Question 1

All of the following are indications of significant influence over another company except

Accepted Answer

A)  exchange of managerial personnel. 
B)  representation on the board of directors. 
C)  technological dependency between the two companies. 
D)  ownership of all of the other company's debt securities. 
A)  exchange of managerial personnel. 
B)  representation on the board of directors. 
C)  technological dependency between the two companies. 
D)  ownership of all of the other company's debt securities.

Question 2

A noninfluential and noncontrolling investment is defined as ownership of less than 10 percent of the stock of another company.

Accepted Answer

A) True 
 B)False

Question 3

The financial information of a foreign subsidiary should be included in the consolidated statements of the parent.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following statements is true about investments categorized as trading securities?

Accepted Answer

A)  They are valued on the balance sheet at cost. 
B)  They can consist of debt,but not equity,securities. 
C)  They are purchased to be held to maturity. 
D)  Changes in market value are reflected in net income. 
A)  They are valued on the balance sheet at cost. 
B)  They can consist of debt,but not equity,securities. 
C)  They are purchased to be held to maturity. 
D)  Changes in market value are reflected in net income.

Question 5

Investments with a maturity of less than ninety days are generally classified as cash equivalents.

Accepted Answer

A) True 
 B)False

Question 6

Trading securities are valued on the balance sheet at market value.

Accepted Answer

A) True 
 B)False

Question 7

A controlling investment is defined as ownership of 100 percent of the stock of another company.

Accepted Answer

A) True 
 B)False

Question 8

Burr Company purchased 70 percent of Oswald Company for $71,400.Complete the following work sheet by providing the figures for the Eliminations columns and the Consolidated Balance Sheet column.

Accepted Answer

The answer of Burr Company purchased 70 percent of Oswald...

Question 9

Roane Company often invests in the stock of other companies for long-term purposes.None of the stocks currently held by Roane qualify for use of the equity method.The following amounts relate to Roane's long-term portfolio of marketable equity securities. $\begin{array}{lrr} 
& \text { Dec. 31, 2012 } & \text { Dec. 31, 2013 } \
\text { Total cost } & \$ 560,000 & \$ 660,000 \
\text { Total market } & 460,000 & 584,000
\end{array}$ Based on the above information,the adjusting entry on December 31,2013 is:

Accepted Answer

A)  Allowance to Adjust Long Term Investment to Market 76,000
Unrealized Loss on Long-Term Investments 76,000 
B)  Allowance to Adjust Long Term Investment to Market 24,000
Unrealized Loss on Long-Term Investments 24,000 
C)  Unrealized Loss on Long-Term Investments 76,000
Allowance to Adjust Long Term Investment to Market 76,000 
D)  Unrealized Loss on Long-Term Investments 24,000
Allowance to Adjust Long Term Investment to Market 24,000 
A)  Allowance to Adjust Long Term Investment to Market 76,000
Unrealized Loss on Long-Term Investments 76,000 
B)  Allowance to Adjust Long Term Investment to Market 24,000
Unrealized Loss on Long-Term Investments 24,000 
C)  Unrealized Loss on Long-Term Investments 76,000
Allowance to Adjust Long Term Investment to Market 76,000 
D)  Unrealized Loss on Long-Term Investments 24,000
Allowance to Adjust Long Term Investment to Market 24,000

Question 10

Match each definition with the correct term below.
-Reporting currency

Accepted Answer

A) Debt or equity securities bought and held principally for the purpose of being sold in the near term. 
B) The method of accounting for the ownership of more than 20 percent of another company's voting stock. 
C) Debt or equity securities that do not meet the criteria for either trading or held-to-maturity securities. 
D) A single set of financial statements for both the parent company and the subsidiary company. 
E) Companies that have expanded by establishing or buying foreign subsidiaries.
F)The method of recording available-for-sale securities that initially records securities at cost and thereafter periodically adjusts for changes in market value by using an allowance account.
G)The currency in which the consolidated financial statements are presented.
H)Debt securities that management intends to hold until their maturity date.
I)The investing company in a parent-subsidiary relationship.
J)Making use of inside information for personal gain. 
A) Debt or equity securities bought and held principally for the purpose of being sold in the near term. 
B) The method of accounting for the ownership of more than 20 percent of another company's voting stock. 
C) Debt or equity securities that do not meet the criteria for either trading or held-to-maturity securities. 
D) A single set of financial statements for both the parent company and the subsidiary company. 
E) Companies that have expanded by establishing or buying foreign subsidiaries.
F)The method of recording available-for-sale securities that initially records securities at cost and thereafter periodically adjusts for changes in market value by using an allowance account.
G)The currency in which the consolidated financial statements are presented.
H)Debt securities that management intends to hold until their maturity date.
I)The investing company in a parent-subsidiary relationship.
J)Making use of inside information for personal gain.

