Question 1

What are the five components necessary to account for investments in available-for-sale securities?

Accepted Answer

*The initial investment is recorded at c

Question 2

When transferring investments between categories, unrealized holding gains for securities transferred from trading to available-for-sale

Accepted Answer

A)  must be realized on the income statement. 
B)  must be recognized on the income statement. 
C)  must be realized and reported in comprehensive income. 
D)  need no accounting since they have already been recognized in net income. 
A)  must be realized on the income statement. 
B)  must be recognized on the income statement. 
C)  must be realized and reported in comprehensive income. 
D)  need no accounting since they have already been recognized in net income.

Question 3

First Bank purchased the following securities during 2017 and classified them all as trading securities.
Purchased 500 shares of Duke Company's common stock for $55 per share Purchased 2,000 shares of Queen Company's common stock for $45 per share Purchased 1,000 shares of Prince Company's preferred stock at $120 per share. Received $3,000 of dividends during 2017 related to the common stock investments   
1.) Prepare journal entries to record the preceding information.
2.) What is the unrealized holding gain or loss and where is it reported on the 2017 financial statements?
3.) Prepare the journal entry to record the unrealized holding gain or loss.
4.) How would the bank report these securities on its balance sheet for the year ended 2017?

Accepted Answer

The answer of First Bank purchased the following securities during...

Question 4

When the investor owns more than 50% of the voting common stock of the investee, the investee is considered to be under the legal control of the investor.

Accepted Answer

A) True 
 B)False

Question 5

Waldo Company owns 30% of Randy Company. During 2017, Randy reported earnings of $650,000 and paid cash dividends of $345,000. What effect would this have on Waldo's investment account and net income?

Accepted Answer

A)  I 
B)  II 
C)  III 
D)  IV 
A)  I 
B)  II 
C)  III 
D)  IV

Question 6

On January 6, 2017, Michael Company acquired 4,000 shares or 10%) of George Corporation's common stock at $25 per share. The securities are classified as trading securities. On October 24, 2017, George declared and paid a cash dividend of $1 per share. On December 31, 2017, the market value of George's common stock was $35 per share. George also reported a net income of $250,000 for 2017. At what value should Michael report the investment in George's common stock on its December 31, 2017 balance sheet?

Accepted Answer

A)  $100,000 
B)  $140,000 
C)  $144,000 
D)  $104,000 
A)  $100,000 
B)  $140,000 
C)  $144,000 
D)  $104,000

Question 7

Which of the following statements regarding available-for-sale debt investments is true?

Accepted Answer

A)  The realized gain on sale is determined by comparing the amortized cost of the investment with its selling price. 
B)  Income is affected by temporary changes in market value. 
C)  All debt security investments can only be classified as current. 
D)  Unrealized holding gains/losses are reported on the income statement. 
A)  The realized gain on sale is determined by comparing the amortized cost of the investment with its selling price. 
B)  Income is affected by temporary changes in market value. 
C)  All debt security investments can only be classified as current. 
D)  Unrealized holding gains/losses are reported on the income statement.

Question 8

Acquisition of greater than 20% of the outstanding stock of a company normally suggests that the investor should use the

Accepted Answer

A)  consolidation method. 
B)  equity method. 
C)  fair-value method. 
D)  straight-line method. 
A)  consolidation method. 
B)  equity method. 
C)  fair-value method. 
D)  straight-line method.

Question 9

On January 1, 2017, the Leaf Company acquired a 5% interest in the Trunk Corporation through the purchase of 100,000 shares of Trunk's common stock for $640,000; the investment is recorded on Leaf's books as trading securities. During 2017, Trunk paid $40,000 in dividends and reported net income of $100,000. The market price of Trunk's common stock was $6.20 per share on December 31, 2017. Leaf should report the investment in the Trunk Corporation on its December 31, 2017, balance sheet at

Accepted Answer

A)  $620,000. 
B)  $627,000. 
C)  $640,000. 
D)  $645,000. 
A)  $620,000. 
B)  $627,000. 
C)  $640,000. 
D)  $645,000.

Question 10

In a matched swap, the actual loan amount is

Accepted Answer

A)  greater than the notional amount. 
B)  less than the notional amount. 
C)  equal to the notional amount. 
D)  the only amount because there is no notional amount. 
A)  greater than the notional amount. 
B)  less than the notional amount. 
C)  equal to the notional amount. 
D)  the only amount because there is no notional amount.

Question 11

On January 1, Reagan Company purchased $15,000 of Delta Company's 12% bonds, acquired at par, as available- for-sale securities. The bonds pay interest on June 30 and December 31 each year. What amount should be recorded to the Investment in Available-for-Sale Securities account?

