Question 1

Which of the following is not a category used for valuing and reporting debt investments?

Accepted Answer

A) Securities held for investing purposes. 
B) Trading securities. 
C) Held-to-maturity securities. 
D) Available-for-sale securities. 
A) Securities held for investing purposes. 
B) Trading securities. 
C) Held-to-maturity securities. 
D) Available-for-sale securities. A

Question 2

In recognizing a decline in the fair value of short-term stock investments, an Unrealized Loss account is debited because

Accepted Answer

A) management intends to realize this loss in the near future. 
B) the securities have not been sold. 
C) the stock market is volatile. 
D) management cannot determine the exact amount of the loss in value. 
A) management intends to realize this loss in the near future. 
B) the securities have not been sold. 
C) the stock market is volatile. 
D) management cannot determine the exact amount of the loss in value. B

Question 3

On January 1, Bay View Company purchased as an investment a $1,000, 5% bond for $1,000.The bond pays interest on January 1.The bond is sold on July 1 for $1,070 plus accrued interest.Interest has not been accrued since the last interest payment date.What is the entry to record the cash proceeds at the time the bond is sold?

Accepted Answer

B

Question 4

Eglin Company owns 30% interest in the stock of Bosco Corporation.During the year, Bosco pays $10,000 in dividends to Eglin, and reports a net loss of $200,000.Eglin Company's investment in Bosco will affect Eglin net income by a

Accepted Answer

A) $10,000 increase. 
B) $60,000 increase. 
C) $60,000 decrease. 
D) $10,000 decrease. 
A) $10,000 increase. 
B) $60,000 increase. 
C) $60,000 decrease. 
D) $10,000 decrease.

Question 5

Under the equity method the investor records a proportionate share of the investee's income in the year when it is earned.

Accepted Answer

A) True 
 B)False

Question 6

Chopper Company owns 15% interest in the stock of Elton Corporation.During the year, Elton pays $10,000 in dividends to Chopper, and reports $400,000 in net income.Chopper Company's investment in Elton will increase Chopper net income by

Accepted Answer

A) $10,000. 
B) $50,000. 
C) $60,000. 
D) $1,500. 
A) $10,000. 
B) $50,000. 
C) $60,000. 
D) $1,500.

Question 7

Jambon Company owns 10% interest in the stock of Fanth Corporation.During the year, Fanth pays $12,000 in dividends to Jambon, and reports $200,000 in net income.Jambon Company's investment in Fanth will increase Jambon net income by

Accepted Answer

A) $20,000. 
B) $19,200. 
C) $12,000. 
D) $8,000. 
A) $20,000. 
B) $19,200. 
C) $12,000. 
D) $8,000.

Question 8

In order to use the cost method of accounting for stock investments, how much stock must the investor own?

Accepted Answer

A) Less than 20%. 
B) More than 50%. 
C) Between 20% and 50%. 
D) The cost method is always used for stock investments of any size. 
A) Less than 20%. 
B) More than 50%. 
C) Between 20% and 50%. 
D) The cost method is always used for stock investments of any size.

Question 9

The cost method of accounting for investments in stock should be used when the investment is

Accepted Answer

A) influential and controlling. 
B) influential and noncontrolling. 
C) controlling. 
D) non-influential and noncontrolling. 
A) influential and controlling. 
B) influential and noncontrolling. 
C) controlling. 
D) non-influential and noncontrolling.

Question 10

Which is not a strategic reason to invest?

Accepted Answer

A) There has been a change in the economic climate. 
B) To establish a presence in a related industry. 
C) To exercise some influence over a customer or supplier. 
D) To enter a new industry without starting from scratch. 
A) There has been a change in the economic climate. 
B) To establish a presence in a related industry. 
C) To exercise some influence over a customer or supplier. 
D) To enter a new industry without starting from scratch.

Question 11

Deutsche Corporation's portfolio of stock holdings of less than 20% at the end of the year is as follows:   At the end of the year, Deutsche Corporation should
A)set up a Fair Value Adjustment account for Common Stock B.
B)set up a Fair Value Adjustment account for the portfolio.
C)recognize an Unrealized Gain or Loss-Income for $6,000.
D)report a loss on the income statement for $6,000 under "Other Expenses and Losses."

