Question 1

Controlling interest equity investments are debt securities in which the investor owns more than 50% of the investee's voting stock.

Accepted Answer

A) True 
 B)False

Question 2

Unrealized holding gains or losses on trading debt investments are reported in the ________.

Accepted Answer

A)  current assets section of the balance sheet 
B)  operating expenses section of the income statement 
C)  other income and (expenses) section of the income statement 
D)  accumulated other comprehensive income section of stockholder's equity 
A)  current assets section of the balance sheet 
B)  operating expenses section of the income statement 
C)  other income and (expenses) section of the income statement 
D)  accumulated other comprehensive income section of stockholder's equity

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

Littlefield Industries purchased a bond on September 1 of the current year for $200,000 and classified the investment as trading debt.The market value of the trading debt investment at year-end is $196,000.The adjustment is ________.

Accepted Answer

A)  reported as a separate component of stockholders' equity 
B)  added to the Trading Debt Investments account 
C)  not reported on the income statement because the bond has not been disposed of 
D)  reported as a $4,000 unrealized holding loss in the Other Income and (Expenses) section of the income statement 
A)  reported as a separate component of stockholders' equity 
B)  added to the Trading Debt Investments account 
C)  not reported on the income statement because the bond has not been disposed of 
D)  reported as a $4,000 unrealized holding loss in the Other Income and (Expenses) section of the income statement

Question 5

Securities are ________.

Accepted Answer

A)  commonly traded on an exchange 
B)  assets traded between companies working in the same industry 
C)  owned by the investee 
D)  always considered to be long-term investments 
A)  commonly traded on an exchange 
B)  assets traded between companies working in the same industry 
C)  owned by the investee 
D)  always considered to be long-term investments

Question 6

For each of the following scenarios,state the type of investment:
1.Available-for-sale debt investment
2.No significant influence equity investment
3.Trading debt investment
4.Significant influence equity investment
5.Held-to-maturity debt investment
6.Controlling interest equity investment
Indicate your answer by placing the correct number next to the scenario.
a.________ Arnold Corp.owns a debt security in Brady Corp.Arnold plans on holding the debt for thirty days.
b.________ Maxwell Inc.owns 70% of the voting stock of Russell Corp.
c.________ Millie Inc.owns a debt security of Auntie Inc.Millie intends to and has the ability to hold the debt security until maturity.

Accepted Answer

The answer of For each of the following scenarios,state the...

Question 7

Creditors invest in a company and hope to receive a return on their investment.

Accepted Answer

A) True 
 B)False

Question 8

Realized gains or losses occur when a company adjusts an asset to fair value but has not yet disposed of the asset.

Accepted Answer

A) True 
 B)False

Question 9

A parent 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)  has any level of 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)  has any level of investment in another company

Question 10

Provide the following information for controlling interest equity investments:
1.Which accounting method is used?
2.What is the balance sheet effect when using this accounting method?
3.What is the income statement effect when using this accounting method?

Accepted Answer

1.Consolidation accounting met

Question 11

Which of the following securities typically pay interest?

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 12

The fair value of a trading debt security is the price that would be used if the company were to sell the investment on the market.

Accepted Answer

A) True 
 B)False

Question 13

Available-for-sale debt investments include all trading debt and held-to-maturity debt investments.

Accepted Answer

A) True 
 B)False

Question 14

Greene Corporation pays $500,000 to acquire 40% of the voting stock of Universal Technologies,Inc.on May 5,2019.This investment will be classified as a(n)________.

Accepted Answer

A)  trading equity investment 
B)  available-for-sale equity investment 
C)  significant influence equity investment 
D)  held-to-maturity equity investment 
A)  trading equity investment 
B)  available-for-sale equity investment 
C)  significant influence equity investment 
D)  held-to-maturity equity investment

Question 15

Treasury bills are ________.

Accepted Answer

A)  investments that pay cash dividends 
B)  equity securities 
C)  U. S. government debt securities 
D)  a credit relationship with another company 
A)  investments that pay cash dividends 
B)  equity securities 
C)  U. S. government debt securities 
D)  a credit relationship with another company

Question 16

A preferred stock is an example of a debt security.

Accepted Answer

A) True 
 B)False

Question 17

Companies make a year-end adjustment of the trading debt investment to bring the account to historical value.

Accepted Answer

A) True 
 B)False

Question 18

At the beginning of the year,Wilson Steel,Inc.purchased 10,000 shares of Barnes Metals,Inc.for $34,000 in exchange for cash and now holds 3.2% of the voting stock of Barnes Metals,Inc.The management of Wilson Steel intends to hold this stock for two years.Assuming no other transaction happened during the year,the ________ in the balance sheet will increase.

Accepted Answer

A)  long-term assets 
B)  cash 
C)  total assets 
D)  current assets 
A)  long-term assets 
B)  cash 
C)  total assets 
D)  current assets

Question 19

When a trading debt investment is disposed of,________.

Accepted Answer

A)  an unrealized holding loss is reported on the income statement 
B)  the Trading Debt Investments account is debited 
C)  the amount of gain or loss is calculated as the difference between the cash received and the cost of the debt investment disposed of. 
D)  the fair value adjustment is used in determining the calculation of the gain or loss 
A)  an unrealized holding loss is reported on the income statement 
B)  the Trading Debt Investments account is debited 
C)  the amount of gain or loss is calculated as the difference between the cash received and the cost of the debt investment disposed of. 
D)  the fair value adjustment is used in determining the calculation of the gain or loss

Question 20

The owner of a bond or stock of a corporation is referred to as the investor.

Accepted Answer

A) True 
 B)False

Exam 15: Investments

Controlling interest equity investments are debt securities in which the investor owns more than 50% of the investee's voting stock.

Unrealized holding gains or losses on trading debt investments are reported in the ________.

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

Littlefield Industries purchased a bond on September 1 of the current year for $200,000 and classified the investment as trading debt.The market value of the trading debt investment at year-end is $196,000.The adjustment is ________.

Securities are ________.

Creditors invest in a company and hope to receive a return on their investment.

Realized gains or losses occur when a company adjusts an asset to fair value but has not yet disposed of the asset.

A parent company is a company that ________.

Provide the following information for controlling interest equity investments: 1.Which accounting method is used? 2.What is the balance sheet effect when using this accounting method? 3.What is the income statement effect when using this accounting method?

Which of the following securities typically pay interest?

The fair value of a trading debt security is the price that would be used if the company were to sell the investment on the market.

Available-for-sale debt investments include all trading debt and held-to-maturity debt investments.

Greene Corporation pays $500,000 to acquire 40% of the voting stock of Universal Technologies,Inc.on May 5,2019.This investment will be classified as a(n)________.

Treasury bills are ________.

A preferred stock is an example of a debt security.

Companies make a year-end adjustment of the trading debt investment to bring the account to historical value.

When a trading debt investment is disposed of,________.

The owner of a bond or stock of a corporation is referred to as the investor.

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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