Question 1

If the Fair Value Adjustment account for trading investments has a debit balance:

Accepted Answer

A) it is subtracted from the Fixed Asset account to determine carrying value. 
B) it is subtracted from the Short-term Investment--Trading account to determine carrying value. 
C) it is added to the Short-term Investment--Trading account to determine carrying value. 
D) it is added to the Fixed Asset account to determine carrying value. 
A) it is subtracted from the Fixed Asset account to determine carrying value. 
B) it is subtracted from the Short-term Investment--Trading account to determine carrying value. 
C) it is added to the Short-term Investment--Trading account to determine carrying value. 
D) it is added to the Fixed Asset account to determine carrying value.

Question 2

At the end of each period, trading securities must be adjusted and reported at fair value.

Accepted Answer

A) True 
 B)False

Question 3

Long-term investments are also known as marketable securities.

Accepted Answer

A) True 
 B)False

Question 4

The Gain on Disposal of Trading Securities is reported in the:

Accepted Answer

A) other revenues and expenses section of the income statement. 
B) owners' capital section of the income statement. 
C) current assets section of the balance sheet. 
D) fixed assets section of the balance sheet. 
A) other revenues and expenses section of the income statement. 
B) owners' capital section of the income statement. 
C) current assets section of the balance sheet. 
D) fixed assets section of the balance sheet.

Question 5

Short-term investments:

Accepted Answer

A) include debt and equity securities that the investor expects to hold for more than a year. 
B) are investments in debt securities or equity securities in which the investor holds less than 50% of the voting stock and that the investor plans to sell in the very near future. 
C) are investments in debt and equity securities that are highly liquid and that the investor intends to sell in one year or less. 
D) are investments in debt securities, and the investor intends to hold them until maturity. 
A) include debt and equity securities that the investor expects to hold for more than a year. 
B) are investments in debt securities or equity securities in which the investor holds less than 50% of the voting stock and that the investor plans to sell in the very near future. 
C) are investments in debt and equity securities that are highly liquid and that the investor intends to sell in one year or less. 
D) are investments in debt securities, and the investor intends to hold them until maturity.

Question 6

Trading investments are categorized as noncurrent assets.

Accepted Answer

A) True 
 B)False

Question 7

Debra Technologies invested $50,000 to buy $50,000 face value, 8%, five-year in municipal bonds on January 2, 2010. The bonds will mature on January 2, 2015. The bonds pay interest semiannually on January 2 and July 2 every year till maturity. Based on the information provided, which of the following will be included in the journal entry for the transaction on January 2, 2014?

Accepted Answer

A) a credit to Interest Revenue for $4,000 
B) a debit to Interest Revenue for $4,000 
C) a credit to Interest Revenue for $2,000 
D) a debit to Interest Revenue for $2,000 
A) a credit to Interest Revenue for $4,000 
B) a debit to Interest Revenue for $4,000 
C) a credit to Interest Revenue for $2,000 
D) a debit to Interest Revenue for $2,000

Question 8

Which of the following securities make an interest payment?

Accepted Answer

A) equity securities 
B) preferred stocks 
C) corporate bonds 
D) significant interest investment 
A) equity securities 
B) preferred stocks 
C) corporate bonds 
D) significant interest investment

Question 9

Which of the following is an example of investment income from securities?

Accepted Answer

A) deferred tax assets 
B) depreciation of long-term assets 
C) sale of fixed assets 
D) interest earned from debt investments 
A) deferred tax assets 
B) depreciation of long-term assets 
C) sale of fixed assets 
D) interest earned from debt investments

Question 10

Which of the following is a condition to record an investment as an available-for-sale security?

Accepted Answer

A) There should not be any annual cash flows from the investment. 
B) It should have a maturity of less than two years. 
C) It should be a debt security. 
D) The ownership in the voting stock of the investee should be less than 20%. 
A) There should not be any annual cash flows from the investment. 
B) It should have a maturity of less than two years. 
C) It should be a debt security. 
D) The ownership in the voting stock of the investee should be less than 20%.

Question 11

All available-for-sale (AFS)investments are reported on the balance sheet at:

Accepted Answer

A) historical cost. 
B) replacement cost. 
C) current market value. 
D) net realizable value. 
A) historical cost. 
B) replacement cost. 
C) current market value. 
D) net realizable value.

Question 12

Accruex Corporation has excess cash of $25,000 and invests the same amount in corporate bonds on March 30, 2015. The bonds will mature in two years from the date of purchase. The company plans to use the cash from the bonds for its business expansion after the bonds mature in 2017. Based on the information provided, which of the following will be included in the journal entry on March 30, 2015?

