Question 1

Debt securities do not include U.S. government securities.

Accepted Answer

A) True 
 B)False

Question 2

Trading investments:

Accepted Answer

A) include debt and equity securities that the investor expects to hold longer than one year or debt or equity securities that are not readily marketable. 
B) are investments in debt and equity securities that are highly illiquid and that the investor intends to keep till their maturity. 
C) are investments in debt securities, the investor intends to hold until maturity. 
D) are investments in debt securities or equity securities in which the investor holds less than 20% of the voting stock and that the investor plans to sell in the very near future. 
A) include debt and equity securities that the investor expects to hold longer than one year or debt or equity securities that are not readily marketable. 
B) are investments in debt and equity securities that are highly illiquid and that the investor intends to keep till their maturity. 
C) are investments in debt securities, the investor intends to hold until maturity. 
D) are investments in debt securities or equity securities in which the investor holds less than 20% of the voting stock and that the investor plans to sell in the very near future.

Question 3

At the maturity of a bond investment, the journal entry has:

Accepted Answer

A) a debit to Cash and a credit to the Short-term Investments account. 
B) a debit to the Short-term Investments account and a credit to Cash. 
C) a debit to the Interest Revenue and a credit to Cash. 
D) a debit to Cash and a credit to Interest Revenue. 
A) a debit to Cash and a credit to the Short-term Investments account. 
B) a debit to the Short-term Investments account and a credit to Cash. 
C) a debit to the Interest Revenue and a credit to Cash. 
D) a debit to Cash and a credit to Interest Revenue.

Question 4

A security is a share or interest representing financial value.

Accepted Answer

A) True 
 B)False

Question 5

An equity security does not represent an ownership interest in a corporation, although it pays dividends.

Accepted Answer

A) True 
 B)False

Question 6

An equity security represents a credit relationship with another company or governmental entity.

Accepted Answer

A) True 
 B)False

Question 7

Beige Corporation pays $500,000 to acquire 40% of the equity securities of Olive Technologies on May 5, 2015. This investment will be classified as a(n):

Accepted Answer

A) trading investment. 
B) available for sale. 
C) significant interest investment. 
D) held-to-maturity. 
A) trading investment. 
B) available for sale. 
C) significant interest investment. 
D) held-to-maturity.

Question 8

Which of the following is true of the accounting entries for debt securities?

Accepted Answer

A) The receipt of interest revenue is recorded with a debit to Interest Revenue and a credit to Cash. 
B) Investments in debt securities are recorded at cost, including any brokerage fees paid. 
C) The receipt of interest revenue is recorded with a debit to Cash and a credit to Long-term Securities-Held-to-Maturity. 
D) Debt securities disposed of at maturity are recorded with a debit to the Short-term or Long-term Investments account and a credit to Cash. 
A) The receipt of interest revenue is recorded with a debit to Interest Revenue and a credit to Cash. 
B) Investments in debt securities are recorded at cost, including any brokerage fees paid. 
C) The receipt of interest revenue is recorded with a debit to Cash and a credit to Long-term Securities-Held-to-Maturity. 
D) Debt securities disposed of at maturity are recorded with a debit to the Short-term or Long-term Investments account and a credit to Cash.

Question 9

Companies invest in trading investments with the intent of:

Accepted Answer

A) increasing the amount of long-term assets. 
B) gaining the controlling rights of the investee. 
C) holding the investment till maturity. 
D) generating a profit on a quick sale. 
A) increasing the amount of long-term assets. 
B) gaining the controlling rights of the investee. 
C) holding the investment till maturity. 
D) generating a profit on a quick sale.

Question 10

The unrealized holding gains and losses on available-for-sale investments are recorded as an adjustment to the Unrealized Holding Gain-Available-for-Sale account or Unrealized Holding Loss-Available-for-Sale account.

Accepted Answer

A) True 
 B)False

Question 11

Significant interest investments must be accounted for using the equity method.

Accepted Answer

A) True 
 B)False

Question 12

A preferred stock is an example of a debt security.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following is an example of a security?

