Question 1

All of the following are true about debt securities except:

Accepted Answer

A)  They can have a cost higher than the maturity value. 
B)  They can be short-term investments. 
C)  They can be long-term investments. 
D)  They can have a cost lower than the maturity value. 
E)  They reflect an owner relationship. 
A)  They can have a cost higher than the maturity value. 
B)  They can be short-term investments. 
C)  They can be long-term investments. 
D)  They can have a cost lower than the maturity value. 
E)  They reflect an owner relationship.

Question 2

Mire Corporation had the following transactions involving investments in trading securities during the year. Prior to these transactions, Mire had never had any investments in trading securities. Prepare the required general journal entries to record these transactions.
Feb. 16 Purchased 800 shares of HM Corporation stock at $28 per share plus a $400 brokerage fee.
Feb. 26 Purchased 500 shares of Sugarland Co. stock at $19 per share plus a $300 brokerage fee.
Mar. 2 Received a $0.95 per share dividend from the HM Corporation.
Mar. 28 Sold 200 shares of HM Corporation stock for $31 per share less a $150 brokerage fee.
Apr. 20 Sold 150 shares of Sugarland Co. stock at $17 per share less a $100 brokerage fee.
Apr. 30 The company is preparing quarterly financial statements; prepare an adjusting entry for the fair value adjustment on the trading securities. At April 30, the HM stock has a fair value of $30 per share, and the Sugarland stock has a fair value of
$16 per share.

Accepted Answer

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Question 3

When the cost of a short-term held-to-maturity debt security is different from the maturity value, the difference is amortized over the remaining life of the security.

Accepted Answer

A) True 
 B)False

Question 4

Foreign exchange rates fluctuate due to changing ________ and ________ conditions.

Accepted Answer

The answer of Foreign exchange rates fluctuate due to changing...

Question 5

A company had net income of $350,000 in Year 1 and $520,000 in Year 2. The company had average total assets of $2,500,000 in Year 1 and $3,000,000 in Year 2. Calculate the return on total assets for Year 1 and Year 2. Comment on the results, did the company's performance improve?

Accepted Answer

(a) Year 1: $350,000 / $2,500,000 = 14.0

Question 6

Landmark Corp. buys $300,000 of Schroeter Company's 8%, 5-year bonds payable at par value on September 1. Interest payments are made semiannually. Landmark plans to hold the bonds for the 5-year life. When the bonds mature, the journal entry to record the proceeds will be:

Accepted Answer

A)  Debit Cash $300,000; credit Long-Term Investments-HTM $300,000. 
B)  Debit Long-Term Investments-HTM $300,000; credit Cash $300,000. 
C)  Debit Cash $300,000; credit Interest Receivable $300,000. 
D)  Debit Cash $300,000; credit Bonds Payable $300,000. 
E)  Debit Cash $300,000; credit Interest Revenue $300,000. 
A)  Debit Cash $300,000; credit Long-Term Investments-HTM $300,000. 
B)  Debit Long-Term Investments-HTM $300,000; credit Cash $300,000. 
C)  Debit Cash $300,000; credit Interest Receivable $300,000. 
D)  Debit Cash $300,000; credit Bonds Payable $300,000. 
E)  Debit Cash $300,000; credit Interest Revenue $300,000.

Question 7

Consolidated financial statements show the financial position, results of operations, and cash flows of all entities under the parent's control, including all subsidiaries.

Accepted Answer

A) True 
 B)False

Question 8

If a U.S. Company's credit sale to an international customer allows payment to be made in a foreign currency, the same exchange rate must be used for the date of sale and the cash payment date.

Accepted Answer

A) True 
 B)False

Question 9

A decrease in the fair value of a security that has not yet been realized through an actual sale of the security is called a(n):

Accepted Answer

A)  Unrealized loss. 
B)  Market loss. 
C)  Contingent loss. 
D)  Realizable loss. 
E)  Capitalized loss. 
A)  Unrealized loss. 
B)  Market loss. 
C)  Contingent loss. 
D)  Realizable loss. 
E)  Capitalized loss.

