Question 1

Available-for-sale securities are securities that management expects to sell in the future, but are not actively traded for profit.

Accepted Answer

A) True 
 B)False

Question 2

On January 1, the Valuation Allowance for Available-for-Sale Investments account had a zero balance. On December 31, the cost of the available-for-sale securities was $48,700, and the fair value was $39,200. Prepare the adjusting entry to record the unrealized gain or loss for available-for-sale investments on December 31.

Accepted Answer

The answer of On January 1, the Valuation Allowance for...

Question 3

The income statement for Hudson Company reported net income of $345,000 for the year ended December 31 before considering the following:
During the year the company purchased trading securities.
At year end, the fair value of the investment portfolio was $23,000 less than cost. The balance of Retained Earnings was $823,000 on January 1.
Hudson Company paid $43,000 in cash dividends during the year.
Calculate the balance of Retained Earnings on December 31.

Accepted Answer

@#IMG-DLM& *Because these are trading se

Question 4

Foreign currency translation adjustment is an example of an item that would be included in other comprehensive income.

Accepted Answer

A) True 
 B)False

Question 5

Unrealized gains and losses on trading securities are not included in the calculation of income from operations.

Accepted Answer

A) True 
 B)False

Question 6

Match each of the definitions that follow with the appropriate investment term a-j).
-a balance sheet account where the fair value adjustment for investments is reported

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

Question 7

Investments in stocks that are expected to be held for the long term are listed in the stockholder's equity section of the balance sheet.

Accepted Answer

A) True 
 B)False

Question 8

Armando Company owns 17,000 of the 70,000 shares of common stock outstanding of Tito Company and exercises a significant influence over its operating and financial policies. The investment should be accounted for by the

Accepted Answer

A)  equity method 
B)  market method 
C)  cost or market method 
D)  cost method 
A)  equity method 
B)  market method 
C)  cost or market method 
D)  cost method

Question 9

Companies may report comprehensive income on each of the statements below except

Accepted Answer

A)  income statement 
B)  separate statement of comprehensive income 
C)  statement of cash flows 
D)  retained earnings statement 
A)  income statement 
B)  separate statement of comprehensive income 
C)  statement of cash flows 
D)  retained earnings statement

Question 10

Any difference between the fair market values of the securities and their cost is a realized gain or loss.

Accepted Answer

A) True 
 B)False

Question 11

Define debt securities and equity securities. Include their similarities and differences in your discussion.

Accepted Answer

Debt securities are notes and bonds that

Question 12

The company whose stock is more than 50% owned by another company is called the

Accepted Answer

A)  controlling company 
B)  investee company 
C)  subsidiary company 
D)  sibling company 
A)  controlling company 
B)  investee company 
C)  subsidiary company 
D)  sibling company

Question 13

What are the total proceeds from the February 1 sale?

Accepted Answer

A)  $52,400 
B)  $51,500 
C)  $50,000 
D)  $52,000 
A)  $52,400 
B)  $51,500 
C)  $50,000 
D)  $52,000

Question 14

The dividend yield is measured as

Accepted Answer

A)  Dividends per share of common stock/Market price per share of common stock 
B)  Dividends per share of preferred stock/Market price per share of common stock 
C)  Dividends per share of common stock × Market price per share of preferred stock 
D)  Dividends per share of preferred stock × Market price per share of preferred stock 
A)  Dividends per share of common stock/Market price per share of common stock 
B)  Dividends per share of preferred stock/Market price per share of common stock 
C)  Dividends per share of common stock × Market price per share of preferred stock 
D)  Dividends per share of preferred stock × Market price per share of preferred stock

Question 15

The primary objectives of investing in temporary investments is to

Accepted Answer

A)  all of these 
B)  realize gains from increases in market price of the securities 
C)  receive dividends 
D)  earn interest revenue 
A)  all of these 
B)  realize gains from increases in market price of the securities 
C)  receive dividends 
D)  earn interest revenue

Question 16

Investment in certificates of deposit and other securities that do not change in value are reported on the balance sheet as

Accepted Answer

A)  equity investments 
B)  available-for-sale securities 
C)  cash and cash equivalents 
D)  held-to-maturity securities 
A)  equity investments 
B)  available-for-sale securities 
C)  cash and cash equivalents 
D)  held-to-maturity securities

Question 17

If the proceeds from the sale of bond investments exceed the carrying amount of the bonds, a gain is realized.

Accepted Answer

A) True 
 B)False

Question 18

Match each of the definitions that follow with the appropriate investment term a-j).
-securities not held for trading or to maturity or other strategic reasons

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 19

Discuss the similarities and differences in reporting trading securities, available-for-sale securities and held-to-maturity securities.

Accepted Answer

Both trading securities and available-fo

Question 20

Following is data for the available-for-sale securities held by Lindy Company as of December 31:   a) Complete the table above to find the total cost and fair value for the company's available­for­sale securities portfolio.
b) Calculate and record the required December 31 adjustment.
c) Explain how the adjustment from step 2) is reported on Lindy's financial statements.

Accepted Answer

@#IMG-DLM& @#IMG-DLM& c) The unrealized loss will be shown a

Exam 13: Investments and Fair Value Accounting

Available-for-sale securities are securities that management expects to sell in the future, but are not actively traded for profit.

Foreign currency translation adjustment is an example of an item that would be included in other comprehensive income.

Unrealized gains and losses on trading securities are not included in the calculation of income from operations.

Match each of the definitions that follow with the appropriate investment term a-j). -a balance sheet account where the fair value adjustment for investments is reported

Investments in stocks that are expected to be held for the long term are listed in the stockholder's equity section of the balance sheet.

Armando Company owns 17,000 of the 70,000 shares of common stock outstanding of Tito Company and exercises a significant influence over its operating and financial policies. The investment should be accounted for by the

Companies may report comprehensive income on each of the statements below except

Any difference between the fair market values of the securities and their cost is a realized gain or loss.

Define debt securities and equity securities. Include their similarities and differences in your discussion.

The company whose stock is more than 50% owned by another company is called the

What are the total proceeds from the February 1 sale?

The dividend yield is measured as

The primary objectives of investing in temporary investments is to

Investment in certificates of deposit and other securities that do not change in value are reported on the balance sheet as

If the proceeds from the sale of bond investments exceed the carrying amount of the bonds, a gain is realized.

Match each of the definitions that follow with the appropriate investment term a-j). -securities not held for trading or to maturity or other strategic reasons

Discuss the similarities and differences in reporting trading securities, available-for-sale securities and held-to-maturity securities.

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

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