Question 1

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

Accepted Answer

A) a debit to Cash and a credit to Long-term Investments - Held-to-Maturity 
B) a debit to Long-term Investments - Held-to-Maturity and a credit to Cash 
C) a debit to the Interest Revenue and a credit to Cash 
D) a debit to Cash and a credit to Interest Revenue 
A) a debit to Cash and a credit to Long-term Investments - Held-to-Maturity 
B) a debit to Long-term Investments - Held-to-Maturity and a credit to Cash 
C) a debit to the Interest Revenue and a credit to Cash 
D) a debit to Cash and a credit to Interest Revenue

Question 2

When a company receives interest revenue on a long-term investment in bonds,________.

Accepted Answer

A) long-term assets decrease 
B) long-term assets increase 
C) equity increases 
D) current assets decrease 
A) long-term assets decrease 
B) long-term assets increase 
C) equity increases 
D) current assets decrease

Question 3

A subsidiary 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 a trading 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 a trading investment in another company

Question 4

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 5

Which of the following is the least desirable business reason for a company to invest in debt or equity securities?

Accepted Answer

A) to generate investment income 
B) to invest short-term,excess cash 
C)    
D) to weaken the investing company's supply chain 
A) to generate investment income 
B) to invest short-term,excess cash 
C)    
D) to weaken the investing company's supply chain

Question 6

Which of the following is included in comprehensive income?

Accepted Answer

A) Owners' investments 
B) Purchase of capital assets 
C) Preferred dividends 
D) Deferred gains or losses from derivatives 
A) Owners' investments 
B) Purchase of capital assets 
C) Preferred dividends 
D) Deferred gains or losses from derivatives

Question 7

Based on the partial balance sheet of Marco Investments,Inc. ,compute the rate of return on total assets.

Accepted Answer

A) 12.56% 
B) 22.92% 
C) 11.46% 
D) 5.73% 
A) 12.56% 
B) 22.92% 
C) 11.46% 
D) 5.73%

Question 8

The Gain on Disposal from trading securities is a(n)________.

Accepted Answer

A) current asset account 
B) fixed asset account 
C) liability account 
D) equity account 
A) current asset account 
B) fixed asset account 
C) liability account 
D) equity account

Question 9

An equity security does not represent an ownership interest in a corporation,although it pays dividends.

Accepted Answer

A) True 
 B)False

Question 10

Significant interest investments must be accounted for using the equity method.

Accepted Answer

A) True 
 B)False

Question 11

Debt securities do not include U.S.government securities.

Accepted Answer

A) True 
 B)False

Question 12

Short-term investments are investments in debt and equity securities that are highly illiquid.

Accepted Answer

A) True 
 B)False

Question 13

Securities are ________.

Accepted Answer

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

Question 14

Kelly Financial Services,Inc.invested $33,000 to acquire 7,250 shares of Mitt Investments,Inc.on March 15,2013.This investment represents less than 20% of the investee's voting stock.On May 7,2017,Kelly Financial Services,Inc.sells 2,750 shares for $12,250.In the accounting equation on May 7,2017,________.

Accepted Answer

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

Question 15

The fair value of a trading 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 16

When a company pays cash for a long-term investment in bonds,________.

Accepted Answer

A) equity remains unchanged 
B) current assets increase 
C) liabilities increase 
D) total assets increase 
A) equity remains unchanged 
B) current assets increase 
C) liabilities increase 
D) total assets increase

Question 17

When a company receives interest revenue on a bond,total stockholders' equity remains unchanged.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following is the correct formula for calculating rate of return on total assets?

Accepted Answer

A) (Net income + Interest expense)/ Average total assets 
B) (Net income - Interest expense)/ Average total asset 
C) (Net income - Interest expense)/ Total assets 
D) Total equity / Total assets 
A) (Net income + Interest expense)/ Average total assets 
B) (Net income - Interest expense)/ Average total asset 
C) (Net income - Interest expense)/ Total assets 
D) Total equity / Total assets

Question 19

Anglin 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.Anglin intends to hold the bonds to maturity.The bonds are disposed of,at face value,on June 30,2021.
Prepare the journal entry for June 30,2016 (omit the explanation).

Accepted Answer

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

Question 20

Interest revenue earned on held-to-maturity investments is reported on the income statement in the ________ section.

Accepted Answer

A) other revenues and expenses 
B) current assets 
C) operating income 
D) minority interest 
A) other revenues and expenses 
B) current assets 
C) operating income 
D) minority interest

Exam 15: Investments

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

When a company receives interest revenue on a long-term investment in bonds,________.

A subsidiary company is a company that ________.

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.

Which of the following is the least desirable business reason for a company to invest in debt or equity securities?

Which of the following is included in comprehensive income?

Based on the partial balance sheet of Marco Investments,Inc. ,compute the rate of return on total assets.

The Gain on Disposal from trading securities is a(n)________.

An equity security does not represent an ownership interest in a corporation,although it pays dividends.

Significant interest investments must be accounted for using the equity method.

Debt securities do not include U.S.government securities.

Short-term investments are investments in debt and equity securities that are highly illiquid.

Securities are ________.

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

When a company pays cash for a long-term investment in bonds,________.

When a company receives interest revenue on a bond,total stockholders' equity remains unchanged.

Which of the following is the correct formula for calculating rate of return on total assets?

Interest revenue earned on held-to-maturity investments is reported on the income statement in the ________ section.

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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