Question 1

Held-to-Maturity securities

Accepted Answer

A)  are reported at their fair market value on the balance sheet date 
B)  include both stocks and bonds 
C)  are primarily purchased to earn interest revenue 
D)  all of the above 
A)  are reported at their fair market value on the balance sheet date 
B)  include both stocks and bonds 
C)  are primarily purchased to earn interest revenue 
D)  all of the above

Question 2

Trading securities are reported on the balance sheet at cost.

Accepted Answer

A) True 
 B)False

Question 3

When bonds held as long-term investments are purchased at a price other than the face value, the premium or discount should be amortized over the remaining life of the bonds.

Accepted Answer

A) True 
 B)False

Question 4

The corporation owning all or a majority of the voting stock of another corporation is known as the parent company.

Accepted Answer

A) True 
 B)False

Question 5

On June 1, $40,000 of treasury bonds were purchased between interest dates. The broker commission was $600. The bonds pay interest at 12%, which is paid semiannually on January 1 and July 1. How much interest revenue will be recorded on July 1?

Accepted Answer

A)  $400 
B)  $406 
C)  $2,000 
D)  $2,400 
A)  $400 
B)  $406 
C)  $2,000 
D)  $2,400

Question 6

Held to maturity securities

Accepted Answer

A)  are reported at fair market value 
B)  include stocks as well as bonds 
C)  may be reported as current or noncurrent assets 
D)  all of the above 
A)  are reported at fair market value 
B)  include stocks as well as bonds 
C)  may be reported as current or noncurrent assets 
D)  all of the above

Question 7

On May 1, 2014, Stanton Company purchased $60,000 of Harris Company's 12% bonds at 100 plus accrued interest of $2,400. On June 30, 2014, Stanton received its first semiannual interest. On February 1, 2015, Stanton sold $50,000 of the bonds at 103 plus accrued interest. The journal entry Stanton will record on June 30, 2014, will include:

Accepted Answer

A)  a credit to Interest Revenue for $2,400. 
B)  a debit to Cash for $3,600. 
C)  a credit to Cash for $2,400. 
D)  a credit to Interest Receivable for $1,200. 
A)  a credit to Interest Revenue for $2,400. 
B)  a debit to Cash for $3,600. 
C)  a credit to Cash for $2,400. 
D)  a credit to Interest Receivable for $1,200.

Question 8

In order to maintain the original value of a trading security, the fair value adjustments are debited or credited to the account Valuation Allowance for Trading Investments.

Accepted Answer

A) True 
 B)False

Question 9

The equity method is usually more appropriate for accounting for investments where the purchaser does have significant influence over the investee.

Accepted Answer

A) True 
 B)False

Question 10

Long-term investments are held for all of the listed reasons below except

Accepted Answer

A)  to earn the interest or dividend income 
B)  for its long-term gain potential 
C)  to influence over another business entity 
D)  to meet current cash needs 
A)  to earn the interest or dividend income 
B)  for its long-term gain potential 
C)  to influence over another business entity 
D)  to meet current cash needs

Question 11

Compare and contrast why companies invest cash in short-term temporary investments vs. long-term investments.

Accepted Answer

When companies temporarily have excess c

Question 12

Held-to-maturity securities maturing beyond a year are reported as noncurrent assets.

Accepted Answer

A) True 
 B)False

Question 13

The cumulative effects of other comprehensive income items must be reported separately from retained earnings and paid-in capital, on the balance sheet, as accumulated other comprehensive income.

Accepted Answer

A) True 
 B)False

Question 14

If the bonds are purchased between interest dates, the purchase price includes accrued interest since the last interest payment.

Accepted Answer

A) True 
 B)False

Question 15

Purchased $400,000 of ABC Co. 5% bonds at 100 plus accrued interest of $4,500. Sold $250,000 of bonds at 97 plus accrued interest. The journal entry for the sale would include:

Accepted Answer

A)  a debit to Cash for $242,500 
B)  a credit to Loss on Sale for $7,500 
C)  a credit to Gain on Sale for $7,500 
D)  a debit to Cash for $244,300 
A)  a debit to Cash for $242,500 
B)  a credit to Loss on Sale for $7,500 
C)  a credit to Gain on Sale for $7,500 
D)  a debit to Cash for $244,300

Question 16

Which of the following would be considered an "Other Comprehensive Income" item?

Accepted Answer

A)  net income. 
B)  extraordinary loss related to flood. 
C)  gain on disposal of discontinued operations. 
D)  unrealized loss on available-for-sale securities. 
A)  net income. 
B)  extraordinary loss related to flood. 
C)  gain on disposal of discontinued operations. 
D)  unrealized loss on available-for-sale securities.

Question 17

Match between columns
                        Premises: Debt Securities
Business Combination
Equity Method
Available-for-sale Securities
Equity Securities
Investee
Held-to-maturity Securities
Investor
Trading Securities
Cost Method

Accepted Answer

The Answer of Debt investments that a company intends to is...

Question 18

The equity method causes the investment account to mirror the proportional changes in book value of the investee.

