Question 1

When a loss is recorded on the sale of a significant influence equity 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 2

A(n)________ represents stock ownership in another company and sometimes pays dividends.

Accepted Answer

A)  debt security 
B)  Treasury bill 
C)  corporate bond 
D)  equity security 
A)  debt security 
B)  Treasury bill 
C)  corporate bond 
D)  equity security

Question 3

Equity investments with no significant influence must be adjusted at the end of the year and reported at fair value.

Accepted Answer

A) True 
 B)False

Question 4

When a company acquires a long-term bond investment,by paying cash,total assets remain unchanged.

Accepted Answer

A) True 
 B)False

Question 5

Short Company owns a 2% investment in the common stock of Long Company.The receipt of a cash dividend from Long will have no effect on Short's total equity.

Accepted Answer

A) True 
 B)False

Question 6

Securities are represented by a certificate and are commonly traded on an exchange.

Accepted Answer

A) True 
 B)False

Question 7

When a company receives a dividend payment on investments in equity securities with no significant influence,the ________.

Accepted Answer

A)  total assets will remain unaffected 
B)  long-term assets will decrease 
C)  total equity will increase 
D)  total liabilities will decrease 
A)  total assets will remain unaffected 
B)  long-term assets will decrease 
C)  total equity will increase 
D)  total liabilities will decrease

Question 8

Jones Enterprises purchased a bond on August 31 of the current year for $250,000 and classified the investment as an available-for-sale debt.The market value of the available-for-sale debt investment at year-end is $255,000.The adjustment is ________.

Accepted Answer

A)  subtracted from the Available-for-Sale Debt Investments account to arrive at the amount reported on the balance sheet 
B)  recorded as a debit to Fair Value Adjustment - Available-for-Sale 
C)  recorded as a debit to Unrealized Holding Gain - Available-for-Sale 
D)  reported as a $5,000 unrealized holding gain in the income statement 
A)  subtracted from the Available-for-Sale Debt Investments account to arrive at the amount reported on the balance sheet 
B)  recorded as a debit to Fair Value Adjustment - Available-for-Sale 
C)  recorded as a debit to Unrealized Holding Gain - Available-for-Sale 
D)  reported as a $5,000 unrealized holding gain in the income statement

Question 9

On the maturity date of a bond investment,the journal entry includes ________.

Accepted Answer

A)  a debit to Cash and a credit to Held-to-Maturity Debt Investments 
B)  a debit to Long-term Investments and a credit to Cash 
C)  a debit to the Interest Revenue and a credit to Cash 
D)  recording a gain or loss on disposition at maturity 
A)  a debit to Cash and a credit to Held-to-Maturity Debt Investments 
B)  a debit to Long-term Investments and a credit to Cash 
C)  a debit to the Interest Revenue and a credit to Cash 
D)  recording a gain or loss on disposition at maturity

Question 10

World-wide Financial Services,Inc.invested $27,000 to acquire 4000 shares of Dawn Investments,Inc.on March 15,2016.This investment represents less than 20% of the investee's voting stock.On May 7,2019,World-wide Financial Services,Inc.sells 2500 shares for $14,250.In the accounting equation on May 7,2019,________.

Accepted Answer

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

Question 11

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 short period of time 
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 short period of time

Question 12

Worldwide Enterprises purchased a bond on June 30 of the current year for $100,000 and classified the investment as trading debt.The market value of the trading debt investment at year-end is $102,500.The adjustment is ________.

Accepted Answer

A)  reported as a separate component of stockholders' equity 
B)  reported as a $2,500 unrealized holding gain in the Other Income and (Expenses) section of the income statement 
C)  not reported on the income statement because the market value is greater than the cost 
D)  subtracted from the Trading Debt Investment account 
A)  reported as a separate component of stockholders' equity 
B)  reported as a $2,500 unrealized holding gain in the Other Income and (Expenses) section of the income statement 
C)  not reported on the income statement because the market value is greater than the cost 
D)  subtracted from the Trading Debt Investment account

Question 13

Which of the following is TRUE of consolidated statements?