Question 11

The following transactions and information pertain to Langston Corporation for 2013.Prepare entries in journal form,without explanations,to record these transactions.
 $\begin{array}{lrl}
\text { May } & 1 & \begin{array}{l}
\text { Purchased 1,000 shares of Granger Corporation's common stock at } \$ 180 \text { per } \
\text { share (representing 5 percent of Granger's total outstanding stock) as a } \
\text { long-term investment. }
\end{array} \
\text { Sept. } & 1 & \text { Received a cash dividend of } \$ 6.00 \text { per share from Granger. } \
\text { Dec. } & 31 & \text { End of Langston's accounting year. Granger's market price per share is } \$ 168 .
\end{array}$

Accepted Answer

The answer of The following transactions and information pertain to...

Question 12

Amelia Corporation purchases 60 percent of the voting stock of Bath Corporation for $96,000.Bath has common stock of $50,000 and retained earnings of $70,000.Based solely on the above facts,the consolidated balance sheet would include

Accepted Answer

A)  goodwill of $8,400. 
B)  investment in Bath of $96,000. 
C)  minority interest of $72,000. 
D)  minority interest of $48,000. 
A)  goodwill of $8,400. 
B)  investment in Bath of $96,000. 
C)  minority interest of $72,000. 
D)  minority interest of $48,000.

Question 13

When a corporation owns more than 50 percent of the voting stock in another corporation,it usually should report its investment by using (the)

Accepted Answer

A)  equity method. 
B)  cost adjusted to market method. 
C)  book value method. 
D)  consolidated financial statements. 
A)  equity method. 
B)  cost adjusted to market method. 
C)  book value method. 
D)  consolidated financial statements.

Question 14

Match each definition with the correct term below.
-Multinational or transnational companies

Accepted Answer

A) Debt or equity securities bought and held principally for the purpose of being sold in the near term. 
B) The method of accounting for the ownership of more than 20 percent of another company's voting stock. 
C) Debt or equity securities that do not meet the criteria for either trading or held-to-maturity securities. 
D) A single set of financial statements for both the parent company and the subsidiary company. 
E) Companies that have expanded by establishing or buying foreign subsidiaries.
F)The method of recording available-for-sale securities that initially records securities at cost and thereafter periodically adjusts for changes in market value by using an allowance account.
G)The currency in which the consolidated financial statements are presented.
H)Debt securities that management intends to hold until their maturity date.
I)The investing company in a parent-subsidiary relationship.
J)Making use of inside information for personal gain. 
A) Debt or equity securities bought and held principally for the purpose of being sold in the near term. 
B) The method of accounting for the ownership of more than 20 percent of another company's voting stock. 
C) Debt or equity securities that do not meet the criteria for either trading or held-to-maturity securities. 
D) A single set of financial statements for both the parent company and the subsidiary company. 
E) Companies that have expanded by establishing or buying foreign subsidiaries.
F)The method of recording available-for-sale securities that initially records securities at cost and thereafter periodically adjusts for changes in market value by using an allowance account.
G)The currency in which the consolidated financial statements are presented.
H)Debt securities that management intends to hold until their maturity date.
I)The investing company in a parent-subsidiary relationship.
J)Making use of inside information for personal gain.

Question 15

The following transactions and information pertain to Lazar Corporation for 2012 and 2013.
   Prepare entries in journal form,without explanations,to record the above.Lazar's accounting year ends December 31.

Accepted Answer

The answer of The following transactions and information pertain to...

Question 16

When the cost of available-for-sale securities exceeds market value,the Allowance to Adjust Long-Term Investments to Market decreases Long-Term Investments on the balance sheet.

Accepted Answer

A) True 
 B)False

Question 17

When a company receives a dividend from its investee,what will be the effect on the financial statements of the investing company if it uses the equity method?

Accepted Answer

There will be no effect on the

Question 18

Tyler Corporation holds 1,900 shares of Tucker Corporation common stock as its sole long-term investment.Tyler does not have significant influence or control over Tucker.The stock was purchased during 2012 at a price of $120 per share.On December 31,2012,the market price of Tucker's stock was $108 per share.On December 31,2013,the market price of Tucker's stock was $136 per share.What should be reported as the carrying value of the investment on Tyler's December 31,2012,and December 31,2013,balance sheets,respectively?

Accepted Answer

A)  $228,000; $228,000 
B)  $205,200; $228,000 
C)  $205,200; $205,200 
D)  $205,200; $258,400 
A)  $228,000; $228,000 
B)  $205,200; $228,000 
C)  $205,200; $205,200 
D)  $205,200; $258,400

Question 19

Bland Corporation purchases 75 percent of the stock of Carroll Corporation for $726,000.Sikora has contributed capital of $400,000 and retained earnings of $568,000.The consolidated financial statements will contain

Accepted Answer

A)  minority interest and negative goodwill. 
B)  neither minority interest nor goodwill. 
C)  goodwill but not minority interest. 
D)  minority interest but not goodwill. 
A)  minority interest and negative goodwill. 
B)  neither minority interest nor goodwill. 
C)  goodwill but not minority interest. 
D)  minority interest but not goodwill.

