Question 1

Match each of the definitions that follow with the appropriate investment term a-j).
-notes and bonds that pay interest and have a fixed maturity

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 2

Journalize the entries to record the following selected equity investment transactions completed by Flurry Company during the current year. Flurry's purchase represents less than 20% of the total outstanding Braxter stock.
February 2 Purchased for cash 500 shares of Braxter Co. stock for $34 per share plus a $250 brokerage commission.
April 16 Received dividends of $0.35 per share on Braxter Co. stock.
June 17 Sold 100 shares of Braxter Co. stock for $40 per share less a $100 brokerage commission.

Accepted Answer

Feb. 2
Investments-Braxter Co. Stock
​17

Question 3

On October 1, Marcus Corporation purchased $20,000 of 6% bonds of Roberts Corporation, due in 8 1/2 years. The bonds were purchased at a price of $17,561 plus interest of $300 accrued from July 1, the date of the last semiannual interest payments. Journalize the purchase.

Accepted Answer

The answer of On October 1, Marcus Corporation purchased $20,000...

Question 4

For accounting purposes, the method used to account for investments in common stock is determined by

Accepted Answer

A)  the amount paid for the stock by the investor 
B)  whether the acquisition of the stock by the investor was "friendly" or "hostile" 
C)  the extent of an investor's influence over the operating and financial affairs of the investee 
D)  whether the stock has paid dividends in past years 
A)  the amount paid for the stock by the investor 
B)  whether the acquisition of the stock by the investor was "friendly" or "hostile" 
C)  the extent of an investor's influence over the operating and financial affairs of the investee 
D)  whether the stock has paid dividends in past years

Question 5

On April 1, Alliance Company purchased $50,000 of Tetter Company's 12% bonds at 100 plus accrued interest of $2,000. On June 30, Alliance received its first semiannual interest. On February 1, Alliance sold $40,000 of the bonds at 103 plus accrued interest. The journal entry Alliance will record on April 1 for the purchase of the bonds will include a

Accepted Answer

A)  credit to Interest Payable for $2,000 
B)  debit to Investments-Tetter Company Bonds for $52,000 
C)  debit for Cash of $50,000 
D)  debit to Investments-Tetter Company Bonds for $50,000 
A)  credit to Interest Payable for $2,000 
B)  debit to Investments-Tetter Company Bonds for $52,000 
C)  debit for Cash of $50,000 
D)  debit to Investments-Tetter Company Bonds for $50,000

Question 6

Match each of the definitions that follow with the appropriate investment term a-j).
-debt and equity securities purchased and sold to earn short-term profits from changes in the market price

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 7

Investment in Bonds is listed on the balance sheet after Bonds Payable.

Accepted Answer

A) True 
 B)False

Question 8

On June 1, $50,000 of treasury bonds were purchased between interest dates. The broker commission was $500. The bonds pay interest at 12%, which is paid semiannually on January 1 and July 1. What is the total cost to be debited to the Investment-Treasury Bonds account?

Accepted Answer

A)  $50,000 
B)  $50,500 
C)  $49,500 
D)  $53,000 
A)  $50,000 
B)  $50,500 
C)  $49,500 
D)  $53,000

Question 9

A company uses cash to pay all of the following except

Accepted Answer

A)  all of the options are uses of cash 
B)  interest to creditors 
C)  current expenses 
D)  dividends to stockholders 
A)  all of the options are uses of cash 
B)  interest to creditors 
C)  current expenses 
D)  dividends to stockholders

Question 10

The cost method of accounting for stock

Accepted Answer

A)  recognizes dividends as income 
B)  is only appropriate as part of a consolidation 
C)  requires the investment be increased by the reported net income of the investee 
D)  requires the investment be decreased by the reported net income of the investee 
A)  recognizes dividends as income 
B)  is only appropriate as part of a consolidation 
C)  requires the investment be increased by the reported net income of the investee 
D)  requires the investment be decreased by the reported net income of the investee

Question 11

Under the equity method, the receipt of cash dividends on an investment in common stock of Vallerio Corporation is accounted for as a debit to Cash and a credit to

Accepted Answer

A)  Investment in Vallerio 
B)  Retained Earnings 
C)  Dividend Revenue 
D)  Dividend Receivables 
A)  Investment in Vallerio 
B)  Retained Earnings 
C)  Dividend Revenue 
D)  Dividend Receivables

Question 12

Blanton Corporation purchased 15% of the outstanding shares of common stock of Worton Corporation as a long-term investment. Subsequently, Worton Corporation reported net income and declared and paid cash dividends. What journal entry would Blanton Corporation use to record the dividends it receives?

Accepted Answer

A)  debit Investment in Worton Corporation; credit Cash 
B)  debit Cash; credit Dividend Revenue 
C)  debit Investment in Worton Corporation; credit Income of Worton Corporation 
D)  debit Cash; credit Investment in Worton Corporation 
A)  debit Investment in Worton Corporation; credit Cash 
B)  debit Cash; credit Dividend Revenue 
C)  debit Investment in Worton Corporation; credit Income of Worton Corporation 
D)  debit Cash; credit Investment in Worton Corporation

Question 13

Skyline, Inc. purchased a portfolio of available-for-sale securities during the current fiscal year. The cost and fair value of this portfolio on December 31, was as follows:   a) Provide the journal entry to record the adjustment of the available-for-sale security portfolio to fair value on December 31.
b) Where will the information from the journal entry be reported on the financial statements?

