Question 1

Which of the following is TRUE of comprehensive income?

Accepted Answer

A)  All items included in comprehensive income enter into the determination of net income. 
B)  Dividend payments are not included in the determination of comprehensive income, even though it results in a decrease in total stockholders' equity. 
C)  Comprehensive income includes company changes in total stockholders' equity from all sources, including owners' investments. 
D)  Comprehensive income cannot be combined with a traditional income statement into a combined statement of comprehensive income. 
A)  All items included in comprehensive income enter into the determination of net income. 
B)  Dividend payments are not included in the determination of comprehensive income, even though it results in a decrease in total stockholders' equity. 
C)  Comprehensive income includes company changes in total stockholders' equity from all sources, including owners' investments. 
D)  Comprehensive income cannot be combined with a traditional income statement into a combined statement of comprehensive income.

Question 2

Gardens,Inc.invests its excess cash in Innovative Technologies,Inc.and acquires 4300 shares for $28.00 per share.Garden,Inc.owns less than 3% of Innovative's voting stock and plans to hold the stock for two years.Which of the following is the correct journal entry for the transaction?

Accepted Answer

A)  $$\begin{array} { | c | r | r | } 
\hline \text { Common Stock - Gardens } & 120,400 & \
\hline \text { Cash } & & 120,400 \
\hline
\end{array}$$ 
B)  $$\begin{array} { | c | r | r | } 
\hline \text { Cash } & 120,400 & \
\hline \text { Equity Investments } & & 120,400 \
\hline
\end{array}$$ 
C)  $$\begin{array} { | c | r | r | } 
\hline \text { Cash } & 120,400 & \
\hline \text { Common Stock - Gardens } & & 120,400 \
\hline
\end{array}$$ 
D)  $$\begin{array} { | c | r | r | } 
\hline \text { Equity Investments } & 120,400 & \
\hline \text { Cash } & & 120,400 \
\hline
\end{array}$$ 
A)  $$\begin{array} { | c | r | r | } 
\hline \text { Common Stock - Gardens } & 120,400 & \
\hline \text { Cash } & & 120,400 \
\hline
\end{array}$$ 
B)  $$\begin{array} { | c | r | r | } 
\hline \text { Cash } & 120,400 & \
\hline \text { Equity Investments } & & 120,400 \
\hline
\end{array}$$ 
C)  $$\begin{array} { | c | r | r | } 
\hline \text { Cash } & 120,400 & \
\hline \text { Common Stock - Gardens } & & 120,400 \
\hline
\end{array}$$ 
D)  $$\begin{array} { | c | r | r | } 
\hline \text { Equity Investments } & 120,400 & \
\hline \text { Cash } & & 120,400 \
\hline
\end{array}$$

Question 3

When there is an unrealized loss on trading debt 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 4

A security is a share or interest representing financial value.

Accepted Answer

A) True 
 B)False

Question 5

The fair value method is used to account for available-for-sale debt investments.

Accepted Answer

A) True 
 B)False

Question 6

LLL Company reported the following items on its 2019 financial statements:
 $$\begin{array} { | l | r | } 
\hline \text { Total Assets, June 30, 2019 } & \$ 60,000 \
\hline \text { Total Assets, June 30, 2018 } & 64,000 \
\hline \text { For Year Ended June 30, 2019 } & \
\hline \text { Interest Expense } & 1,200 \
\hline \text { Net Income } & 4,000 \
\hline
\end{array}$$ Requirement:
a.Determine LLL's rate of return on total assets for 2019.Round final answer to two decimal places.Label your work and show computations.
b.What does the rate of return on total assets mean? Discuss your findings for LLL.

Accepted Answer

a.Rate of return on total assets = (Net

Question 7

A company's investments in stock or bonds cannot include the acquisition of an entire company.

Accepted Answer

A) True 
 B)False

Question 8

List and discuss two common reasons why companies invest in debt or equity securities.

Accepted Answer

1.The company may have short-term,excess

Question 9

Which of the following is NOT an example of a security?

Accepted Answer

A)  preferred stock 
B)  municipal bond 
C)  Treasury bills 
D)  All are examples of a security. 
A)  preferred stock 
B)  municipal bond 
C)  Treasury bills 
D)  All are examples of a security.

Question 10

On January 1,2018,West Coast Boats paid $ 1,850,000 for its 30% investment in East Coast Autos.After the purchase,West Coast Boats has significant influence over East Coast Autos.East Coast Autos earned net income of $30,000,000 and paid cash dividends of $15,000,000 to all outstanding stockholders during 2018.Assume all outstanding stock is voting stock.
Requirement:
1.Journalize all required 2018 transactions related to West Coast Boats' investment in East Coast Autos.Omit explanations.
2.What is the December 31,2018 balance of the investment account? Label your work.

Accepted Answer

1.
 \[\begin{array} { | c | c | c | c |

Question 11

An investor is the corporation that issued the bond or stock to the investee.

Accepted Answer

A) True 
 B)False

Question 12

For equity investments with no significant influence,the unrealized holding gain or loss is reported as a component of stockholders' equity.

Accepted Answer

A) True 
 B)False

Question 13

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 14

Which of the following may pay dividends?

