Question 1

The corporation owning all or a majority of the voting stock of another corporation is known as the parent company.

Accepted Answer

A) True 
 B)False

Question 2

Ramiro Company purchased 40% of the outstanding stock of Marco Company on January 1. Marco reported net income of $95,000 and declared dividends of $35,000 during the year. How much would Ramiro adjust its investment in Marco Company under the equity method?

Accepted Answer

The answer of Ramiro Company purchased 40% of the outstanding...

Question 3

Comprehensive income is all changes in stockholders' equity during the period except those resulting from dividends and stockholders' investments.

Accepted Answer

A) True 
 B)False

Question 4

Held-to-maturity securities

Accepted Answer

A)  are reported at fair market value 
B)  include stocks as well as bonds 
C)  may be reported as current or noncurrent assets 
D)  All of these choices 
A)  are reported at fair market value 
B)  include stocks as well as bonds 
C)  may be reported as current or noncurrent assets 
D)  All of these choices

Question 5

Interest revenue on bonds is reported as

Accepted Answer

A)  an addition to the investment in bonds account 
B)  part of comprehensive income but not as part of net income 
C)  part of other income 
D)  part of operating income 
A)  an addition to the investment in bonds account 
B)  part of comprehensive income but not as part of net income 
C)  part of other income 
D)  part of operating income

Question 6

Yankton Company began the year without an investment portfolio. During the year, it purchased investments classified as trading securities at a cost of $13,000. At the end of the year, the market value of the securities was $11,000. Yankton Company's financial statements for the current year should show

Accepted Answer

A)  a loss of $2,000 on the income statement and net trading securities of $13,000 on the balance sheet 
B)  no loss on the income statement and net trading securities of $13,000 on the balance sheet 
C)  no loss on the income statement, net trading securities of $11,000, and an unrealized loss of $2,000 as a stockholders' equity adjustment on the balance sheet 
D)  a loss of $2,000 on the income statement and temporary investments of $11,000 on the balance sheet 
A)  a loss of $2,000 on the income statement and net trading securities of $13,000 on the balance sheet 
B)  no loss on the income statement and net trading securities of $13,000 on the balance sheet 
C)  no loss on the income statement, net trading securities of $11,000, and an unrealized loss of $2,000 as a stockholders' equity adjustment on the balance sheet 
D)  a loss of $2,000 on the income statement and temporary investments of $11,000 on the balance sheet

Question 7

Generally accepted accounting principles  (GAAP) require the use of fair value accounting for all assets and liabilities.

Accepted Answer

A) True 
 B)False

Question 8

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 9

In order to maintain a record of the original cost of a trading security, the fair value adjustments are debited or credited to the account Valuation Allowance for Trading Investments.

Accepted Answer

A) True 
 B)False

Question 10

On February 12, Addison, Inc. purchased 6,000 shares of Lucas Company at $22 per share plus a $240 brokerage fee. On August 22, Lucas paid a dividend per share of $0.42. On November 10, 4,000 shares of Lucas stock were sold for $28 per share less a $160 brokerage fee. The journal entry to record the purchase would include a

Accepted Answer

A)  debit to Investments-Lucas Company Stock for $132,000 
B)  credit to Cash for $132,000 
C)  debit to Investments-Lucas Company Stock for $132,240 
D)  credit to Investments-Lucas Company Stock for $240 
A)  debit to Investments-Lucas Company Stock for $132,000 
B)  credit to Cash for $132,000 
C)  debit to Investments-Lucas Company Stock for $132,240 
D)  credit to Investments-Lucas Company Stock for $240

Question 11

Yankton Company began the year without an investment portfolio. During the year, it purchased investments classified as available-for-sale securities at a cost of $13,000. At the end of the year, the market value of the securities was $11,000. Yankton Company's financial statements for the current year should show

Accepted Answer

A)  a loss of $2,000 on the income statement and available-for-sale investments of $13,000 on the balance sheet 
B)  no loss on the income statement and available-for-sale investments of $13,000 on the balance sheet 
C)  no loss on the income statement, available-for-sale investments of $11,000, and an unrealized loss of $2,000 as a stockholders' equity adjustment on the balance sheet 
D)  a loss of $2,000 on the income statement and temporary investments of $11,000 on the balance sheet 
A)  a loss of $2,000 on the income statement and available-for-sale investments of $13,000 on the balance sheet 
B)  no loss on the income statement and available-for-sale investments of $13,000 on the balance sheet 
C)  no loss on the income statement, available-for-sale investments of $11,000, and an unrealized loss of $2,000 as a stockholders' equity adjustment on the balance sheet 
D)  a loss of $2,000 on the income statement and temporary investments of $11,000 on the balance sheet

Question 12

Match each of the definitions that follow with the appropriate investment term (a-j).
-Recognition of changes in the fair value of short-term investments

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 13

Present entries to record the following selected transactions of Masterson Co.Aug. 1Purchased 600 shares of the 100,000 shares outstanding $10 par common shares of Dankin Corporation for $5,100.1Purchased 3,500 shares of the 10,000 shares no par common shares of Ramon Co. for $45,700. The investment was accounted for by the equity method.Sept. 1Received a cash dividend of $1 per share on the Dankin Corporation stock acquired on August 1.1Received a cash dividend of $2 per share on the Ramon Co. stock acquired on August 1.Dec. 31Sold 100 shares of the Dankin Corporation shares acquired on August 1 for $2,100.31Dankin Corporation reported net income of $30,000 and Ramon Company's reported net income was $50,000.​

Accepted Answer

The answer of Present entries to record the following selected...

