Question 1

Most companies invest excess cash in bonds as investments in order to profit long-term from the growth of the investment.

Accepted Answer

A) True 
 B)False

Question 2

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 were 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-fo

Question 3

The price that would be received to sell an asset or pay off a liability is the

Accepted Answer

A)  fair value 
B)  market value 
C)  investing value 
D)  historical value 
A)  fair value 
B)  market value 
C)  investing value 
D)  historical value

Question 4

Comprehensive income must be reported on the income statement.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following is part of the primary objective of investing in temporary investments?

Accepted Answer

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

Question 6

On February 12, Addison, Inc. purchased 6,000 shares of Lucas Company at $22 per share plus a $240 brokerage fee. This purchase represents less than 20% ownership of Lucas Company. 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.​Prepare the journal entries for the original purchase, dividend, and sale.

Accepted Answer

The answer of On February 12, Addison, Inc. purchased 6,000...

Question 7

Which of the following items would not affect the investor's income for the period?

Accepted Answer

A)  interest received on a temporary investment in bonds 
B)  dividends received on a long-term investment in stock where the investor owns 10% of the investee's stock 
C)  dividends received on a long-term investment in stock where the investor owns 30% of the investee's stock 
D)  interest received on a long-term investment in bonds 
A)  interest received on a temporary investment in bonds 
B)  dividends received on a long-term investment in stock where the investor owns 10% of the investee's stock 
C)  dividends received on a long-term investment in stock where the investor owns 30% of the investee's stock 
D)  interest received on a long-term investment in bonds

Question 8

Ruben Company purchased $100,000 of Evans Company bonds at 100 plus $1,500 in accrued interest. The bond interest rate is 8% and interest is paid semiannually. The journal entry to record the purchase would be

Accepted Answer

A)  debit Investments-Evans Company Bonds, $101,500; credit Cash, $101,500 
B)  debit Investments-Evans Company Bonds, $100,000; credit Interest Revenue, $1,500, and Cash, $98,500 
C)  debit Investments-Evans Company Bonds, $100,000, and Interest Receivable $1,500; credit Cash, $101,500 
D)  debit Investments-Evans Company Bonds, $100,000; credit Cash, $100,000 
A)  debit Investments-Evans Company Bonds, $101,500; credit Cash, $101,500 
B)  debit Investments-Evans Company Bonds, $100,000; credit Interest Revenue, $1,500, and Cash, $98,500 
C)  debit Investments-Evans Company Bonds, $100,000, and Interest Receivable $1,500; credit Cash, $101,500 
D)  debit Investments-Evans Company Bonds, $100,000; credit Cash, $100,000

Question 9

It is not possible for one company to influence the operating policies of another company unless it owns more than 50% interest in that company.

Accepted Answer

A) True 
 B)False

Question 10

A disadvantage of fair value use is that the comparability between companies may be impacted by different fair value measurements.

Accepted Answer

A) True 
 B)False

Question 11

On March 1, Year 1, Chase Inc. purchases 35% of the outstanding shares of Glory Corporation stock for $325,000. On December 31, Year 1, Glory reports net income of $162,000. On January 15, Year 2, Glory pays total dividends to stockholders of $33,000. Journalize the three transactions.

Accepted Answer

The answer of On March 1, Year 1, Chase Inc....

Question 12

The journal entry Pierce will record on June 30 will include a

Accepted Answer

A)  credit to Interest Revenue for $2,400 
B)  debit to Cash for $3,600 
C)  credit to Cash for $2,400 
D)  credit to Interest Receivable for $1,200 
A)  credit to Interest Revenue for $2,400 
B)  debit to Cash for $3,600 
C)  credit to Cash for $2,400 
D)  credit to Interest Receivable for $1,200

Question 13

Match each of the definitions that follow with the appropriate investment term (a-j).
-What occurs when a company purchases 50% or more of 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 14

On May 1, Cedar Inc. purchases $150,000 of 10-year, Knox Corporation 8% bonds dated March 1 at 100 plus accrued interest. Journalize the entry to record the semiannual receipt of interest on March 1, Year 2.

Accepted Answer

Cash6,000Interest Re

Question 15

The cumulative effects of other comprehensive income items are included in retained earnings on the balance sheet.

Accepted Answer

A) True 
 B)False

Question 16

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

Accepted Answer

Debt securities are notes and bonds that

Question 17

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 18

The equity method causes the investment account to mirror the proportional changes in book value of the investee.

Accepted Answer

A) True 
 B)False

Question 19

On June 1, $50,000 of treasury bonds were purchased between interest dates. The brokerage 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 Investments-Treasury Bonds?

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 20

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

Accepted Answer

A) True 
 B)False

Exam 15: Investments and Fair Value Accounting

Most companies invest excess cash in bonds as investments in order to profit long-term from the growth of the investment.

The price that would be received to sell an asset or pay off a liability is the

Comprehensive income must be reported on the income statement.

Which of the following is part of the primary objective of investing in temporary investments?

Which of the following items would not affect the investor's income for the period?

Ruben Company purchased $100,000 of Evans Company bonds at 100 plus $1,500 in accrued interest. The bond interest rate is 8% and interest is paid semiannually. The journal entry to record the purchase would be

It is not possible for one company to influence the operating policies of another company unless it owns more than 50% interest in that company.

A disadvantage of fair value use is that the comparability between companies may be impacted by different fair value measurements.

On March 1, Year 1, Chase Inc. purchases 35% of the outstanding shares of Glory Corporation stock for $325,000. On December 31, Year 1, Glory reports net income of $162,000. On January 15, Year 2, Glory pays total dividends to stockholders of $33,000. Journalize the three transactions.

The journal entry Pierce will record on June 30 will include a

Match each of the definitions that follow with the appropriate investment term (a-j). -What occurs when a company purchases 50% or more of another company's stock

On May 1, Cedar Inc. purchases $150,000 of 10-year, Knox Corporation 8% bonds dated March 1 at 100 plus accrued interest. Journalize the entry to record the semiannual receipt of interest on March 1, Year 2.

The cumulative effects of other comprehensive income items are included in retained earnings on the balance sheet.

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

What are the total proceeds from the February 1 sale?

The equity method causes the investment account to mirror the proportional changes in book value of the investee.

On June 1, $50,000 of treasury bonds were purchased between interest dates. The brokerage 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 Investments-Treasury Bonds?

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

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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