Exam 14: Understanding Investments in Debt and Equity Securities

Suppose you have a winning lottery ticket and you are given the option of accepting $3,000,000 three years from now or taking the present value of the $3,000,000 now.The sponsor of the prize uses a 6% discount rate.If you elect to receive the present value of the prize now, the amount you will receive is

(Multiple Choice)

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Question 141

If you are able to earn an 8% rate of return, what amount would you need to invest to have $30,000 one year from now?

(Multiple Choice)

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Question 142

Barcelona Company owns 40% interest in the stock of ABX Corporation.During the year, ABX pays $40,000 in dividends to Barcelona, and reports $300,000 in net income.Barcelona Company's investment in ABX will increase Barcelona net income by

(Multiple Choice)

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Question 143

On January 1, Connid Company purchased as an investment a $1,000, 8% bond for $1,000.The bond pays interest on January 1.What is the entry to record the interest accrual on December 31?

(Short Answer)

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Question 144

CGS Corporation makes an investment in 300 shares of Bama Company's common stock.The stock is purchased for $53 a share.The entry for the purchase is:

(Short Answer)

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Question 145

Demulza Company is considering an investment in equipment.The present value of cash inflows includes

(Multiple Choice)

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Question 146

Hazel Company has just purchased equipment that requires annual payments of $40,000 to be paid at the end of each of the next 4 years.The appropriate discount rate is 15%.What is the present value of the payments?

(Multiple Choice)

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Question 147

If a parent company has two wholly owned subsidiaries, how many legal and economic entities are there from the viewpoint of the shareholders of the parent company?

(Short Answer)

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Question 148

The amount you must deposit now in your savings account, paying 6% interest, in order to accumulate $6,000 for a down payment 5 years from now on a new car is

(Multiple Choice)

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Question 149

Which of the following is a debt security?

(Multiple Choice)

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Question 150

Under the equity method, the receipt of dividends from the investee company results in a credit to the Dividend Revenue account.

(True/False)

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Question 151

The ability of an investing company to affect the operating and financial activities of another company, even though the investor holds less than 50% of the stock, is known as

(Multiple Choice)

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Question 152

Barcelona Company owns 40% interest in the stock of ABX Corporation.During the year, ABX pays $40,000 in dividends to Barcelona, and reports $300,000 in net income.Barcelona Company's investment in ABX will increase by

(Multiple Choice)

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Question 153

A reason some companies purchase investments is because they generate a significant portion of their earnings from investment income.

(True/False)

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Question 154

Which of the following is not necessary to know in computing the future value of an annuity?

(Multiple Choice)

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Question 155

On January 1, 2022, JBT Company purchased at face value, a $1,000 6%, bond that pays interest on January 1.JBT Company has a calendar year end.The entry on January 1, 2022, is

(Short Answer)

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Question 156

If a stock investment is sold at a gain, the gain

(Multiple Choice)

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Question 157

When investments in bonds are sold, any difference between the sales price and the fair value of the bonds is recorded as a gain or loss.

(True/False)

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Question 158

McComb Inc.earns $1,350,000 and pays cash dividends for $450,000 during 2022.SFX Corporation owns 70,000 of the 210,000 outstanding shares of McComb.What amount should SFX show in the investment account at December 31, 2022 if the beginning of the year balance in the account was $150,000?

(Multiple Choice)

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Question 159

At December 31, 2022, the trading securities for Blue Bell, Inc.are as follow Blue Bell should report the following amount related to the securities transactions in its 2022 income statement

(Multiple Choice)

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Question 160

Showing 141 - 160 of 209

If you are able to earn an 8% rate of return, what amount would you need to invest to have $30,000 one year from now?

Barcelona Company owns 40% interest in the stock of ABX Corporation.During the year, ABX pays $40,000 in dividends to Barcelona, and reports $300,000 in net income.Barcelona Company's investment in ABX will increase Barcelona net income by

On January 1, Connid Company purchased as an investment a $1,000, 8% bond for $1,000.The bond pays interest on January 1.What is the entry to record the interest accrual on December 31?

CGS Corporation makes an investment in 300 shares of Bama Company's common stock.The stock is purchased for $53 a share.The entry for the purchase is:

Demulza Company is considering an investment in equipment.The present value of cash inflows includes

Hazel Company has just purchased equipment that requires annual payments of $40,000 to be paid at the end of each of the next 4 years.The appropriate discount rate is 15%.What is the present value of the payments?

If a parent company has two wholly owned subsidiaries, how many legal and economic entities are there from the viewpoint of the shareholders of the parent company?

The amount you must deposit now in your savings account, paying 6% interest, in order to accumulate $6,000 for a down payment 5 years from now on a new car is

Which of the following is a debt security?

Under the equity method, the receipt of dividends from the investee company results in a credit to the Dividend Revenue account.

The ability of an investing company to affect the operating and financial activities of another company, even though the investor holds less than 50% of the stock, is known as

Barcelona Company owns 40% interest in the stock of ABX Corporation.During the year, ABX pays $40,000 in dividends to Barcelona, and reports $300,000 in net income.Barcelona Company's investment in ABX will increase by

A reason some companies purchase investments is because they generate a significant portion of their earnings from investment income.

Which of the following is not necessary to know in computing the future value of an annuity?

On January 1, 2022, JBT Company purchased at face value, a $1,000 6%, bond that pays interest on January 1.JBT Company has a calendar year end.The entry on January 1, 2022, is

If a stock investment is sold at a gain, the gain

When investments in bonds are sold, any difference between the sales price and the fair value of the bonds is recorded as a gain or loss.

McComb Inc.earns $1,350,000 and pays cash dividends for $450,000 during 2022.SFX Corporation owns 70,000 of the 210,000 outstanding shares of McComb.What amount should SFX show in the investment account at December 31, 2022 if the beginning of the year balance in the account was $150,000?

At December 31, 2022, the trading securities for Blue Bell, Inc.are as follow Blue Bell should report the following amount related to the securities transactions in its 2022 income statement

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

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