Question 1

When determining the future value of an annuity, cash flows are presumed to occur

Accepted Answer

A) at the start of the first period. 
B) at the end of the first period. 
C) when the interest is received. 
D) at the maturity date. 
A) at the start of the first period. 
B) at the end of the first period. 
C) when the interest is received. 
D) at the maturity date. B

Question 2

If the investor holds 50% or more of the common stock of the investee, then the two corporations are no longer separate accounting entities and therefore must prepare ____________________ financial statements, which combine information about the two corporations as if they were a single company.

Accepted Answer

consolidated

Question 3

Wanda Ward makes an investment of $11,800, which pays 8% interest that is compounded quarterly. How much interest will have accrued at the end of 48 months?

Accepted Answer

398.92 (or $4,398.78)This problem will typically be solved using the Future Value of a Single Amount Table for 16 periods at 2%. The problem can also be solved using the Present Value of a Single Amount Table for 16 periods at 2%. Although the latter is less conventional, it will produce the correct answer. However, the answers will differ slightly due to rounding of the tables to five decimal places.
Periods 4 years × 4 = 16
Rate   Future Value of a Single Amount:
$11,800 x FV of a Single Amount, 16 periods, 2%
$11,800 × 1.37279 = $16,198.92
$16,198.92 - $11,800 = $4,398.92
Present Value of a Single Amount:
$11,800 / PV of a Single Amount, 16 periods, 2%
$11,800 / 0.72845 = $16,198.78
$16,198.78 - $11,800 = $4,398.78

Question 4

P Company paid $500,000 for 100% of the net assets (assets less liabilities) of S Company. The current value of S Company's net assets was only $475,000. As a result of this acquisition, P Company must recognize

Accepted Answer

A) negative goodwill. 
B) goodwill. 
C) gain. 
D) loss. 
A) negative goodwill. 
B) goodwill. 
C) gain. 
D) loss.

Question 5

Compound interest is a method of calculating the time value of money in which interest is earned on the previous periods' interest.

Accepted Answer

A) True 
 B)False

Question 6

The interest period is the time interval between interest calculations.

Accepted Answer

A) True 
 B)False

Question 7

____________________ securities are debt investments that are accounted for on an amortized cost basis because management intends to hold the investment until the debt contract requires the borrower to completely repay the debt.

Accepted Answer

The answer of ____________________ securities are debt investments that are...

Question 8

Beach Catering sold its business for $75,000 under an asset purchase agreement. Under the agreement, the buyer made an initial payment of $35,000 which Beach Catering invested at 6% compounded semiannually. At the beginning of the fourth year, the balance of the purchase price was paid by the buyer. Beach Catering places this $40,000 in the same investment with interest compounded semiannually at 6%. At the end of 6 years, how much does Beach Catering have in its investment account?

Accepted Answer

$97,663.44 (or $97,663.60)Due to the nat

Question 9

Held-to-maturity securities are equity and debt investments that management intends to sell in the future, but not necessarily in the near term.

Accepted Answer

A) True 
 B)False

Question 10

The future value of a single amount is the original cash flow plus simple interest as of a specific future date.

Accepted Answer

A) True 
 B)False

Question 11

Select the incorrect statement from the following:

Accepted Answer

A) Adjustments are required to eliminate any transactions between Parent and Sub (e.g., selling or other transfer of assets). 
B) Even when the parent owns less than 100% of the subsidiary's stock, 100% of the subsidiary's assets and liabilities are included in the consolidated balance sheet. 
C) Any consolidated net income attributable to minority interest must be clearly identified and shown on the consolidated income statement. 
D) Consolidated net income is equal to the sum of the parent's net income and the sub's net income. 
A) Adjustments are required to eliminate any transactions between Parent and Sub (e.g., selling or other transfer of assets). 
B) Even when the parent owns less than 100% of the subsidiary's stock, 100% of the subsidiary's assets and liabilities are included in the consolidated balance sheet. 
C) Any consolidated net income attributable to minority interest must be clearly identified and shown on the consolidated income statement. 
D) Consolidated net income is equal to the sum of the parent's net income and the sub's net income.

Question 12

The journal entry to record the interest income from an annuity would include a

Accepted Answer

A) debit to interest income. 
B) credit to interest income. 
C) debit to interest expense. 
D) None of the above. 
A) debit to interest income. 
B) credit to interest income. 
C) debit to interest expense. 
D) None of the above.

