Question 1

The account Unrealized Gain (Loss) on Available-for-Sale Investments should be included on 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 2

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

The answer of Herberto Company had a net income of...

Question 3

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 4

In general, consolidated financial statements should be prepared

Accepted Answer

A)  when a corporation owns more than 20% and less than 40% of the common stock of another company 
B)  when a corporation owns more than 50% of the common stock of another company 
C)  only when a corporation owns 100% of the common stock of another company 
D)  whenever the market value of the stock investment is significantly lower than its cost 
A)  when a corporation owns more than 20% and less than 40% of the common stock of another company 
B)  when a corporation owns more than 50% of the common stock of another company 
C)  only when a corporation owns 100% of the common stock of another company 
D)  whenever the market value of the stock investment is significantly lower than its cost

Question 5

(a) What is comprehensive income? (b) How is it calculated?  (c) What are some examples of items included in other comprehensive income?  (d) Where is comprehensive income reported?

Accepted Answer

(a) Comprehensive income is all changes

Question 6

Held-to-maturity securities maturing beyond a year are reported as noncurrent assets.

Accepted Answer

A) True 
 B)False

Question 7

Gale Company owns 87% of the outstanding stock of Leonardo Company. Leonardo Company is referred to as the

Accepted Answer

A)  parent 
B)  minority interest 
C)  affiliate 
D)  subsidiary 
A)  parent 
B)  minority interest 
C)  affiliate 
D)  subsidiary

Question 8

Pepito Company purchased 40% of the outstanding stock of Reyes Company on January 1. Reyes reported net income of $75,000 and declared dividends of $15,000 during the current year. How much would Pepito adjust its investment in Reyes Company under the equity method?

Accepted Answer

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

Question 9

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

Question 10

LM, Inc. reported net income for the year ending December 31 of $483,500. Dividends paid during the year totaled $52,900. The company holds available-for-sale securities with an original cost of $162,000 and a fair value of $181,000 at the end of the year. It also holds trading securities with an original cost of $150,000 and a fair value of $147,000. Retained earnings on January 1 was $736,400, and accumulated other comprehensive income on January 1 was $16,200.?Calculate the following balances to be reported in the financial statements dated December 31:
(a) Valuation allowance for available-for-sale securities
(b) Comprehensive income
(c) Retained earnings
(d) Accumulated other comprehensive income

Accepted Answer

The answer of LM, Inc. reported net income for the...

Question 11

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 12

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

Accepted Answer

A) True 
 B)False

Question 13

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

Question 14

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 15

The valuation allowance for trading investments account is found on 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 16

Journalize the entries to record the following selected transactions of Oliver Co.:May 1Purchased $100,000 of Kruse Co. 6% bonds at their face amount plus accrued interest of $2,000.July 1Received first semiannual interest payment.Sept. 1Sold the bonds at 97 plus accrued interest of $1,000.

Accepted Answer

The answer of Journalize the entries to record the following...

Question 17

Which of the following stock investments should be accounted for using the cost method?

Accepted Answer

A)  investments of less than 20% 
B)  investments between 20% and 50% 
C)  investments of less than 20% and investments between 20% and 50% 
D)  All stock investments should be accounted for using the cost method 
A)  investments of less than 20% 
B)  investments between 20% and 50% 
C)  investments of less than 20% and investments between 20% and 50% 
D)  All stock investments should be accounted for using the cost method

Question 18

Which of the following statements is not a reason a company may purchase another company's stock?

Accepted Answer

A)  earning a return on excess cash 
B)  sustaining the other company's stock price 
C)  gaining control of another company's operations 
D)  developing or maintaining business relationships 
A)  earning a return on excess cash 
B)  sustaining the other company's stock price 
C)  gaining control of another company's operations 
D)  developing or maintaining business relationships

Question 19

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 Co. stock.​Feb. 2Purchased for cash 500 shares of Braxter Co. stock for $34 per share plus a $250 brokerage commission.Apr. 16Received dividends of $0.35 per share on Braxter Co. stock.June 17Sold 100 shares of Braxter Co. stock for $40 per share less a $100 brokerage commission.​

Accepted Answer

The answer of Journalize the entries to record the following...

Question 20

Trading securities should be reported on the financial statements at fair market value.

Accepted Answer

A) True 
 B)False

Exam 15: Investments and Fair Value Accounting

The account Unrealized Gain (Loss) on Available-for-Sale Investments should be included on the

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

In general, consolidated financial statements should be prepared

(a) What is comprehensive income? (b) How is it calculated? (c) What are some examples of items included in other comprehensive income? (d) Where is comprehensive income reported?

Held-to-maturity securities maturing beyond a year are reported as noncurrent assets.

Gale Company owns 87% of the outstanding stock of Leonardo Company. Leonardo Company is referred to as the

Pepito Company purchased 40% of the outstanding stock of Reyes Company on January 1. Reyes reported net income of $75,000 and declared dividends of $15,000 during the current year. How much would Pepito adjust its investment in Reyes Company under the equity method?

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

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

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

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

The valuation allowance for trading investments account is found on the

Journalize the entries to record the following selected transactions of Oliver Co.:May 1Purchased $100,000 of Kruse Co. 6% bonds at their face amount plus accrued interest of $2,000.July 1Received first semiannual interest payment.Sept. 1Sold the bonds at 97 plus accrued interest of $1,000.

Which of the following stock investments should be accounted for using the cost method?

Which of the following statements is not a reason a company may purchase another company's stock?

Trading securities should be reported on the financial statements at fair market value.

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

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