Question 10

J.P. Industries purchased 2,000 shares of Yang's common stock for $143,000 as a long-term investment. The investment is classified as available-for-sale securities. The par value of the stock was $1 per share. J.P. paid $375 in commissions on the transaction. J.P.'s entry to record the purchase transaction would include a:

Accepted Answer

A)  Credit to Common Stock for $143,375. 
B)  Debit to Long-Term Investments-AFS for $143,375. 
C)  Debit to Long-Term Investments-AFS for $143,000. 
D)  Credit to Common Stock for $2,000. 
E)  Credit to Common Stock for $143,000. 
A)  Credit to Common Stock for $143,375. 
B)  Debit to Long-Term Investments-AFS for $143,375. 
C)  Debit to Long-Term Investments-AFS for $143,000. 
D)  Credit to Common Stock for $2,000. 
E)  Credit to Common Stock for $143,000.

Question 11

Canberry Corporation had net income of $80,000, beginning total assets of $640,000 and ending total assets of $580,000. Its return on total assets is:

Accepted Answer

A)  13.8% 
B)  12.5% 
C)  13.1% 
D)  725% 
E)  800% 
A)  13.8% 
B)  12.5% 
C)  13.1% 
D)  725% 
E)  800%

Question 12

A company paid $37,800 plus a broker's fee of $525 to acquire 8% bonds with a $40,000 maturity value as a long-term investment. The company intends to hold the bonds to maturity. The correct entry to record the purchase of the bond investment is:

Accepted Answer

A)  Debit Long-Term Investments-HTM $38,325; credit Cash $38,325. 
B)  Debit Long-Term Investments-HTM $37,800; credit Cash $37,800. 
C)  Debit Long-Term Investments-HTM $37,800; debit Loss on Investment $525; credit Cash $38,325. 
D)  Debit Long-Term Investments-HTM $37,800; debit Investment Expense $525; credit Cash $38,325. 
E)  Debit Cash $40,000; credit Long-Term Investments-HTM $40,000. 
A)  Debit Long-Term Investments-HTM $38,325; credit Cash $38,325. 
B)  Debit Long-Term Investments-HTM $37,800; credit Cash $37,800. 
C)  Debit Long-Term Investments-HTM $37,800; debit Loss on Investment $525; credit Cash $38,325. 
D)  Debit Long-Term Investments-HTM $37,800; debit Investment Expense $525; credit Cash $38,325. 
E)  Debit Cash $40,000; credit Long-Term Investments-HTM $40,000.

Question 13

Security prices are sometimes listed in fractions. For example, a debt security with a price of 22¾ is the same as $22.25.

Accepted Answer

A) True 
 B)False

Question 14

Define the return on total assets and explain how it is used to measure a company's financial performance.

Accepted Answer

The return on total assets is calculated

Question 15

Accounting for long-term investments in equity securities with controlling influence uses the:

Accepted Answer

A)  Controlling method. 
B)  Consolidated method. 
C)  Equity method with consolidation. 
D)  Investment method. 
E)  Investor method. 
A)  Controlling method. 
B)  Consolidated method. 
C)  Equity method with consolidation. 
D)  Investment method. 
E)  Investor method.

Question 16

The controlling investor is called the:

Accepted Answer

A)  Senior entity. 
B)  Parent. 
C)  Owner. 
D)  Investee. 
E)  Subsidiary. 
A)  Senior entity. 
B)  Parent. 
C)  Owner. 
D)  Investee. 
E)  Subsidiary.

Question 17

On February 15, Jewel Company buys 7,000 shares of Marcelo Corp. common stock at $28.53 per share plus a brokerage fee of $400. The stock is classified as available-for-sale securities. This is the company's first and only investment in available-for-sale securities. On March 15, Marcelo Corp. declares a dividend of $1.15 per share payable to stockholders of record on April 15. Jewel Company received the dividend on April 15 and ultimately sells half of the Marcelo Corp. stock on November 17 of the current year for $29.30 per share less a brokerage fee of $250.
- The fair value of the remaining shares is $29.50 per share. The impact on Jewel's net income as a result of its investment in Marcelo Corp. was a(n):

Accepted Answer

A)  Increase to income of $10,295. 
B)  Increase to income of $8,050. 
C)  Decrease to income of $5,440. 
D)  Decrease to income of $3,195. 
E)  Increase to income of $2,245. 
A)  Increase to income of $10,295. 
B)  Increase to income of $8,050. 
C)  Decrease to income of $5,440. 
D)  Decrease to income of $3,195. 
E)  Increase to income of $2,245.

