Question 1

Financial statements in which financial data for two or more companies are combined as a single entity are called

Accepted Answer

A)  Conventional statements 
B)  Consolidated statements 
C)  Audited statements 
D)  Constitutional statements 
A)  Conventional statements 
B)  Consolidated statements 
C)  Audited statements 
D)  Constitutional statements B

Question 2

Which of the following is NOT typically a reason why one company would invest in another company?

Accepted Answer

A)  To diversify product offerings 
B)  To ensure a supply of raw materials 
C)  To recruit key personnel 
D)  To acquire a new product 
A)  To diversify product offerings 
B)  To ensure a supply of raw materials 
C)  To recruit key personnel 
D)  To acquire a new product C

Question 3

On January 1, 2012, Young Inc. purchased $50,000 of Montana Corporation 14 percent bonds for $53,000. Interest is payable semiannually. If Young desires a 12 percent rate of return, how much premium should be amortized on June 30, 2012, using the effective-interest method?

Accepted Answer

A)  $3,180 
B)  $1,855 
C)  $320 
D)  $210 
A)  $3,180 
B)  $1,855 
C)  $320 
D)  $210 C

Question 4

Cleveland purchased $200,000 of Clair Company's 10-year, 9 percent bonds for $166,100 on July 1, 2012. Cleveland purchased the bonds to yield 12 percent interest. If Cleveland uses the effective-interest method to amortize discounts, how much interest revenue should Cleveland recognize for 2012 as a result of the investment?

Accepted Answer

A)  $14,948 
B)  $12,000 
C)  $11,534 
D)  $9,966 
A)  $14,948 
B)  $12,000 
C)  $11,534 
D)  $9,966

Question 5

Sasser Inc. had the following activities related to long-term investments during 2012:   Given this information, how much revenue should Sasser report in 2012 for its investment in Trudie stock?

Accepted Answer

A)  $28,800 
B)  $111,200 
C)  $140,000 
D)  $168,800 
A)  $28,800 
B)  $111,200 
C)  $140,000 
D)  $168,800

Question 6

On January 2, 2012, Forsyth Co. acquired 4,000 shares of Hiram Company common stock for $44,000 and classified these shares as available-for-sale securities. During 2012, Forsyth received $12,000 of cash dividends. The fair value of Hiram's stock on December 31, 2012, was $14 per share. Forsyth should report the following amount in 2012 related to Hiram Co.

Accepted Answer

A)  Revenue of $12,000 
B)  Revenue of $24,000 
C)  A $56,000 decrease in the investment account 
D)  A $56,000 increase in the investment account 
A)  Revenue of $12,000 
B)  Revenue of $24,000 
C)  A $56,000 decrease in the investment account 
D)  A $56,000 increase in the investment account

Question 7

Which type of securities are purchased with the intent of selling them in the near future?

Accepted Answer

A)  Marketable equity securities 
B)  Available-for-sale securities 
C)  Trading securities 
D)  Held-to-maturity securities 
A)  Marketable equity securities 
B)  Available-for-sale securities 
C)  Trading securities 
D)  Held-to-maturity securities

Question 8

If a trading security is sold, the investment account is

Accepted Answer

A)  Debited for the market value of the security 
B)  Credited for the cost of the security 
C)  Credited for the market value of the security 
D)  Debited for the cost of the security 
A)  Debited for the market value of the security 
B)  Credited for the cost of the security 
C)  Credited for the market value of the security 
D)  Debited for the cost of the security

Question 9

On January 1, 2012, Roswell purchased ten $1,000, 12 percent, 10-year bonds issued by E. T. Corporation at 101. The bonds pay interest on June 30 and December 31. When the bonds showed an unamortized balance of $10,070, Roswell sold them for $10,050. How much gain or loss should Roswell record on the sale?

Accepted Answer

A)  $100 gain 
B)  $50 gain 
C)  $30 loss 
D)  $20 loss 
A)  $100 gain 
B)  $50 gain 
C)  $30 loss 
D)  $20 loss

Question 10

Dixie Corporation recorded the following transactions for its long-term investments during 2012:
  
Give the journal entries necessary to account for the investment in Enigma Corporation during 2012.

Accepted Answer

Give the journal entries neces

Question 11

During 2012, Walker Corp. acquired 500 shares of Wychek stock at $30 per share. Walker accounted for the stock as trading securities. The market price per share of Wychek's stock as of December 31, 2012 and 2013, is $22.50 and $37.50, respectively. How much unrealized gain or loss on long-term investments should Walker report on its December 31, 2012, income statement?