Accepted Answer

A) True 
 B)False

Question 19

Yankton Company began the year without an investment portfolio. During the year they purchased investments classified as available-for-sale securities at a cost of $13,000. At the end of the year, the market value of the securities was $11,000. The Yankton Company's financial statements for the current year should show

Accepted Answer

A)  a loss of $2,000 on the income statement and available-for-sale securities of $13,000 on the balance sheet 
B)  no loss on the income statement and available-for-sale securities of $13,000 on the balance sheet 
C)  no loss on the income statement, available-for-sale securities of $11,000 and an unrealized loss of $2,000 as a stockholders' equity adjustment on the balance sheet 
D)  a loss of $2,000 on the income statement and temporary investments of $11,000 on the balance sheet 
A)  a loss of $2,000 on the income statement and available-for-sale securities of $13,000 on the balance sheet 
B)  no loss on the income statement and available-for-sale securities of $13,000 on the balance sheet 
C)  no loss on the income statement, available-for-sale securities of $11,000 and an unrealized loss of $2,000 as a stockholders' equity adjustment on the balance sheet 
D)  a loss of $2,000 on the income statement and temporary investments of $11,000 on the balance sheet

Question 20

Available-for-sale securities are securities that management expects to sell in the future, but are actively traded for profit.

Accepted Answer

A) True 
 B)False

Held-to-Maturity securities

Trading securities are reported on the balance sheet at cost.

When bonds held as long-term investments are purchased at a price other than the face value, the premium or discount should be amortized over the remaining life of the bonds.

The corporation owning all or a majority of the voting stock of another corporation is known as the parent company.

On June 1, $40,000 of treasury bonds were purchased between interest dates. The broker commission was $600. The bonds pay interest at 12%, which is paid semiannually on January 1 and July 1. How much interest revenue will be recorded on July 1?

Held to maturity securities

In order to maintain the original value of a trading security, the fair value adjustments are debited or credited to the account Valuation Allowance for Trading Investments.

The equity method is usually more appropriate for accounting for investments where the purchaser does have significant influence over the investee.

Long-term investments are held for all of the listed reasons below except

Compare and contrast why companies invest cash in short-term temporary investments vs. long-term investments.

Held-to-maturity securities maturing beyond a year are reported as noncurrent assets.

The cumulative effects of other comprehensive income items must be reported separately from retained earnings and paid-in capital, on the balance sheet, as accumulated other comprehensive income.

If the bonds are purchased between interest dates, the purchase price includes accrued interest since the last interest payment.

Purchased $400,000 of ABC Co. 5% bonds at 100 plus accrued interest of $4,500. Sold $250,000 of bonds at 97 plus accrued interest. The journal entry for the sale would include:

Which of the following would be considered an "Other Comprehensive Income" item?

The equity method causes the investment account to mirror the proportional changes in book value of the investee.

Available-for-sale securities are securities that management expects to sell in the future, but are actively traded for profit.

Introduction to Accounting and Business

Analyzing Transactions

The Adjusting Process

Completing the Accounting Cycle

Accounting Systems

Accounting for Merchandising Businesses

Inventories

Sarbanes-Oxley, Internal Control, and Cash

Receivables

Fixed Assets and Intangible Assets

Current Liabilities and Payroll

Accounting for Partnerships and Limited Liability Companies

Corporations: Organization, Stock Transactions, and Dividends

Long-Term Liabilities: Bonds and Notes

Statement of Cash Flows

Financial Statement Analysis

Filters

Exam 15: Investments and Fair Value Accounting

Held-to-Maturity securities

Trading securities are reported on the balance sheet at cost.

When bonds held as long-term investments are purchased at a price other than the face value, the premium or discount should be amortized over the remaining life of the bonds.

The corporation owning all or a majority of the voting stock of another corporation is known as the parent company.

On June 1, $40,000 of treasury bonds were purchased between interest dates. The broker commission was $600. The bonds pay interest at 12%, which is paid semiannually on January 1 and July 1. How much interest revenue will be recorded on July 1?

Held to maturity securities

In order to maintain the original value of a trading security, the fair value adjustments are debited or credited to the account Valuation Allowance for Trading Investments.

The equity method is usually more appropriate for accounting for investments where the purchaser does have significant influence over the investee.

Long-term investments are held for all of the listed reasons below except

Compare and contrast why companies invest cash in short-term temporary investments vs. long-term investments.

Held-to-maturity securities maturing beyond a year are reported as noncurrent assets.

The cumulative effects of other comprehensive income items must be reported separately from retained earnings and paid-in capital, on the balance sheet, as accumulated other comprehensive income.

If the bonds are purchased between interest dates, the purchase price includes accrued interest since the last interest payment.

Purchased $400,000 of ABC Co. 5% bonds at 100 plus accrued interest of $4,500. Sold $250,000 of bonds at 97 plus accrued interest. The journal entry for the sale would include:

Which of the following would be considered an "Other Comprehensive Income" item?

The equity method causes the investment account to mirror the proportional changes in book value of the investee.

Available-for-sale securities are securities that management expects to sell in the future, but are actively traded for profit.

Introduction to Accounting and Business

Analyzing Transactions

The Adjusting Process

Completing the Accounting Cycle

Accounting Systems

Accounting for Merchandising Businesses

Inventories

Sarbanes-Oxley, Internal Control, and Cash

Receivables

Fixed Assets and Intangible Assets

Current Liabilities and Payroll

Accounting for Partnerships and Limited Liability Companies

Corporations: Organization, Stock Transactions, and Dividends

Long-Term Liabilities: Bonds and Notes

Statement of Cash Flows

Financial Statement Analysis

Filters