Question 18

A company had a profit margin of 10.5% and total asset turnover of 1.84. Its return on total assets was:

Accepted Answer

A)  13.61% 
B)  19.32% 
C)  8.66% 
D)  12.34% 
E)  5.71% 
A)  13.61% 
B)  19.32% 
C)  8.66% 
D)  12.34% 
E)  5.71%

Question 19

Define the foreign exchange rate between two currencies. Explain its effect on business transactions conducted in a foreign currency.

Accepted Answer

A foreign exchange rate is the price of

Question 20

Strickland Corporation has invested in 10% of the outstanding stock of Nez Corporation. Strickland intends to actively manage this investment for profit. This investment is classified as:

Accepted Answer

A)  a held-to-maturity security. 
B)  a significant influence security. 
C)  a trading security. 
D)  a controlling influence security. 
E)  an available-for-sale security. 
A)  a held-to-maturity security. 
B)  a significant influence security. 
C)  a trading security. 
D)  a controlling influence security. 
E)  an available-for-sale security.

Exam 15: Investments

All of the following are true about debt securities except:

When the cost of a short-term held-to-maturity debt security is different from the maturity value, the difference is amortized over the remaining life of the security.

Foreign exchange rates fluctuate due to changing ________ and ________ conditions.

A company had net income of $350,000 in Year 1 and $520,000 in Year 2. The company had average total assets of $2,500,000 in Year 1 and $3,000,000 in Year 2. Calculate the return on total assets for Year 1 and Year 2. Comment on the results, did the company's performance improve?

Landmark Corp. buys $300,000 of Schroeter Company's 8%, 5-year bonds payable at par value on September 1. Interest payments are made semiannually. Landmark plans to hold the bonds for the 5-year life. When the bonds mature, the journal entry to record the proceeds will be:

Consolidated financial statements show the financial position, results of operations, and cash flows of all entities under the parent's control, including all subsidiaries.

If a U.S. Company's credit sale to an international customer allows payment to be made in a foreign currency, the same exchange rate must be used for the date of sale and the cash payment date.

A decrease in the fair value of a security that has not yet been realized through an actual sale of the security is called a(n):

Canberry Corporation had net income of $80,000, beginning total assets of $640,000 and ending total assets of $580,000. Its return on total assets is:

A company paid $37,800 plus a broker's fee of $525 to acquire 8% bonds with a $40,000 maturity value as a long-term investment. The company intends to hold the bonds to maturity. The correct entry to record the purchase of the bond investment is:

Security prices are sometimes listed in fractions. For example, a debt security with a price of 22¾ is the same as $22.25.

Define the return on total assets and explain how it is used to measure a company's financial performance.

Accounting for long-term investments in equity securities with controlling influence uses the:

The controlling investor is called the:

A company had a profit margin of 10.5% and total asset turnover of 1.84. Its return on total assets was:

Define the foreign exchange rate between two currencies. Explain its effect on business transactions conducted in a foreign currency.

Strickland Corporation has invested in 10% of the outstanding stock of Nez Corporation. Strickland intends to actively manage this investment for profit. This investment is classified as:

Accounting in Business

Analyzing and Recording Transactions

Adjusting Accounts and Preparing Financial Statements

Completing the Accounting Cycle

Accounting for Merchandising Operations

Inventories and Cost of Sales

Accounting Information Systems

Cash and Internal Controls

Accounting for Receivables

Plant Assets Natural Resoures and Intangibles

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Accounting for Corporations

Long-Term Liabilities

Reporting the Statement of Cash Flows

Analysis of Financial Statements

Managerial Accounting Concepts and Principles

Job Order Costing

Process Costing

Cost-Volume-Profit Analysis

Master Budgets and Planning

Flexible Budgets and Standard Costs

Performance Measurement and Responsibility Accounting

Capital Budgeting and Managerial Decisions

Present and Future Values in Accounting

Activity-Based Costing

Filters

Foreign exchange rates fluctuate due to changing and conditions.