Accepted Answer

A)  $3,750 unrealized loss 
B)  $11,250 unrealized loss 
C)  $1,875 unrealized gain 
D)  No unrealized gain or loss 
A)  $3,750 unrealized loss 
B)  $11,250 unrealized loss 
C)  $1,875 unrealized gain 
D)  No unrealized gain or loss

Question 12

If a trading security is bought, the investment account is

Accepted Answer

A)  Debited for the cost of the security NOT including any extra expenditures required in making the purchase 
B)  Credited for the cost of the security NOT including any extra expenditures required in making the purchase 
C)  Credited for the cost of the security including any extra expenditures required in making the purchase 
D)  Debited for the cost of the security including any extra expenditures required in making the purchase 
A)  Debited for the cost of the security NOT including any extra expenditures required in making the purchase 
B)  Credited for the cost of the security NOT including any extra expenditures required in making the purchase 
C)  Credited for the cost of the security including any extra expenditures required in making the purchase 
D)  Debited for the cost of the security including any extra expenditures required in making the purchase

Question 13

Augsburg Corporation recorded the following transactions for its long-term investments during 2012:
 
- Refer to Exhibit 12-1. Given the information above, on May 22, Augsburg should

Accepted Answer

A)  Credit Investment in Trading Securities for $55,000 
B)  Debit Investment in Trading Securities for $56,000 
C)  Credit Cash for $56,000 
D)  Debit Cash for $55,000 
A)  Credit Investment in Trading Securities for $55,000 
B)  Debit Investment in Trading Securities for $56,000 
C)  Credit Cash for $56,000 
D)  Debit Cash for $55,000

Question 14

Changes in fair value of securities are reported in the stockholders' equity section of the balance sheet for which type of securities?

Accepted Answer

A)  Marketable equity securities 
B)  Available-for-sale securities 
C)  Trading securities 
D)  Held-to-maturity securities 
A)  Marketable equity securities 
B)  Available-for-sale securities 
C)  Trading securities 
D)  Held-to-maturity securities

Question 15

During 2012, Walker Corporation acquired 500 shares of Wychek stock at $30 per share. Walker Corporation accounted for the stock as available-for-sale securities. All declines in market value are considered to be temporary. The market price per share of Wychek's stock as of December 31, 2012 and 2013, is $22.50 and $37.50, respectively. Given this information, the correct adjusting entry by walker at December 31, 2013, would include a credit to

Accepted Answer

A)  Market Adjustment - Available-for-Sale Securities of $3,750 
B)  Unrealized Increase in Value of Available-for-Sale Securities - Equity of $7,500 
C)  Market Adjustment - Available-for-Sale Securities of $7,500 
D)  Unrealized Increase in Value of Available-for-Sale Securities - Equity of $3,750 
A)  Market Adjustment - Available-for-Sale Securities of $3,750 
B)  Unrealized Increase in Value of Available-for-Sale Securities - Equity of $7,500 
C)  Market Adjustment - Available-for-Sale Securities of $7,500 
D)  Unrealized Increase in Value of Available-for-Sale Securities - Equity of $3,750

Question 16

On April 1, 2012, Bering Inc. purchased $20,000 of Warner Corporation's 10-year, 8 percent bonds at par plus accrued interest. Interest is payable on June 30 and December 31. How much interest revenue should Bering report on its December 31, 2012, income statement as a result of this investment?

Accepted Answer

A)  $1,248 
B)  $1,200 
C)  $824 
D)  $800 
A)  $1,248 
B)  $1,200 
C)  $824 
D)  $800

Question 17

Rouen Corporation recorded the following transactions for its short-term investments during 2012:   Given this information, the adjusting entry that Rouen needs to make on December 31 is

Accepted Answer

A)  
  
B) 
  
C) 
  
D)  
  
A)  
  
B) 
  
C) 
  
D)

Question 18

On January 1, 2012, Shane Corporation acquired 30 percent (13,000 shares) of Matthews Services Inc. common stock for $1,300,000 as a long-term investment. Data from Matthews's 2012 financial statements include the following:
  
The market value of Matthews Services Inc. common stock on December 31, 2012, was $98 per share. Shane does not have any other investments in securities.
Prepare the necessary journal entries for Shane's investment in Matthews Services Inc. common stock assuming Shane uses the following methods to account for its investment in Matthews Services:

Accepted Answer

The market value of Matthews Services In

Question 19

When bonds that are held as a long-term investment are sold before their maturity dates, the difference between the sales price and the balance in the Investment account is

Accepted Answer

A)  Debited or credited to Capital Stock 
B)  Recorded as a gain or loss on the sale 
C)  Recorded directly to Retained Earnings 
D)  Recorded as interest revenue or expense 
A)  Debited or credited to Capital Stock 
B)  Recorded as a gain or loss on the sale 
C)  Recorded directly to Retained Earnings 
D)  Recorded as interest revenue or expense

Question 20

Which of the following is NOT typically a reason why one company would invest in another company?

Accepted Answer

A)  To earn higher returns than those offered by banks 
B)  To make a safer investment than those offered by banks 
C)  To influence the board of directors 
D)  To make use of seasonal increases in cash flows 
A)  To earn higher returns than those offered by banks 
B)  To make a safer investment than those offered by banks 
C)  To influence the board of directors 
D)  To make use of seasonal increases in cash flows

Financial statements in which financial data for two or more companies are combined as a single entity are called

Which of the following is NOT typically a reason why one company would invest in another company?