Accepted Answer

A) a debit to Long-term Investments-Held-to-Maturity for $25,000 
B) a debit to Short-term Investments-US Treasury Notes for $25,000 
C) a debit to Long-term Investments-Available-for-Sale for $25,000 
D) a credit to Long-term Investments-Available-for-Sale for $25,000 
A) a debit to Long-term Investments-Held-to-Maturity for $25,000 
B) a debit to Short-term Investments-US Treasury Notes for $25,000 
C) a debit to Long-term Investments-Available-for-Sale for $25,000 
D) a credit to Long-term Investments-Available-for-Sale for $25,000

Question 13

Marketable securities are also known as:

Accepted Answer

A) short-term investments. 
B) held-to-maturity investments. 
C) debt investments. 
D) long-term investments. 
A) short-term investments. 
B) held-to-maturity investments. 
C) debt investments. 
D) long-term investments.

Question 14

U.S. government securities are:

Accepted Answer

A) real estate investments. 
B) equity securities. 
C) debt securities. 
D) forward contracts. 
A) real estate investments. 
B) equity securities. 
C) debt securities. 
D) forward contracts.

Question 15

A debt security:

Accepted Answer

A) represents a credit relationship with another company or governmental entity, and typically pays interest for a fixed period. 
B) represents stock ownership in another company and sometimes pays dividends. 
C) is a standardized contract between two parties to buy or sell an underlying security at a predetermined price on a specific date. 
D) is a cash market transaction in which the ownership of the underlying asset is deferred until a specific date. 
A) represents a credit relationship with another company or governmental entity, and typically pays interest for a fixed period. 
B) represents stock ownership in another company and sometimes pays dividends. 
C) is a standardized contract between two parties to buy or sell an underlying security at a predetermined price on a specific date. 
D) is a cash market transaction in which the ownership of the underlying asset is deferred until a specific date.

Question 16

Held-to-maturity investments are categorized as long-term assets on the balance sheet, irrespective of the maturity date.

Accepted Answer

A) True 
 B)False

Question 17

Held-to-maturity investments applies only to debt securities because:

Accepted Answer

A) these securities earn periodic interest. 
B) equity securities do not mature on a specific date. 
C) these are long-term investments. 
D) equity securities are held for a very short period. 
A) these securities earn periodic interest. 
B) equity securities do not mature on a specific date. 
C) these are long-term investments. 
D) equity securities are held for a very short period.

Question 18

When a loss is recorded on the sale of a significant interest investment:

Accepted Answer

A) total assets will increase. 
B) equity will increase. 
C) total assets will decrease. 
D) equity will remain unchanged. 
A) total assets will increase. 
B) equity will increase. 
C) total assets will decrease. 
D) equity will remain unchanged.

Question 19

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. In the balance sheet at May 7, 2016:

Accepted Answer

A) total assets will remain unchanged. 
B) total assets will decrease. 
C) total liabilities will decrease. 
D) total equity will increase. 
A) total assets will remain unchanged. 
B) total assets will decrease. 
C) total liabilities will decrease. 
D) total equity will increase.

Question 20

Green Services invests its excess cash in Creative Technologies and acquires 1,000 shares for $53.25. Green Services owns less than 1% of Creative's voting stock and plans to hold the stock for two years. While preparing the journal entry to record this transaction:

Accepted Answer

A) Long-term Investments-Available-for-Sale will be debited for $53,250. 
B) Long-term Investments-Held-to-Maturity will be debited for $53,250. 
C) Long-term Investments-Trading Investments will be credited for $53,250. 
D) Long-term Investments-Significant Interest Investments will be debited for $53,250. 
A) Long-term Investments-Available-for-Sale will be debited for $53,250. 
B) Long-term Investments-Held-to-Maturity will be debited for $53,250. 
C) Long-term Investments-Trading Investments will be credited for $53,250. 
D) Long-term Investments-Significant Interest Investments will be debited for $53,250.

Exam 15: Investments

If the Fair Value Adjustment account for trading investments has a debit balance:

At the end of each period, trading securities must be adjusted and reported at fair value.

Long-term investments are also known as marketable securities.

The Gain on Disposal of Trading Securities is reported in the:

Short-term investments:

Trading investments are categorized as noncurrent assets.

Which of the following securities make an interest payment?

Which of the following is an example of investment income from securities?

Which of the following is a condition to record an investment as an available-for-sale security?

All available-for-sale (AFS)investments are reported on the balance sheet at:

Marketable securities are also known as:

U.S. government securities are:

A debt security:

Held-to-maturity investments are categorized as long-term assets on the balance sheet, irrespective of the maturity date.

Held-to-maturity investments applies only to debt securities because:

When a loss is recorded on the sale of a significant interest investment:

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. In the balance sheet at May 7, 2016:

Green Services invests its excess cash in Creative Technologies and acquires 1,000 shares for $53.25. Green Services owns less than 1% of Creative's voting stock and plans to hold the stock for two years. While preparing the journal entry to record this transaction:

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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