Question 1

A security is a:

Accepted Answer

A) regulation dealing with the transactions of investments. 
B) system aimed at protecting the interests of the market participants. 
C) share or interest representing financial value. 
D) process related to the valuation of a financial instrument. 
A) regulation dealing with the transactions of investments. 
B) system aimed at protecting the interests of the market participants. 
C) share or interest representing financial value. 
D) process related to the valuation of a financial instrument.

Question 2

Which of the following securities pay a dividend?

Accepted Answer

A) corporate bonds 
B) common stocks 
C) debt securities 
D) U.S. Government bonds 
A) corporate bonds 
B) common stocks 
C) debt securities 
D) U.S. Government bonds

Question 3

Equity securities in which the investor owns less than 20% ownership in the voting stock of the investee can be:

Accepted Answer

A) significant interest investments. 
B) controlling interest investments. 
C) held-to-maturity investments. 
D) either trading investments or available-for-sale investments. 
A) significant interest investments. 
B) controlling interest investments. 
C) held-to-maturity investments. 
D) either trading investments or available-for-sale investments.

Question 4

The Long-term Investments account is debited for the receipt of a dividend on an equity-method investment because the dividend increases the investee's equity.

Accepted Answer

A) True 
 B)False

Question 5

Under the equity method, the dividend revenue from a long-term investment-which has an ownership of 20% to 50%-the dividend is treated as a:

Accepted Answer

A) debit to revenue from investments. 
B) dividend revenue. 
C) return of capital. 
D) credit to current assets. 
A) debit to revenue from investments. 
B) dividend revenue. 
C) return of capital. 
D) credit to current assets.

Question 6

________ are equity securities in which the investor owns 20% or more, but less than 50%, of the investee's voting stock.

Accepted Answer

A) Held-to-maturity investments 
B) Significant interest investments 
C) Controlling interest investments 
D) Available-for-sale investments 
A) Held-to-maturity investments 
B) Significant interest investments 
C) Controlling interest investments 
D) Available-for-sale investments

Question 7

________ are categorized as either current assets or long-term assets on the balance sheet, depending on the maturity date.

Accepted Answer

A) Equity investments 
B) Matured investments 
C) Trading investments 
D) Held-to-maturity investments 
A) Equity investments 
B) Matured investments 
C) Trading investments 
D) Held-to-maturity investments

Question 8

Which of the following is classified as a current asset in the balance sheet?

Accepted Answer

A) marketable securities 
B) real estate investments 
C) fixed assets 
D) equipment 
A) marketable securities 
B) real estate investments 
C) fixed assets 
D) equipment

Question 9

Greg Financial Services invested $15,000 to acquire 3,750 shares of Mitt Investments on March 15, 2012. This investment represents less than 20% of the investee's voting stock. On May 7, 2016, Greg Financial Services sells 1,750 shares for $12,250. Which of the following will be the correct journal entry for this transaction?

Accepted Answer

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

Question 10

Which of the following is included comprehensive income?

Accepted Answer

A) owners investments 
B) purchase of capital assets 
C) preferred dividends 
D) deferred gains or losses from derivatives 
A) owners investments 
B) purchase of capital assets 
C) preferred dividends 
D) deferred gains or losses from derivatives

Question 11

Maurice Corporation invested $100,000 to acquire 20,000 shares of Delta Technologies on March 1, 2015. On July 2, 2015, Delta pays a cash dividend of $0.25 per share. The investment is classified as an available-for-sale investment. Which of the following is the correct journal entry to record the transaction on July 2, 2015?

Accepted Answer

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

Question 12

When a firm collects the face value of a bond investment at maturity, the total assets increase.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following accounting methods is used to account for controlling interest investments?

Accepted Answer

A) equity method 
B) acquisition method 
C) consolidation method 
D) discounted cash flow method 
A) equity method 
B) acquisition method 
C) consolidation method 
D) discounted cash flow method

Question 14

When a company makes investments in equity securities with less than 20% ownership using idle cash, its total equity will increase.