Accepted Answer

A)  preferred stock 
B)  investors 
C)  Treasury bills 
D)  notes payable 
A)  preferred stock 
B)  investors 
C)  Treasury bills 
D)  notes payable

Question 15

On March 1,2018,Rawlins Company invests $25,000 in Ashton Company stock.Ashton pays Rawlins a $800 dividend on September 30,2018.Rawlins sells the Ashton stock on November 30,2018 for $23,500.Assume the investment is categorized as a short-term equity investment and that Rawlins does not have significant influence over Ashton.
Requirements:
1.Journalize the transactions for Rawlins' investment in Ashton's stock.
2.What was the net effect of the investment on Rawlins' net income for the year ended December 31,2018.

Accepted Answer

1.
 \[\begin{array} { | c | l | r | r |

Question 16

Which of the following is TRUE of the Fair Value Adjustment - Trading account for trading debt investments?

Accepted Answer

A)  It will always have a credit balance. 
B)  It will always have a debit balance. 
C)  It is considered as an adjunct account if it has a credit balance. 
D)  It is considered as an adjunct account if it has a debit balance. 
A)  It will always have a credit balance. 
B)  It will always have a debit balance. 
C)  It is considered as an adjunct account if it has a credit balance. 
D)  It is considered as an adjunct account if it has a debit balance.

Question 17

All State Services,Inc.acquired 100,000 shares of Omega Metals,Inc.on January 1,2018.Omega pays a cash dividend of $0.25 per share on March 2,2019.With the current investment,All State Services,Inc.holds 8% of Omega.In the journal entry on March 2,2019,________.

Accepted Answer

A)  Equity Investments is credited 
B)  Dividend Revenue is credited 
C)  Equity Investments is debited 
D)  Cash Dividends is credited 
A)  Equity Investments is credited 
B)  Dividend Revenue is credited 
C)  Equity Investments is debited 
D)  Cash Dividends is credited

Question 18

Metro Services,Inc.reported the following information for the year 2019.Based on the following information,calculate the rate of return on total assets for Metro Services,Inc.(Round the percentage to two decimal places.) $$\begin{array} { | l | l | } 
\hline \text { Total Assets, December 31,2019 } & \$ 599,000 \
\hline \text { Total Assets, December 31,2018 } & \$ 505,000 \
\hline \text { For Year Ended December 31, 2019: } & \
\hline \text { Interest Expense } & \$ 27,900 \
\hline \text { Net Income } & \$ 67,100 \
\hline
\end{array}$$

Accepted Answer

A)  11.20% 
B)  7.78% 
C)  17.21% 
D)  7.10% 
A)  11.20% 
B)  7.78% 
C)  17.21% 
D)  7.10%

Question 19

Investments in equity securities are classified into three specific types based on the investor's level of influence over the investee company.

Accepted Answer

A) True 
 B)False

Question 20

Dynamic Software,Inc.invests excess cash of $100,000 in corporate bonds on March 30,2019.The bonds mature 20 years from the date of purchase.Dynamic plans to hold the bonds until maturity and has the ability to do so.How does the March 30,2019 transaction affect the accounting equation?

Accepted Answer

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

Exam 15: Investments

Which of the following is TRUE of comprehensive income?

Gardens,Inc.invests its excess cash in Innovative Technologies,Inc.and acquires 4300 shares for $28.00 per share.Garden,Inc.owns less than 3% of Innovative's voting stock and plans to hold the stock for two years.Which of the following is the correct journal entry for the transaction?

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

A security is a share or interest representing financial value.

The fair value method is used to account for available-for-sale debt investments.

A company's investments in stock or bonds cannot include the acquisition of an entire company.

List and discuss two common reasons why companies invest in debt or equity securities.

Which of the following is NOT an example of a security?

An investor is the corporation that issued the bond or stock to the investee.

For equity investments with no significant influence,the unrealized holding gain or loss is reported as a component of stockholders' equity.

A debt security ________.

Which of the following may pay dividends?

Which of the following is TRUE of the Fair Value Adjustment - Trading account for trading debt investments?

All State Services,Inc.acquired 100,000 shares of Omega Metals,Inc.on January 1,2018.Omega pays a cash dividend of $0.25 per share on March 2,2019.With the current investment,All State Services,Inc.holds 8% of Omega.In the journal entry on March 2,2019,________.

Investments in equity securities are classified into three specific types based on the investor's level of influence over the investee company.

Dynamic Software,Inc.invests excess cash of $100,000 in corporate bonds on March 30,2019.The bonds mature 20 years from the date of purchase.Dynamic plans to hold the bonds until maturity and has the ability to do so.How does the March 30,2019 transaction affect the accounting equation?

Accounting and the Business Environment

Recording Business Transactions

The Adjusting Process

Completing the Accounting Cycle

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Merchandise Inventory

Accounting Information Systems

Internal Control and Cash

Receivables

Plant Assets,natural Resources,and Intangibles

Current Liabilities and Payroll

Partnerships

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Long-Term Liabilities

The Statement of Cash Flows

Financial Statement Analysis

Introduction to Managerial Accounting

Job Order Costing

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Master Budgets

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Cost Allocation and Responsibility Accounting

Short-Term Business Decisions

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