Accepted Answer

A)  $15,900 
B)  $14,100 
C)  $15,000 
D)  $16,800 
A)  $15,900 
B)  $14,100 
C)  $15,000 
D)  $16,800

Question 12

On January 1, 2017, Fargo Company purchased 30% of the common stock of Fairly Company for $80,000. The purchase was made at book value. Additional information for Fairly Company follows:   On Fargo's books, what would be the balance of Investment in Fairly Company at December 31, 2018?

Accepted Answer

A)  $104,000 
B)  $63,400 
C)  $84,200 
D)  $60,200 
A)  $104,000 
B)  $63,400 
C)  $84,200 
D)  $60,200

Question 13

Available-for-sale securities are recorded at cost, which equals fair value on the acquisition date.

Accepted Answer

A) True 
 B)False

Question 14

The Plutonium Company has a bond investment classified as held-to-maturity, which has a carrying value of $62,000 and a fair value of $24,000. The decline in value is considered as other than temporary. What entry should Plutonium make to record the decline in value?

Accepted Answer

The answer of The Plutonium Company has a bond investment...

Question 15

On January 1, 2017, Macie Company purchased Jefferson Company's 9% bonds with a face amount of $200,000 for $213,420 to yield 8%. The bonds mature on January 1, 2027, and Macie has both the intent and ability to hold these bonds to maturity. The bonds pay interest annually on December 31. Assuming Macie uses the effective interest method of amortizing the bond premium; interest income reported on the income statement for the year ended December 31, 2017, would be

Accepted Answer

A)  $16,000. 
B)  $17,074. 
C)  $18,000. 
D)  $18,926. 
A)  $16,000. 
B)  $17,074. 
C)  $18,000. 
D)  $18,926.

Question 16

Investments in debt securities include all of the following except

Accepted Answer

A)  U.S. treasury securities. 
B)  corporate bonds. 
C)  preferred stocks that are redeemable at the option of the issuer. 
D)  commercial paper. 
A)  U.S. treasury securities. 
B)  corporate bonds. 
C)  preferred stocks that are redeemable at the option of the issuer. 
D)  commercial paper.

Question 17

When an available-for-sale security is sold, any unrealized gains or losses would need to be reclassified from the Allowance for Change in Fair Value of Investments account in order to avoid double counting any gains or losses recorded in comprehensive income.

Accepted Answer

A) True 
 B)False

Question 18

What are the four components necessary to account for investments in trading securities?

Accepted Answer

*The investment is recorded at cost.
*Th

Question 19

In order for a derivative to be considered a hedge, it must be mostly effective in offsetting a substantial amount of risk exposure associated with changes in fair values or cash flows of the hedged item.

Accepted Answer

A) True 
 B)False

Question 20

When selecting the appropriate accounting for held-to-maturity securities, the company must

Accepted Answer

A)  never sell the equity instrument before maturity. 
B)  never sell the debt instrument before maturity. 
C)  have the intent and ability to hold the equity investment to maturity. 
D)  have the intent and ability to hold the debt instrument to maturity. 
A)  never sell the equity instrument before maturity. 
B)  never sell the debt instrument before maturity. 
C)  have the intent and ability to hold the equity investment to maturity. 
D)  have the intent and ability to hold the debt instrument to maturity.

What are the five components necessary to account for investments in available-for-sale securities?

When transferring investments between categories, unrealized holding gains for securities transferred from trading to available-for-sale

When the investor owns more than 50% of the voting common stock of the investee, the investee is considered to be under the legal control of the investor.

Waldo Company owns 30% of Randy Company. During 2017, Randy reported earnings of $650,000 and paid cash dividends of $345,000. What effect would this have on Waldo's investment account and net income?

Which of the following statements regarding available-for-sale debt investments is true?

Acquisition of greater than 20% of the outstanding stock of a company normally suggests that the investor should use the

In a matched swap, the actual loan amount is

On January 1, Reagan Company purchased $15,000 of Delta Company's 12% bonds, acquired at par, as available- for-sale securities. The bonds pay interest on June 30 and December 31 each year. What amount should be recorded to the Investment in Available-for-Sale Securities account?

On January 1, 2017, Fargo Company purchased 30% of the common stock of Fairly Company for $80,000. The purchase was made at book value. Additional information for Fairly Company follows: On Fargo's books, what would be the balance of Investment in Fairly Company at December 31, 2018?

Available-for-sale securities are recorded at cost, which equals fair value on the acquisition date.

