Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

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

Accepted Answer

A) debt security 
B) forward contracts 
C) futures contract 
D) equity security 
A) debt security 
B) forward contracts 
C) futures contract 
D) equity security

Question 3

Dividends received from available-for-sale investments are recorded with a debit to the Dividend Revenue account.

Accepted Answer

A) True 
 B)False

Question 4

Glitter Services,Inc.pays $1,350,000 to acquire 35% of voting stock of Grey Investments,Inc.on March 5,2017.When this transaction is recorded,the ________.

Accepted Answer

A) total equity will increase 
B) total assets will increase 
C) total assets will decrease 
D) total cash will decrease 
A) total equity will increase 
B) total assets will increase 
C) total assets will decrease 
D) total cash will decrease

Question 5

Hometown Resources,Inc.has a 9% rate of return on total assets and the industry average is 12%.How was the 9% rate of return on total assets computed? Comment on this information.

Accepted Answer

The 9% percent rate of return is compute

Question 6

Gain on Disposal of a trading investment is an equity account and is reported in the Other Revenues and (Expenses)section of the income statement.

Accepted Answer

A) True 
 B)False

Question 7

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

Accepted Answer

A) True 
 B)False

Question 8

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

Accepted Answer

A) deferred tax assets 
B) depreciation of long-term assets 
C) gain on the sale of fixed assets 
D) interest earned from debt securities 
A) deferred tax assets 
B) depreciation of long-term assets 
C) gain on the sale of fixed assets 
D) interest earned from debt securities

Question 9

Elite Services,Inc.pays $1,950,000 to acquire 38% of voting stock of Grey Investments,Inc.on March 5,2017.Which of the following is the correct journal entry for the transaction?

Accepted Answer

A) 
  
B) 
  
C) 
  
D) 
  
A) 
  
B) 
  
C) 
  
D)

Question 10

Consolidated statements combine the balance sheets,income statements,and statements of cash flow of the parent company with those of its controlling interest affiliates.

Accepted Answer

A) True 
 B)False

Question 11

Short-term investments ________.

Accepted Answer

A) are 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 percent 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 convert to cash within one year 
D) are investments in debt securities that the investor intends to hold until maturity 
A) are 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 percent 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 convert to cash within one year 
D) are investments in debt securities that the investor intends to hold until maturity

Question 12

A ________ ownership in the investee's voting stock can significantly influence the investee's decisions.

Accepted Answer

A) 10 percent 
B) 5 percent to 10 percent 
C) 15 percent to 20 percent 
D) 20 percent to 50 percent 
A) 10 percent 
B) 5 percent to 10 percent 
C) 15 percent to 20 percent 
D) 20 percent to 50 percent

Question 13

Which of the following is true of debt securities?

Accepted Answer

A) Debt securities entitle the holder to receipt of a share of profit in the form of dividends. 
B) Debt securities typically pay interest for a fixed period. 
C) Debt securities include preferred stocks. 
D) Debt securities represent ownership interests of the investors. 
A) Debt securities entitle the holder to receipt of a share of profit in the form of dividends. 
B) Debt securities typically pay interest for a fixed period. 
C) Debt securities include preferred stocks. 
D) Debt securities represent ownership interests of the investors.

Question 14

Depending on the maturity date,held-to-maturity investments are categorized as current assets or long-term assets on the balance sheet.

Accepted Answer

A) True 
 B)False

Question 15

Investments accounted for by the equity method are recorded at cost at the time of purchase.

Accepted Answer

A) True 
 B)False

Question 16

________ are equity securities in which the investor owns between 20% and 50% of the investee's voting stock.

Accepted Answer

A) Held-to-maturity investments 
B) Significant interest investments 
C) Controlling interest investments 
D) Available-for-sale investments 
A) Held-to-maturity investments 
B) Significant interest investments 
C) Controlling interest investments 
D) Available-for-sale investments

Question 17

A(n)________ is represented by a certificate and is commonly traded on an exchange.

Accepted Answer

A) inventory 
B) intangible asset 
C) interest 
D) security 
A) inventory 
B) intangible asset 
C) interest 
D) security

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

Anthem Corporation has excess cash to invest and pays $200,000 to buy 7%,five-year bonds of Richmond Corporation,at face value,on June 30,2016.The bonds pay interest on June 30 and December 31.At the date of purchase,Anthem intended to hold the bonds to maturity.The bonds are disposed of,at face value,on June 30,2021.
Prepare the journal entry for (omit the explanation)June 30,2021 (assume that the last interest payment has already been recorded).

Accepted Answer

The answer of Anthem Corporation has excess cash to invest...

Question 20

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

Exam 15: Investments

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

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

Dividends received from available-for-sale investments are recorded with a debit to the Dividend Revenue account.

Glitter Services,Inc.pays $1,350,000 to acquire 35% of voting stock of Grey Investments,Inc.on March 5,2017.When this transaction is recorded,the ________.

Hometown Resources,Inc.has a 9% rate of return on total assets and the industry average is 12%.How was the 9% rate of return on total assets computed? Comment on this information.

Gain on Disposal of a trading investment is an equity account and is reported in the Other Revenues and (Expenses)section of the income statement.

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

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

Elite Services,Inc.pays $1,950,000 to acquire 38% of voting stock of Grey Investments,Inc.on March 5,2017.Which of the following is the correct journal entry for the transaction?

Consolidated statements combine the balance sheets,income statements,and statements of cash flow of the parent company with those of its controlling interest affiliates.

Short-term investments ________.

A ________ ownership in the investee's voting stock can significantly influence the investee's decisions.

Which of the following is true of debt securities?

Depending on the maturity date,held-to-maturity investments are categorized as current assets or long-term assets on the balance sheet.

Investments accounted for by the equity method are recorded at cost at the time of purchase.

________ are equity securities in which the investor owns between 20% and 50% of the investee's voting stock.

A(n)________ is represented by a certificate and is commonly traded on an exchange.

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

Marketable securities are also known as ________.

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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