Question 14

Following are 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 available-for-sale securities portfolio.
(b) Calculate and record the required December 31 adjustment.
(c) Explain how the adjustment from part 
(b) is reported on Lindy's financial statements.

Accepted Answer

? @#IMG-DLM& ?  @#IMG-DLM& (c) The unrealized loss will be s

Question 15

Match each of the definitions that follow with the appropriate investment term (a-j).
-The company investing in another company's stock

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 16

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 17

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

Question 18

Match each of the definitions that follow with the appropriate investment term (a-j).
-Appropriate method for accounting for small stock investments

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 19

Match each of the definitions that follow with the appropriate investment term (a-j).
-When using this, dividends are treated as a reduction of the investment

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 20

An equity investment in less than 20% of another company's stock is accounted for using the cost method.

Accepted Answer

A) True 
 B)False

The corporation owning all or a majority of the voting stock of another corporation is known as the parent company.

Ramiro Company purchased 40% of the outstanding stock of Marco Company on January 1. Marco reported net income of $95,000 and declared dividends of $35,000 during the year. How much would Ramiro adjust its investment in Marco Company under the equity method?

Comprehensive income is all changes in stockholders' equity during the period except those resulting from dividends and stockholders' investments.

Held-to-maturity securities

Interest revenue on bonds is reported as

Generally accepted accounting principles (GAAP) require the use of fair value accounting for all assets and liabilities.

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

In order to maintain a record of the original cost of a trading security, the fair value adjustments are debited or credited to the account Valuation Allowance for Trading Investments.

Match each of the definitions that follow with the appropriate investment term (a-j). -Recognition of changes in the fair value of short-term investments

Match each of the definitions that follow with the appropriate investment term (a-j). -The company investing in another company's stock

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). -Measurement of the rate of return to stockholders based on cash dividends

Match each of the definitions that follow with the appropriate investment term (a-j). -Appropriate method for accounting for small stock investments

Match each of the definitions that follow with the appropriate investment term (a-j). -When using this, dividends are treated as a reduction of the investment

An equity investment in less than 20% of another company's stock is accounted for using the cost method.

Introduction to Accounting and Business

Analyzing Transactions

The Adjusting Process

Completing the Accounting Cycle

Accounting Systems

Accounting for Merchandising Businesses

Inventories

Internal Control and Cash

Receivables

Long-Term Assets: Fixed and Intangible

Current Liabilities and Payroll

Accounting for Partnerships and Limited Liability Companies

Corporations: Organization, Stock Transactions, and Dividends

Long-Term Liabilities: Bonds and Notes

Statement of Cash Flows

Financial Statement Analysis

Introduction to Managerial Accounting

Job Order Costing

Process Cost Systems

Cost-Volume-Profit Analysis

Evaluating Variances From Standard Costs

Decentralized Operations

Differential Analysis, Product Pricing, and Activity-Based Costing

Capital Investment Analysis

Filters

Exam 15: Investments and Fair Value Accounting

The corporation owning all or a majority of the voting stock of another corporation is known as the parent company.

Ramiro Company purchased 40% of the outstanding stock of Marco Company on January 1. Marco reported net income of $95,000 and declared dividends of $35,000 during the year. How much would Ramiro adjust its investment in Marco Company under the equity method?

Comprehensive income is all changes in stockholders' equity during the period except those resulting from dividends and stockholders' investments.

Held-to-maturity securities

Interest revenue on bonds is reported as

Generally accepted accounting principles (GAAP) require the use of fair value accounting for all assets and liabilities.

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

In order to maintain a record of the original cost of a trading security, the fair value adjustments are debited or credited to the account Valuation Allowance for Trading Investments.

Match each of the definitions that follow with the appropriate investment term (a-j). -Recognition of changes in the fair value of short-term investments

Match each of the definitions that follow with the appropriate investment term (a-j). -The company investing in another company's stock

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). -Measurement of the rate of return to stockholders based on cash dividends

Match each of the definitions that follow with the appropriate investment term (a-j). -Appropriate method for accounting for small stock investments

Match each of the definitions that follow with the appropriate investment term (a-j). -When using this, dividends are treated as a reduction of the investment

An equity investment in less than 20% of another company's stock is accounted for using the cost method.

Introduction to Accounting and Business

Analyzing Transactions

The Adjusting Process

Completing the Accounting Cycle

Accounting Systems

Accounting for Merchandising Businesses

Inventories

Internal Control and Cash

Receivables

Long-Term Assets: Fixed and Intangible

Current Liabilities and Payroll

Accounting for Partnerships and Limited Liability Companies

Corporations: Organization, Stock Transactions, and Dividends

Long-Term Liabilities: Bonds and Notes

Statement of Cash Flows

Financial Statement Analysis

Introduction to Managerial Accounting

Job Order Costing

Process Cost Systems

Cost-Volume-Profit Analysis

Evaluating Variances From Standard Costs

Decentralized Operations

Differential Analysis, Product Pricing, and Activity-Based Costing

Capital Investment Analysis

Filters