The Plutonium Company has a bond investment classified as held-to-maturity, which has a carrying value of $62,000 and a fair value of $24,000. The decline in value is considered as other than temporary. What entry should Plutonium make to record the decline in value?

Investments in debt securities include all of the following except

When an available-for-sale security is sold, any unrealized gains or losses would need to be reclassified from the Allowance for Change in Fair Value of Investments account in order to avoid double counting any gains or losses recorded in comprehensive income.

What are the four components necessary to account for investments in trading securities?

In order for a derivative to be considered a hedge, it must be mostly effective in offsetting a substantial amount of risk exposure associated with changes in fair values or cash flows of the hedged item.

When selecting the appropriate accounting for held-to-maturity securities, the company must

The Demand for and Supply of Financial Accounting Information

Financial Reporting: Its Conceptual Framework

Review of a Company S Accounting System

The Balance Sheet and the Statement of Shareholders Equity

The Income Statement and the Statement of Cash Flows Time Value of Money Module

Cash and Receivables

Inventories: Cost Measurement and Flow Assumptions

Inventories: Special Valuation Issues

Current Liabilities and Contingent Obligations

Property, Plant, and Equipment: Acquisition and Subsequent Investments

Depreciation, Depletion, Impairment, and Disposal

Intangibles

Financing Liabilities: Bonds and Long-Term Notes Payable

Contributed Capital

Retained Earnings and Earnings Per Share

Advanced Issues in Revenue Recognition

Accounting for Income Taxes

Accounting for Post-Retirement Benefits

Accounting for Leases

The Statement of Cash Flows

Accounting for Changes and Errors

Understanding Time Value of Money Formulas and Concepts

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Exam 13: Investments and Long-Term Receivables

What are the five components necessary to account for investments in available-for-sale securities?

When transferring investments between categories, unrealized holding gains for securities transferred from trading to available-for-sale

When the investor owns more than 50% of the voting common stock of the investee, the investee is considered to be under the legal control of the investor.

Waldo Company owns 30% of Randy Company. During 2017, Randy reported earnings of $650,000 and paid cash dividends of $345,000. What effect would this have on Waldo's investment account and net income?

Which of the following statements regarding available-for-sale debt investments is true?

Acquisition of greater than 20% of the outstanding stock of a company normally suggests that the investor should use the

In a matched swap, the actual loan amount is

On January 1, Reagan Company purchased $15,000 of Delta Company's 12% bonds, acquired at par, as available- for-sale securities. The bonds pay interest on June 30 and December 31 each year. What amount should be recorded to the Investment in Available-for-Sale Securities account?

On January 1, 2017, Fargo Company purchased 30% of the common stock of Fairly Company for $80,000. The purchase was made at book value. Additional information for Fairly Company follows: On Fargo's books, what would be the balance of Investment in Fairly Company at December 31, 2018?

Available-for-sale securities are recorded at cost, which equals fair value on the acquisition date.

The Plutonium Company has a bond investment classified as held-to-maturity, which has a carrying value of $62,000 and a fair value of $24,000. The decline in value is considered as other than temporary. What entry should Plutonium make to record the decline in value?

Investments in debt securities include all of the following except

When an available-for-sale security is sold, any unrealized gains or losses would need to be reclassified from the Allowance for Change in Fair Value of Investments account in order to avoid double counting any gains or losses recorded in comprehensive income.

What are the four components necessary to account for investments in trading securities?

In order for a derivative to be considered a hedge, it must be mostly effective in offsetting a substantial amount of risk exposure associated with changes in fair values or cash flows of the hedged item.

When selecting the appropriate accounting for held-to-maturity securities, the company must

The Demand for and Supply of Financial Accounting Information

Financial Reporting: Its Conceptual Framework

Review of a Company S Accounting System

The Balance Sheet and the Statement of Shareholders Equity

The Income Statement and the Statement of Cash Flows Time Value of Money Module

Cash and Receivables

Inventories: Cost Measurement and Flow Assumptions

Inventories: Special Valuation Issues

Current Liabilities and Contingent Obligations

Property, Plant, and Equipment: Acquisition and Subsequent Investments

Depreciation, Depletion, Impairment, and Disposal

Intangibles

Financing Liabilities: Bonds and Long-Term Notes Payable

Contributed Capital

Retained Earnings and Earnings Per Share

Advanced Issues in Revenue Recognition

Accounting for Income Taxes

Accounting for Post-Retirement Benefits

Accounting for Leases

The Statement of Cash Flows

Accounting for Changes and Errors

Understanding Time Value of Money Formulas and Concepts

Filters