On January 1, 2012, Young Inc. purchased $50,000 of Montana Corporation 14 percent bonds for $53,000. Interest is payable semiannually. If Young desires a 12 percent rate of return, how much premium should be amortized on June 30, 2012, using the effective-interest method?

Sasser Inc. had the following activities related to long-term investments during 2012: Given this information, how much revenue should Sasser report in 2012 for its investment in Trudie stock?

Which type of securities are purchased with the intent of selling them in the near future?

If a trading security is sold, the investment account is

Dixie Corporation recorded the following transactions for its long-term investments during 2012: Give the journal entries necessary to account for the investment in Enigma Corporation during 2012.

If a trading security is bought, the investment account is

Augsburg Corporation recorded the following transactions for its long-term investments during 2012: - Refer to Exhibit 12-1. Given the information above, on May 22, Augsburg should

Changes in fair value of securities are reported in the stockholders' equity section of the balance sheet for which type of securities?

On April 1, 2012, Bering Inc. purchased $20,000 of Warner Corporation's 10-year, 8 percent bonds at par plus accrued interest. Interest is payable on June 30 and December 31. How much interest revenue should Bering report on its December 31, 2012, income statement as a result of this investment?

Rouen Corporation recorded the following transactions for its short-term investments during 2012: Given this information, the adjusting entry that Rouen needs to make on December 31 is

When bonds that are held as a long-term investment are sold before their maturity dates, the difference between the sales price and the balance in the Investment account is

Which of the following is NOT typically a reason why one company would invest in another company?

Accounting Information: Users and Uses

Financial Statements: An Overview

The Accounting Cycle: The Mechanics of Accounting

Completing the Accounting Cycle

Internal Controls: Ensuring the Integrity of Financial Information

Receivables: Selling a Product or a Service

Inventory and the Cost of Sales

Completing the Operating Cycle

Investments: Property, Plant, and Equipment and Intangible Assets

Financing: Long-Term Liabilities

Financing: Equity

Statement of Cash Flows

Analyzing Financial Statements

Management Accounting and Cost Concepts

Cost Flows and Business Organizations

Activity-Based Costing

Budgeting and Control

Controlling Cost and Profit

Inventory Management and Variable and Absorption Costing

Cost Behavior and Decisions Using C-V-P Analysis

Relevant Information and Decisions

Capital Investment Decisions

New Measures of Performance

Filters

Exam 12: Investments: Debt and Equity Securities

Financial statements in which financial data for two or more companies are combined as a single entity are called

Which of the following is NOT typically a reason why one company would invest in another company?

On January 1, 2012, Young Inc. purchased $50,000 of Montana Corporation 14 percent bonds for $53,000. Interest is payable semiannually. If Young desires a 12 percent rate of return, how much premium should be amortized on June 30, 2012, using the effective-interest method?

Sasser Inc. had the following activities related to long-term investments during 2012: Given this information, how much revenue should Sasser report in 2012 for its investment in Trudie stock?

Which type of securities are purchased with the intent of selling them in the near future?

If a trading security is sold, the investment account is

Dixie Corporation recorded the following transactions for its long-term investments during 2012: Give the journal entries necessary to account for the investment in Enigma Corporation during 2012.

If a trading security is bought, the investment account is

Augsburg Corporation recorded the following transactions for its long-term investments during 2012: - Refer to Exhibit 12-1. Given the information above, on May 22, Augsburg should

Changes in fair value of securities are reported in the stockholders' equity section of the balance sheet for which type of securities?

On April 1, 2012, Bering Inc. purchased $20,000 of Warner Corporation's 10-year, 8 percent bonds at par plus accrued interest. Interest is payable on June 30 and December 31. How much interest revenue should Bering report on its December 31, 2012, income statement as a result of this investment?

Rouen Corporation recorded the following transactions for its short-term investments during 2012: Given this information, the adjusting entry that Rouen needs to make on December 31 is

When bonds that are held as a long-term investment are sold before their maturity dates, the difference between the sales price and the balance in the Investment account is

Which of the following is NOT typically a reason why one company would invest in another company?

Accounting Information: Users and Uses

Financial Statements: An Overview

The Accounting Cycle: The Mechanics of Accounting

Completing the Accounting Cycle

Internal Controls: Ensuring the Integrity of Financial Information

Receivables: Selling a Product or a Service

Inventory and the Cost of Sales

Completing the Operating Cycle

Investments: Property, Plant, and Equipment and Intangible Assets

Financing: Long-Term Liabilities

Financing: Equity

Statement of Cash Flows

Analyzing Financial Statements

Management Accounting and Cost Concepts

Cost Flows and Business Organizations

Activity-Based Costing

Budgeting and Control

Controlling Cost and Profit

Inventory Management and Variable and Absorption Costing

Cost Behavior and Decisions Using C-V-P Analysis

Relevant Information and Decisions

Capital Investment Decisions

New Measures of Performance

Filters