Question 20

The cash amounts of purchases and sales of investments appear in which section of the statement of cash flows?

Accepted Answer

A)  Operating activities 
B)  Investing activities 
C)  Financing activities 
D)  Noncash investing and financing activities 
A)  Operating activities 
B)  Investing activities 
C)  Financing activities 
D)  Noncash investing and financing activities

All of the following are indications of significant influence over another company except

A noninfluential and noncontrolling investment is defined as ownership of less than 10 percent of the stock of another company.

The financial information of a foreign subsidiary should be included in the consolidated statements of the parent.

Which of the following statements is true about investments categorized as trading securities?

Investments with a maturity of less than ninety days are generally classified as cash equivalents.

Trading securities are valued on the balance sheet at market value.

A controlling investment is defined as ownership of 100 percent of the stock of another company.

Burr Company purchased 70 percent of Oswald Company for $71,400.Complete the following work sheet by providing the figures for the Eliminations columns and the Consolidated Balance Sheet column.

Match each definition with the correct term below. -Reporting currency

Amelia Corporation purchases 60 percent of the voting stock of Bath Corporation for $96,000.Bath has common stock of $50,000 and retained earnings of $70,000.Based solely on the above facts,the consolidated balance sheet would include

When a corporation owns more than 50 percent of the voting stock in another corporation,it usually should report its investment by using (the)

Match each definition with the correct term below. -Multinational or transnational companies

The following transactions and information pertain to Lazar Corporation for 2012 and 2013. Prepare entries in journal form,without explanations,to record the above.Lazar's accounting year ends December 31.

When the cost of available-for-sale securities exceeds market value,the Allowance to Adjust Long-Term Investments to Market decreases Long-Term Investments on the balance sheet.

When a company receives a dividend from its investee,what will be the effect on the financial statements of the investing company if it uses the equity method?

Bland Corporation purchases 75 percent of the stock of Carroll Corporation for $726,000.Sikora has contributed capital of $400,000 and retained earnings of $568,000.The consolidated financial statements will contain

The cash amounts of purchases and sales of investments appear in which section of the statement of cash flows?

Uses of Accounting Information and the Financial Statements

Analyzing Business Transactions

Measuring Business Income

Supplement - Closing Entries and the Work Sheet

Financial Reporting and Analysis

The Operating Cycle and Merchandising Operations

Inventories

Cash and Receivables

Current Liabilities and Fair Value Accounting

Long Term Assets

Long-Term Liabilities

Stockholders Equity

The Statement of Cash Flows

Financial Performance Measurement

Filters

Exam 15: Investments

All of the following are indications of significant influence over another company except

A noninfluential and noncontrolling investment is defined as ownership of less than 10 percent of the stock of another company.

The financial information of a foreign subsidiary should be included in the consolidated statements of the parent.

Which of the following statements is true about investments categorized as trading securities?

Investments with a maturity of less than ninety days are generally classified as cash equivalents.

Trading securities are valued on the balance sheet at market value.

A controlling investment is defined as ownership of 100 percent of the stock of another company.

Burr Company purchased 70 percent of Oswald Company for $71,400.Complete the following work sheet by providing the figures for the Eliminations columns and the Consolidated Balance Sheet column.

Match each definition with the correct term below. -Reporting currency

Amelia Corporation purchases 60 percent of the voting stock of Bath Corporation for $96,000.Bath has common stock of $50,000 and retained earnings of $70,000.Based solely on the above facts,the consolidated balance sheet would include

When a corporation owns more than 50 percent of the voting stock in another corporation,it usually should report its investment by using (the)

Match each definition with the correct term below. -Multinational or transnational companies

The following transactions and information pertain to Lazar Corporation for 2012 and 2013. Prepare entries in journal form,without explanations,to record the above.Lazar's accounting year ends December 31.

When the cost of available-for-sale securities exceeds market value,the Allowance to Adjust Long-Term Investments to Market decreases Long-Term Investments on the balance sheet.

When a company receives a dividend from its investee,what will be the effect on the financial statements of the investing company if it uses the equity method?

Bland Corporation purchases 75 percent of the stock of Carroll Corporation for $726,000.Sikora has contributed capital of $400,000 and retained earnings of $568,000.The consolidated financial statements will contain

The cash amounts of purchases and sales of investments appear in which section of the statement of cash flows?

Uses of Accounting Information and the Financial Statements

Analyzing Business Transactions

Measuring Business Income

Supplement - Closing Entries and the Work Sheet

Financial Reporting and Analysis

The Operating Cycle and Merchandising Operations

Inventories

Cash and Receivables

Current Liabilities and Fair Value Accounting

Long Term Assets

Long-Term Liabilities

Stockholders Equity

The Statement of Cash Flows

Financial Performance Measurement

Filters