Accepted Answer

A)  They combine the balance sheets, income statements, and statements of cash flows of the parent company with those of its peer group firms. 
B)  They combine the balance sheets, income statements, but not the statements of cash flows of the subsidiary company using the consolidation method. 
C)  They combine the balance sheets, income statements, and statements of cash flows of the subsidiary company with those of its investee firms. 
D)  They combine the balance sheets, income statements, and statements of cash flows of the parent company with those of its controlling interest affiliates. 
A)  They combine the balance sheets, income statements, and statements of cash flows of the parent company with those of its peer group firms. 
B)  They combine the balance sheets, income statements, but not the statements of cash flows of the subsidiary company using the consolidation method. 
C)  They combine the balance sheets, income statements, and statements of cash flows of the subsidiary company with those of its investee firms. 
D)  They combine the balance sheets, income statements, and statements of cash flows of the parent company with those of its controlling interest affiliates.

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

Trading debt investments are classified on the balance sheet as ________.

Accepted Answer

A)  current or long-term assets, depending on how long the investor intends to hold the debt securities 
B)  current assets 
C)  intangible assets 
D)  current liabilities 
A)  current or long-term assets, depending on how long the investor intends to hold the debt securities 
B)  current assets 
C)  intangible assets 
D)  current liabilities

Question 16

Which of the following is an example of debt securities?

Accepted Answer

A)  preferred stocks 
B)  real estate 
C)  common stocks 
D)  corporate bonds 
A)  preferred stocks 
B)  real estate 
C)  common stocks 
D)  corporate bonds

Question 17

Significant influence equity investments are reported as ________ on the balance sheet.

Accepted Answer

A)  current assets 
B)  either current assets or current liabilities 
C)  long-term assets 
D)  either current assets or long-term assets 
A)  current assets 
B)  either current assets or current liabilities 
C)  long-term assets 
D)  either current assets or long-term assets

Question 18

Investments in debt securities are recorded at cost.Brokerage fees paid are treated as expenses.

Accepted Answer

A) True 
 B)False

Question 19

When applying the rules of the equity method,the Equity Investments account is credited for the receipt of a cash dividend because ________.

Accepted Answer

A)  the dividend decreases the investor's investment 
B)  the dividend is treated as earnings rather than a return of capital 
C)  there is a decrease in the dividend liability 
D)  the dividend increases the total assets 
A)  the dividend decreases the investor's investment 
B)  the dividend is treated as earnings rather than a return of capital 
C)  there is a decrease in the dividend liability 
D)  the dividend increases the total assets

Question 20

An investor owns a controlling interest when the investor has legal control over the investee company and generally owns more than 50% of the investee's voting stock.

Accepted Answer

A) True 
 B)False

Exam 15: Investments

When a loss is recorded on the sale of a significant influence equity investment,________.

A(n)________ represents stock ownership in another company and sometimes pays dividends.

Equity investments with no significant influence must be adjusted at the end of the year and reported at fair value.

When a company acquires a long-term bond investment,by paying cash,total assets remain unchanged.

Short Company owns a 2% investment in the common stock of Long Company.The receipt of a cash dividend from Long will have no effect on Short's total equity.

Securities are represented by a certificate and are commonly traded on an exchange.

When a company receives a dividend payment on investments in equity securities with no significant influence,the ________.

Jones Enterprises purchased a bond on August 31 of the current year for $250,000 and classified the investment as an available-for-sale debt.The market value of the available-for-sale debt investment at year-end is $255,000.The adjustment is ________.

On the maturity date of a bond investment,the journal entry includes ________.

Held-to-maturity investments applies only to debt securities because ________.

Worldwide Enterprises purchased a bond on June 30 of the current year for $100,000 and classified the investment as trading debt.The market value of the trading debt investment at year-end is $102,500.The adjustment is ________.

Which of the following is TRUE of consolidated statements?

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

Trading debt investments are classified on the balance sheet as ________.

Which of the following is an example of debt securities?

Significant influence equity investments are reported as ________ on the balance sheet.

Investments in debt securities are recorded at cost.Brokerage fees paid are treated as expenses.

When applying the rules of the equity method,the Equity Investments account is credited for the receipt of a cash dividend because ________.

An investor owns a controlling interest when the investor has legal control over the investee company and generally owns more than 50% of the investee's voting stock.

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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