accepted Answer

A)  reported at fair value on the balance sheet and as unrealized gains or losses on the income statement 
B)  not reported on the balance sheet 
C)  reported as unrealized gains or losses on the income statement 
D)  reported at fair value in the balance sheet 
A)  reported at fair value on the balance sheet and as unrealized gains or losses on the income statement 
B)  not reported on the balance sheet 
C)  reported as unrealized gains or losses on the income statement 
D)  reported at fair value in the balance sheet

Question 7

Long-term investments are held for all of the listed reasons below except

Accepted Answer

A)  to earn the interest or dividend income 
B)  for their long-term gain potential 
C)  to have influence over another business entity 
D)  to meet current cash needs 
A)  to earn the interest or dividend income 
B)  for their long-term gain potential 
C)  to have influence over another business entity 
D)  to meet current cash needs

Question 8

Which of the following items would not affect the investor's income for the period?

Accepted Answer

A)  interest received on a temporary investment in bonds 
B)  dividends received on a long-term investment in stock where the investor owns 10% of the investee's stock 
C)  dividends received on a long-term investment in stock where the investor owns 30% of the investee's stock 
D)  interest received on a long-term investment in bonds 
A)  interest received on a temporary investment in bonds 
B)  dividends received on a long-term investment in stock where the investor owns 10% of the investee's stock 
C)  dividends received on a long-term investment in stock where the investor owns 30% of the investee's stock 
D)  interest received on a long-term investment in bonds

Question 9

The financial statements resulting from combining parent and subsidiary statements are called consolidated statements.

Accepted Answer

A) True 
 B)False

Question 10

GAAP requires trading and available­for­sale investments to be recorded

Accepted Answer

A)  at their fair value 
B)  at their historical cost 
C)  at their market value 
D)  at their net realizable value 
A)  at their fair value 
B)  at their historical cost 
C)  at their market value 
D)  at their net realizable value

Question 11

Match each of the definitions that follow with the appropriate investment term a-j).
-preferred and common stock that represent ownership in a company and do not have a fixed maturity date

Accepted Answer

A) debt securities 
B) equity securities 
C) investor 
D) investee 
E) cost method
F)trading securities
G)available-for-sale securities
H)held-to-maturity securities
I)equity method
J)business combination 
A) debt securities 
B) equity securities 
C) investor 
D) investee 
E) cost method
F)trading securities
G)available-for-sale securities
H)held-to-maturity securities
I)equity method
J)business combination

Question 12

A disadvantage of fair value use is that the comparability between companies may be impacted by different fair value measurements.

Accepted Answer

A) True 
 B)False

Question 13

The account Unrealized Gain Loss) on Trading Investments should be included in the

Accepted Answer

A)  income statement as other revenue expense) 
B)  balance sheet as an adjustment to the asset account 
C)  balance sheet as an adjustment to stockholders' equity 
D)  statement of retained earnings 
A)  income statement as other revenue expense) 
B)  balance sheet as an adjustment to the asset account 
C)  balance sheet as an adjustment to stockholders' equity 
D)  statement of retained earnings

Question 14

Financial statements in which financial data for two or more companies are combined as a single entity are called

Accepted Answer

A)  conventional statements 
B)  consolidated statements 
C)  audited statements 
D)  constitutional statements 
A)  conventional statements 
B)  consolidated statements 
C)  audited statements 
D)  constitutional statements

Question 15

The cost and fair value of the trading securities held by Lindy Company as of December 31 are as follows:   a) Complete the table above to find the total cost and fair value for the company's trading securities portfolio.
b) Calculate and record the required December 31 adjustment.
c) Explain how the adjustment from step b) is reported on Lindy's financial statements.

Accepted Answer

@#IMG-DLM& @#IMG-DLM& c) The unrealized gain will

Question 16

Financial statements include assets listed at

Accepted Answer

A)  all of these 
B)  their fair value 
C)  their historical cost 
D)  their market value 
A)  all of these 
B)  their fair value 
C)  their historical cost 
D)  their market value

Question 17

The amount of interest paid when buying a bond as an investment should be credited to Interest Revenue.