Accepted Answer

The answer of Deutsche Corporation's portfolio of stock holdings of...

Question 12

An investment in short-term equity securities should be charged to a nominal account since the investment is temporary.

Accepted Answer

A) True 
 B)False

Question 13

Short-term investments are securities that are readily marketable and intended to be converted into cash within the next

Accepted Answer

A) year. 
B) two years. 
C) year or operating cycle, whichever is shorter. 
D) year or operating cycle, whichever is longer. 
A) year. 
B) two years. 
C) year or operating cycle, whichever is shorter. 
D) year or operating cycle, whichever is longer.

Question 14

If the equity method is being used, cash dividends received

Accepted Answer

A) are credited to the Dividend Revenue account. 
B) require no entry because investee net income has already been recorded at the proper proportion on the investor's books. 
C) are credited to the Stock Investments account. 
D) are credited to the Revenue from Investment in Stock account. 
A) are credited to the Dividend Revenue account. 
B) require no entry because investee net income has already been recorded at the proper proportion on the investor's books. 
C) are credited to the Stock Investments account. 
D) are credited to the Revenue from Investment in Stock account.

Question 15

Suzy Douglas has been offered the opportunity of investing $73,540 now.The investment will earn 8% per year and at the end of its life will return $200,000 to Suzy.How many years must Suzy wait to receive the $200,000?

Accepted Answer

A) 10 
B) 11 
C) 12 
D) 13 
A) 10 
B) 11 
C) 12 
D) 13

Question 16

If the cost method is used to account for an investment in common stock, dividends received should be

Accepted Answer

A) credited to the Stock Investments account. 
B) credited to the Dividend Revenue account. 
C) debited to the Stock Investments account. 
D) recorded only when 20% or more of the stock is owned. 
A) credited to the Stock Investments account. 
B) credited to the Dividend Revenue account. 
C) debited to the Stock Investments account. 
D) recorded only when 20% or more of the stock is owned.

Question 17

Hardin Park Company had these transactions pertaining to stock investments Feb.1 Purchased 5,000 shares of Raley Company (10%) for $89,000 cash.
June 1 Received cash dividends of $1 per share on Raley stock.
Oct)1 Sold 2,000 shares of Raley stock for $39,000.
Dec)1 Received cash dividends of $2 per share on Raley stock.
The entry to record the receipt of the dividends Dec.1 would include a

Accepted Answer

A) debit to Stock Investments of $6,000. 
B) credit to Dividend Revenue of $6,000. 
C) debit to Dividend Revenue of $6,000. 
D) credit to the Stock Investments of $6,000. 
A) debit to Stock Investments of $6,000. 
B) credit to Dividend Revenue of $6,000. 
C) debit to Dividend Revenue of $6,000. 
D) credit to the Stock Investments of $6,000.

Question 18

Outer Banks Corporation sells 300 shares of common stock being held as an investment.The shares were acquired six months ago at a cost of $40 a share.Outer Banks sold the shares for $43 a share.The entry to record the sale is

Accepted Answer

The answer of Outer Banks Corporation sells 300 shares of...

Question 19

In present value calculations, the process of determining the present value is called

Accepted Answer

A) allocating. 
B) pricing. 
C) negotiating. 
D) discounting. 
A) allocating. 
B) pricing. 
C) negotiating. 
D) discounting.

Question 20

Under the equity method, the investment in common stock is initially recorded at cost, and the Stock Investments account is adjusted annually.

Accepted Answer

A) True 
 B)False

Which of the following is not a category used for valuing and reporting debt investments?

In recognizing a decline in the fair value of short-term stock investments, an Unrealized Loss account is debited because

Eglin Company owns 30% interest in the stock of Bosco Corporation.During the year, Bosco pays $10,000 in dividends to Eglin, and reports a net loss of $200,000.Eglin Company's investment in Bosco will affect Eglin net income by a

Under the equity method the investor records a proportionate share of the investee's income in the year when it is earned.