Accepted Answer

A) dividends 
B) municipal bond 
C) interest expense 
D) depreciation 
A) dividends 
B) municipal bond 
C) interest expense 
D) depreciation

Question 14

The Gain on Disposal from trading securities is a(n):

Accepted Answer

A) current asset account. 
B) fixed asset account. 
C) liability account. 
D) equity account. 
A) current asset account. 
B) fixed asset account. 
C) liability account. 
D) equity account.

Question 15

An equity security:

Accepted Answer

A) represents a credit relationship with another company or governmental entity. 
B) is a standardized contract between two parties to buy oil at a set price. 
C) represents stock ownership in another company and sometimes pays dividends. 
D) is a financial instrument which entitles the holder to receive periodic interest. 
A) represents a credit relationship with another company or governmental entity. 
B) is a standardized contract between two parties to buy oil at a set price. 
C) represents stock ownership in another company and sometimes pays dividends. 
D) is a financial instrument which entitles the holder to receive periodic interest.

Question 16

When a firm collects the face value of a long-term investment in bonds at maturity:

Accepted Answer

A) both assets and equity of the firm remains unchanged. 
B) both assets and liabilities of the firm increase. 
C) both assets and equity of the firm increase. 
D) liabilities decrease and equity increases. 
A) both assets and equity of the firm remains unchanged. 
B) both assets and liabilities of the firm increase. 
C) both assets and equity of the firm increase. 
D) liabilities decrease and equity increases.

Question 17

When there is an unrealized loss on trading investments, the ________ will decrease.

Accepted Answer

A) total equity 
B) cash 
C) total liabilities 
D) long term investments 
A) total equity 
B) cash 
C) total liabilities 
D) long term investments

Question 18

Glitter Services pays $700,000 for 100,000 shares to acquire 30% of voting stock of Grey Investments on January 5, 2016. Grey Investments declares and pays a cash dividend of $1.4 per share on June 14, 2016. Which of the following is the correct journal entry for the transaction on June 14, 2016?

Accepted Answer

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

Question 19

A subsidiary company is a company that:

Accepted Answer

A) is controlled by another corporation. 
B) owns a controlling interest in another company. 
C) is the first to begin operations in an industry. 
D) that has a trading investment in another company. 
A) is controlled by another corporation. 
B) owns a controlling interest in another company. 
C) is the first to begin operations in an industry. 
D) that has a trading investment in another company.

Question 20

When a company invests in equity securities with 20% or more, but less than 50%, ownership in the investee's voting stock, the investor can significantly influence the investee's decisions.

Accepted Answer

A) True 
 B)False

Exam 15: Investments

Debt securities do not include U.S. government securities.

Trading investments:

At the maturity of a bond investment, the journal entry has:

A security is a share or interest representing financial value.

An equity security does not represent an ownership interest in a corporation, although it pays dividends.

An equity security represents a credit relationship with another company or governmental entity.

Beige Corporation pays $500,000 to acquire 40% of the equity securities of Olive Technologies on May 5, 2015. This investment will be classified as a(n):

Which of the following is true of the accounting entries for debt securities?

Companies invest in trading investments with the intent of:

The unrealized holding gains and losses on available-for-sale investments are recorded as an adjustment to the Unrealized Holding Gain-Available-for-Sale account or Unrealized Holding Loss-Available-for-Sale account.

Significant interest investments must be accounted for using the equity method.

A preferred stock is an example of a debt security.

Which of the following is an example of a security?

The Gain on Disposal from trading securities is a(n):

An equity security:

When a firm collects the face value of a long-term investment in bonds at maturity:

When there is an unrealized loss on trading investments, the ________ will decrease.

Glitter Services pays $700,000 for 100,000 shares to acquire 30% of voting stock of Grey Investments on January 5, 2016. Grey Investments declares and pays a cash dividend of $1.4 per share on June 14, 2016. Which of the following is the correct journal entry for the transaction on June 14, 2016?

A subsidiary company is a company that:

When a company invests in equity securities with 20% or more, but less than 50%, ownership in the investee's voting stock, the investor can significantly influence the investee's decisions.

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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