Accepted Answer

A) True 
 B)False

Question 18

On January 2, Todd Company acquired 40% of the outstanding stock of McGuire Company for $205,000. For the year ending, December 31 McGuire earned income of $48,000 and paid dividends of $14,000.
Prepare the entries for Todd Company for the purchase of the stock, share of McGuire income and dividends received from McGuire.

Accepted Answer

The answer of On January 2, Todd Company acquired 40%...

Question 19

The journal entry Pierce will record on June 30 will include a

Accepted Answer

A)  credit to Interest Revenue for $2,400 
B)  debit to Cash for $3,600 
C)  credit to Cash for $2,400 
D)  credit to Interest Receivable for $1,200 
A)  credit to Interest Revenue for $2,400 
B)  debit to Cash for $3,600 
C)  credit to Cash for $2,400 
D)  credit to Interest Receivable for $1,200

Question 20

All of the following are factors contributing to the trend for regulators to adopt accounting principles using fair value concepts except

Accepted Answer

A)  a greater percentage of total assets existing as receivables and securities 
B)  pressure on regulators to adopt an international set of accounting principles and standards 
C)  hybrid measurement methods within GAAP that conflict with each other 
D)  the ease of applying market values to assets and liabilities 
A)  a greater percentage of total assets existing as receivables and securities 
B)  pressure on regulators to adopt an international set of accounting principles and standards 
C)  hybrid measurement methods within GAAP that conflict with each other 
D)  the ease of applying market values to assets and liabilities

Exam 13: Investments and Fair Value Accounting

As with other assets, the cost of a bond investment includes all costs related to the purchase.

Cash is used for all of the following activities except

Match each of the definitions that follow with the appropriate investment term a-j). -measurement of the rate of return to stockholders based on cash dividends

The equity method is usually more appropriate for accounting for investments where the purchaser does not have significant influence over the investee.

The investor carrying an investment by the equity method records cash dividends received as an increase in the carrying amount of the investment.

Trading securities are

Long-term investments are held for all of the listed reasons below except

Which of the following items would not affect the investor's income for the period?

The financial statements resulting from combining parent and subsidiary statements are called consolidated statements.

GAAP requires trading and available­for­sale investments to be recorded

Match each of the definitions that follow with the appropriate investment term a-j). -preferred and common stock that represent ownership in a company and do not have a fixed maturity date

A disadvantage of fair value use is that the comparability between companies may be impacted by different fair value measurements.

The account Unrealized Gain Loss) on Trading Investments should be included in the

Financial statements in which financial data for two or more companies are combined as a single entity are called

Financial statements include assets listed at

The amount of interest paid when buying a bond as an investment should be credited to Interest Revenue.

The journal entry Pierce will record on June 30 will include a

All of the following are factors contributing to the trend for regulators to adopt accounting principles using fair value concepts except

Introduction to Accounting and Business

Analyzing Transactions

The Adjusting Process

Completing the Accounting Cycle

Accounting for Merchandising Businesses

Inventories

Sarbanes-Oxley, Internal Control, and Cash

Receivables

Fixed Assets and Intangible Assets

Current Liabilities and Payroll

Corporations: Organization, Stock Transactions, and Dividends

Long-Term Liabilities: Bonds and Notes

Statement of Cash Flows

Financial Statement Analysis

Managerial Accounting Concepts and Principles

Job Order Costing

Process Cost Systems

Cost Behavior and Cost-Volume-Profit Analysis

Variable Costing for Management Analysis

Budgeting

Performance Evaluation Using Variances From Standard Costs

Performance Evaluation for Decentralized Operations

Differential Analysis, Product Pricing, and Activity-Based Costing

Capital Investment Analysis

Cost Allocation and Activity-Based Costing

Lean Principles, Lean Accounting, and Activity Analysis

Filters

GAAP requires trading and availableforsale investments to be recorded