Accepted Answer

a) Valuation Allowance for Available-for

Question 14

Herberto Company had a net income of $74,000 and other comprehensive loss of $8,500 for the year. On January 1, the retained earnings balance was $425,000 and the accumulated other comprehensive income balance was $52,000. Determine the a) comprehensive income for the year, b) retained earnings balance on December 31, and c) the accumulated other comprehensive income on December 31.

Accepted Answer

a)$65,500 $74,000 -

Question 15

On May 1, Cedar Inc. purchases $100,000 of 10-year, Madison Corporation 6% bonds dated March 1 at 100 plus accrued interest. What entry would Cedar record when receiving its semiannual interest on September 1?

Accepted Answer

Cash 3,000
Interest Receivable

Question 16

Nicer Corporation reported net income of $50,000 in the current year. There are 10,000 shares of $100 par, 6% preferred stock and 50,000 shares of $2 par common stock outstanding. During the year, Nicer paid the preferred stockholders a $6 per share dividend and also paid $30,000 to common shareholders. The market value of Nicer's stock is preferred stock, $95, and common stock, $5.00.
a) Calculate Nicer's dividend yield.
b) Why does the dividend yield vary widely across firms?

Accepted Answer

a) Dividend yield = $0.60*/$5.00 = 12%
*

Question 17

The journal entry Pierce will record on February 1 will include a

Accepted Answer

A)  credit to Interest Revenue for $1,500 
B)  credit to Gain on Sale of Investments for $1,500 
C)  credit to Cash for $52,500 
D)  credit to Interest Receivable for $600 
A)  credit to Interest Revenue for $1,500 
B)  credit to Gain on Sale of Investments for $1,500 
C)  credit to Cash for $52,500 
D)  credit to Interest Receivable for $600

Question 18

Zach Company owns 45% of the voting stock of Tomas Corporation and uses the equity method in recording this investment. Tomas Corporation reported a $20,000 net loss. Zach Company's entry would include a

Accepted Answer

A)  credit to cash for $9,000 
B)  debit to the investment account for $9,000 
C)  credit to the investment account for $9,000 
D)  credit to a loss account for $9,000 
A)  credit to cash for $9,000 
B)  debit to the investment account for $9,000 
C)  credit to the investment account for $9,000 
D)  credit to a loss account for $9,000

Question 19

A company that has 25,000 shares of $5.00 par value common stock issued and outstanding paid a dividend of $0.40 per share. The market value of the stock is $16 per share. The company's dividend yield is

Accepted Answer

A)  2.5% 
B)  400% 
C)  16% 
D)  40% 
A)  2.5% 
B)  400% 
C)  16% 
D)  40%

Question 20

Match each of the definitions that follow with the appropriate investment term a-j).
-combined reporting of a corporation and other corporations it controls

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

Exam 13: Investments and Fair Value Accounting

Match each of the definitions that follow with the appropriate investment term a-j). -notes and bonds that pay interest and have a fixed maturity

On October 1, Marcus Corporation purchased $20,000 of 6% bonds of Roberts Corporation, due in 8 1/2 years. The bonds were purchased at a price of $17,561 plus interest of $300 accrued from July 1, the date of the last semiannual interest payments. Journalize the purchase.

For accounting purposes, the method used to account for investments in common stock is determined by

Match each of the definitions that follow with the appropriate investment term a-j). -debt and equity securities purchased and sold to earn short-term profits from changes in the market price

Investment in Bonds is listed on the balance sheet after Bonds Payable.

On June 1, $50,000 of treasury bonds were purchased between interest dates. The broker commission was $500. The bonds pay interest at 12%, which is paid semiannually on January 1 and July 1. What is the total cost to be debited to the Investment-Treasury Bonds account?

A company uses cash to pay all of the following except

The cost method of accounting for stock

Under the equity method, the receipt of cash dividends on an investment in common stock of Vallerio Corporation is accounted for as a debit to Cash and a credit to

On May 1, Cedar Inc. purchases $100,000 of 10-year, Madison Corporation 6% bonds dated March 1 at 100 plus accrued interest. What entry would Cedar record when receiving its semiannual interest on September 1?

The journal entry Pierce will record on February 1 will include a

Zach Company owns 45% of the voting stock of Tomas Corporation and uses the equity method in recording this investment. Tomas Corporation reported a $20,000 net loss. Zach Company's entry would include a

A company that has 25,000 shares of $5.00 par value common stock issued and outstanding paid a dividend of $0.40 per share. The market value of the stock is $16 per share. The company's dividend yield is

Match each of the definitions that follow with the appropriate investment term a-j). -combined reporting of a corporation and other corporations it controls

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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