Question 13

Match the following terms to their correct definition:
-Any transaction or set of transactions that brings together two or more previously separate entities to form a single accounting entity

Accepted Answer

A) equity security 
B) debt security 
C) passive 
D) significant influence 
E) control
F)parent
G)subsidiary
H)trading securities
I)available-for-sale securities
J)held-to-maturity securities
K)amortized cost method
L)fair value method
M)unrealized gains and losses
N)equity method
O)consolidation worksheet
P)minority interest
Q)business combination
R)goodwill 
A) equity security 
B) debt security 
C) passive 
D) significant influence 
E) control
F)parent
G)subsidiary
H)trading securities
I)available-for-sale securities
J)held-to-maturity securities
K)amortized cost method
L)fair value method
M)unrealized gains and losses
N)equity method
O)consolidation worksheet
P)minority interest
Q)business combination
R)goodwill

Question 14

On January 1, 2011, P Company purchased all of the outstanding common stock of S Company. The consolidation of the two balance sheets requires a

Accepted Answer

A) credit adjustment to eliminate P Company's "Investment in S Company" account. 
B) debit adjustment to eliminate S Company's "Investment in P Company" account 
C) debit adjustment to eliminate P Company's "Investment in S Company" account 
D) credit adjustment to eliminate S Company's "Investment in P Company" account 
A) credit adjustment to eliminate P Company's "Investment in S Company" account. 
B) debit adjustment to eliminate S Company's "Investment in P Company" account 
C) debit adjustment to eliminate P Company's "Investment in S Company" account 
D) credit adjustment to eliminate S Company's "Investment in P Company" account

Question 15

Match the following terms to their correct definition:
-Name given to the investee when an investor owns over 50% of the investee's outstanding common stock

Accepted Answer

A) equity security 
B) debt security 
C) passive 
D) significant influence 
E) control
F)parent
G)subsidiary
H)trading securities
I)available-for-sale securities
J)held-to-maturity securities
K)amortized cost method
L)fair value method
M)unrealized gains and losses
N)equity method
O)consolidation worksheet
P)minority interest
Q)business combination
R)goodwill 
A) equity security 
B) debt security 
C) passive 
D) significant influence 
E) control
F)parent
G)subsidiary
H)trading securities
I)available-for-sale securities
J)held-to-maturity securities
K)amortized cost method
L)fair value method
M)unrealized gains and losses
N)equity method
O)consolidation worksheet
P)minority interest
Q)business combination
R)goodwill

Question 16

The journal entry required to record the receipt of dividends under the fair value method of accounting for investments includes a

Accepted Answer

A) credit to the investment account. 
B) debit to the investment account. 
C) credit to dividend income. 
D) debit to retained earnings. 
A) credit to the investment account. 
B) debit to the investment account. 
C) credit to dividend income. 
D) debit to retained earnings.

Question 17

A company is referred to as a parent if it owns

Accepted Answer

A) 33% of the debt securities of another company. 
B) 100% of the debt securities of another company. 
C) 15% of the stock of another company. 
D) more than 50% of the stock of another company. 
A) 33% of the debt securities of another company. 
B) 100% of the debt securities of another company. 
C) 15% of the stock of another company. 
D) more than 50% of the stock of another company.

Question 18

Tom liquidates an investment, and his proceeds will be received in 8 annual payments of $10,000 each with interest computed at 7%. What is the Present Value of this Annuity?

Accepted Answer

A) $89,228.00 
B) $59,713.00 
C) $17,181.90 
D) $5,820.10 
A) $89,228.00 
B) $59,713.00 
C) $17,181.90 
D) $5,820.10

Question 19

The first cash flow in the future value of an annuity occurs when?

Accepted Answer

A) At the start of the first period. 
B) At the maturity date of the loan. 
C) When interest is collected. 
D) At the end of the first period. 
A) At the start of the first period. 
B) At the maturity date of the loan. 
C) When interest is collected. 
D) At the end of the first period.

Question 20

Tusk Company acquired all of the assets of Tinsel Company for $1,000,000. With the approval of Tinsel's stockholders and creditors, Tinsel transferred all of its assets and liabilities to Tusk Company and distributed the cash to Tinsel's stockholders. On the acquisition date, Tinsel's stockholders' equity was $500,000. Tusk Company determined that Tinsel's liabilities of $500,000 are correctly valued, but its identifiable assets are worth $300,000 more than their book value of $1,000,000.
Determine the amount of goodwill to be recognized by Tusk Company as a result of its acquisition of Tinsel Company.