Accepted Answer

A) True 
 B)False

Question 15

If a debt security is purchased at a discount, the discount must be amortized when the interest revenue is earned.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following is true of available-for-sale (AFS)investments?

Accepted Answer

A) They are always reported as current assets in the balance sheet. 
B) They are always reported as long-term assets in the balance sheet. 
C) They are reported as current assets on the balance sheet only if the business expects to sell them within the first two years. 
D) They are reported as long-term assets on the balance sheet only if they are planned to be held for longer than a year. 
A) They are always reported as current assets in the balance sheet. 
B) They are always reported as long-term assets in the balance sheet. 
C) They are reported as current assets on the balance sheet only if the business expects to sell them within the first two years. 
D) They are reported as long-term assets on the balance sheet only if they are planned to be held for longer than a year.

Question 17

Investment income may come from interest earned from debt investments, dividends earned from stock investments, and/or increases in the market value of the security.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following is true of trading investments?

Accepted Answer

A) They are held for more than two years. 
B) They are always recorded at the current market value. 
C) They must be adjusted and reported at fair value at the end of each period. 
D) They are always recorded at the historical cost. 
A) They are held for more than two years. 
B) They are always recorded at the current market value. 
C) They must be adjusted and reported at fair value at the end of each period. 
D) They are always recorded at the historical cost.

Question 19

If there is an unrealized holding gain on available-for-sale investments, it is reported:

Accepted Answer

A) as an adjustment to stockholders' equity on the balance sheet. 
B) as a debit to the long-term assets. 
C) as a separate line item on the income statement. 
D) as a credit to the short-term assets. 
A) as an adjustment to stockholders' equity on the balance sheet. 
B) as a debit to the long-term assets. 
C) as a separate line item on the income statement. 
D) as a credit to the short-term assets.

Question 20

When a company receives interest revenue on a bond which has a maturity of five years:

Accepted Answer

A) long-term assets decrease. 
B) long-term assets increase. 
C) equity increases. 
D) current assets decrease. 
A) long-term assets decrease. 
B) long-term assets increase. 
C) equity increases. 
D) current assets decrease.

Exam 15: Investments

A security is a:

Which of the following securities pay a dividend?

Equity securities in which the investor owns less than 20% ownership in the voting stock of the investee can be:

The Long-term Investments account is debited for the receipt of a dividend on an equity-method investment because the dividend increases the investee's equity.

Under the equity method, the dividend revenue from a long-term investment-which has an ownership of 20% to 50%-the dividend is treated as a:

________ are equity securities in which the investor owns 20% or more, but less than 50%, of the investee's voting stock.

________ are categorized as either current assets or long-term assets on the balance sheet, depending on the maturity date.

Which of the following is classified as a current asset in the balance sheet?

Which of the following is included comprehensive income?

When a firm collects the face value of a bond investment at maturity, the total assets increase.

Which of the following accounting methods is used to account for controlling interest investments?

When a company makes investments in equity securities with less than 20% ownership using idle cash, its total equity will increase.

If a debt security is purchased at a discount, the discount must be amortized when the interest revenue is earned.

Which of the following is true of available-for-sale (AFS)investments?

Investment income may come from interest earned from debt investments, dividends earned from stock investments, and/or increases in the market value of the security.

Which of the following is true of trading investments?

If there is an unrealized holding gain on available-for-sale investments, it is reported:

When a company receives interest revenue on a bond which has a maturity of five years:

Accounting and the Business Environment

Recording Business Transactions

The Adjusting Process

Completing the Accounting Cycle

Merchandising Operations

Merchandise Inventory

Accounting Information Systems

Internal Control and Cash

Receivables

Plant Assets, Natural Resources, and Intangibles

Current Liabilities and Payroll

Partnerships

Corporations

Long-Term Liabilities

The Statement of Cash Flows

Financial Statement Analysis

Introduction to Managerial Accounting

Job Order Costing

Process Costing

Cost-Volume-Profit Analysis

Master Budgets

Flexible Budgets and Standard Cost Systems

Cost Allocation and Responsibility Accounting

Short-Term Business Decisions

Capital Investment Decisions

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