Chopper Company owns 15% interest in the stock of Elton Corporation.During the year, Elton pays $10,000 in dividends to Chopper, and reports $400,000 in net income.Chopper Company's investment in Elton will increase Chopper net income by

Jambon Company owns 10% interest in the stock of Fanth Corporation.During the year, Fanth pays $12,000 in dividends to Jambon, and reports $200,000 in net income.Jambon Company's investment in Fanth will increase Jambon net income by

In order to use the cost method of accounting for stock investments, how much stock must the investor own?

The cost method of accounting for investments in stock should be used when the investment is

Which is not a strategic reason to invest?

An investment in short-term equity securities should be charged to a nominal account since the investment is temporary.

Short-term investments are securities that are readily marketable and intended to be converted into cash within the next

If the equity method is being used, cash dividends received

Suzy Douglas has been offered the opportunity of investing $73,540 now.The investment will earn 8% per year and at the end of its life will return $200,000 to Suzy.How many years must Suzy wait to receive the $200,000?

If the cost method is used to account for an investment in common stock, dividends received should be

Outer Banks Corporation sells 300 shares of common stock being held as an investment.The shares were acquired six months ago at a cost of $40 a share.Outer Banks sold the shares for $43 a share.The entry to record the sale is

In present value calculations, the process of determining the present value is called

Under the equity method, the investment in common stock is initially recorded at cost, and the Stock Investments account is adjusted annually.

Introduction to Financial Statements

A Further Look at Financial Statements

The Accounting Information System

Accrual Accounting Concepts

Merchandising Operations and the Multiple-Step Income Statement

Reporting and Analyzing Inventory

Fraud, Internal Control, and Cash

Reporting and Analyzing Receivables

Reporting and Analyzing Long-Lived Assets

Reporting and Analyzing Liabilities

Reporting and Analyzing Stockholders Equity

Statement of Cash Flows

Financial Analysis: The Big Picture

Filters

Exam 14: Understanding Investments in Debt and Equity Securities

Which of the following is not a category used for valuing and reporting debt investments?

In recognizing a decline in the fair value of short-term stock investments, an Unrealized Loss account is debited because

Eglin Company owns 30% interest in the stock of Bosco Corporation.During the year, Bosco pays $10,000 in dividends to Eglin, and reports a net loss of $200,000.Eglin Company's investment in Bosco will affect Eglin net income by a

Under the equity method the investor records a proportionate share of the investee's income in the year when it is earned.

Chopper Company owns 15% interest in the stock of Elton Corporation.During the year, Elton pays $10,000 in dividends to Chopper, and reports $400,000 in net income.Chopper Company's investment in Elton will increase Chopper net income by

Jambon Company owns 10% interest in the stock of Fanth Corporation.During the year, Fanth pays $12,000 in dividends to Jambon, and reports $200,000 in net income.Jambon Company's investment in Fanth will increase Jambon net income by

In order to use the cost method of accounting for stock investments, how much stock must the investor own?

The cost method of accounting for investments in stock should be used when the investment is

Which is not a strategic reason to invest?

An investment in short-term equity securities should be charged to a nominal account since the investment is temporary.

Short-term investments are securities that are readily marketable and intended to be converted into cash within the next

If the equity method is being used, cash dividends received

Suzy Douglas has been offered the opportunity of investing $73,540 now.The investment will earn 8% per year and at the end of its life will return $200,000 to Suzy.How many years must Suzy wait to receive the $200,000?

If the cost method is used to account for an investment in common stock, dividends received should be

Outer Banks Corporation sells 300 shares of common stock being held as an investment.The shares were acquired six months ago at a cost of $40 a share.Outer Banks sold the shares for $43 a share.The entry to record the sale is

In present value calculations, the process of determining the present value is called

Under the equity method, the investment in common stock is initially recorded at cost, and the Stock Investments account is adjusted annually.

Introduction to Financial Statements

A Further Look at Financial Statements

The Accounting Information System

Accrual Accounting Concepts

Merchandising Operations and the Multiple-Step Income Statement

Reporting and Analyzing Inventory

Fraud, Internal Control, and Cash

Reporting and Analyzing Receivables

Reporting and Analyzing Long-Lived Assets

Reporting and Analyzing Liabilities

Reporting and Analyzing Stockholders Equity

Statement of Cash Flows

Financial Analysis: The Big Picture

Filters