Accepted Answer

The acquisition cost exceeds t

When determining the future value of an annuity, cash flows are presumed to occur

If the investor holds 50% or more of the common stock of the investee, then the two corporations are no longer separate accounting entities and therefore must prepare ____________________ financial statements, which combine information about the two corporations as if they were a single company.

Wanda Ward makes an investment of $11,800, which pays 8% interest that is compounded quarterly. How much interest will have accrued at the end of 48 months?

P Company paid $500,000 for 100% of the net assets (assets less liabilities) of S Company. The current value of S Company's net assets was only $475,000. As a result of this acquisition, P Company must recognize

Compound interest is a method of calculating the time value of money in which interest is earned on the previous periods' interest.

The interest period is the time interval between interest calculations.

____________________ securities are debt investments that are accounted for on an amortized cost basis because management intends to hold the investment until the debt contract requires the borrower to completely repay the debt.

Held-to-maturity securities are equity and debt investments that management intends to sell in the future, but not necessarily in the near term.

The future value of a single amount is the original cash flow plus simple interest as of a specific future date.

Select the incorrect statement from the following:

The journal entry to record the interest income from an annuity would include a

Match the following terms to their correct definition: -Any transaction or set of transactions that brings together two or more previously separate entities to form a single accounting entity

On January 1, 2011, P Company purchased all of the outstanding common stock of S Company. The consolidation of the two balance sheets requires a

Match the following terms to their correct definition: -Name given to the investee when an investor owns over 50% of the investee's outstanding common stock

The journal entry required to record the receipt of dividends under the fair value method of accounting for investments includes a

A company is referred to as a parent if it owns

Tom liquidates an investment, and his proceeds will be received in 8 annual payments of $10,000 each with interest computed at 7%. What is the Present Value of this Annuity?

The first cash flow in the future value of an annuity occurs when?

Accounting and The Financial Statements

The Accounting Information System

Accrual Accounting

Internal Control And Cash

Sales And Receivables

Cost Of Goods Sold and Inventory

Operating Assets

Current and Contingent Liabilities

Long Term Liabilities

Stockholders Apos Equity

The Statement Of Cash Flows

Financial Statement Analysis

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Exam 13: Finance and Stock Market Equilibrium

When determining the future value of an annuity, cash flows are presumed to occur

If the investor holds 50% or more of the common stock of the investee, then the two corporations are no longer separate accounting entities and therefore must prepare ____________________ financial statements, which combine information about the two corporations as if they were a single company.

Wanda Ward makes an investment of $11,800, which pays 8% interest that is compounded quarterly. How much interest will have accrued at the end of 48 months?

P Company paid $500,000 for 100% of the net assets (assets less liabilities) of S Company. The current value of S Company's net assets was only $475,000. As a result of this acquisition, P Company must recognize

Compound interest is a method of calculating the time value of money in which interest is earned on the previous periods' interest.

The interest period is the time interval between interest calculations.

____________________ securities are debt investments that are accounted for on an amortized cost basis because management intends to hold the investment until the debt contract requires the borrower to completely repay the debt.

Held-to-maturity securities are equity and debt investments that management intends to sell in the future, but not necessarily in the near term.

The future value of a single amount is the original cash flow plus simple interest as of a specific future date.

Select the incorrect statement from the following:

The journal entry to record the interest income from an annuity would include a

Match the following terms to their correct definition: -Any transaction or set of transactions that brings together two or more previously separate entities to form a single accounting entity

On January 1, 2011, P Company purchased all of the outstanding common stock of S Company. The consolidation of the two balance sheets requires a

Match the following terms to their correct definition: -Name given to the investee when an investor owns over 50% of the investee's outstanding common stock

The journal entry required to record the receipt of dividends under the fair value method of accounting for investments includes a

A company is referred to as a parent if it owns

Tom liquidates an investment, and his proceeds will be received in 8 annual payments of $10,000 each with interest computed at 7%. What is the Present Value of this Annuity?

The first cash flow in the future value of an annuity occurs when?

Accounting and The Financial Statements

The Accounting Information System

Accrual Accounting

Internal Control And Cash

Sales And Receivables

Cost Of Goods Sold and Inventory

Operating Assets

Current and Contingent Liabilities

Long Term Liabilities

Stockholders Apos Equity

The Statement Of Cash Flows

Financial Statement Analysis

Filters