Question 1

Most companies invest excess cash in bonds as investments in order to profit long-term from the growth of the investment.

Accepted Answer

A) True 
 B)False  False

Question 2

(1)Discuss factors contributing to the trend to fair value accounting.
(2)What are some of the disadvantages associated with using fair value?

Accepted Answer

Factors contributing to the trend to fair value accounting include:
1.Current generally accepted accounting principles are a hybrid of varying measurement methods that often conflict with one another.
2.A greater percentage of total assets of many companies consists of financial assets whose fair values can be readily obtained.
3.Fair value is more often used by IFRS (International Financial Reporting Standards).
Disadvantages associated with using fair value include:
1.Fair value may not be readily obtainable for some assets.
2.Fair value makes it more difficult to compare companies if they use different methods of determining what fair value is.
3.Using fair values could lead to more fluctuations in accounting reports because fair values usually change from year to year.

Question 3

Generally accepted accounting principles (GAAP)require the use of fair value accounting for all assets and liabilities.

Accepted Answer

A) True 
 B)False  False

Question 4

Unrealized gains and losses on trading securities are not included in the calculation of net income.

Accepted Answer

A) True 
 B)False

Question 5

On April 1,2015,ValueTime,Inc.had a market price per common share of $24.For the previous year ValueTime paid a dividend of $1.50 per share.Compute the dividend yield for ValueTime,Inc.

Accepted Answer

Dividend yield:
Dividends per

Question 6

The company whose more than 50% stock is owned by the another company is called the

Accepted Answer

A) controlling company. 
B) investee company. 
C) subsidiary company. 
D) sibling company. 
A) controlling company. 
B) investee company. 
C) subsidiary company. 
D) sibling company.

Question 7

To record a bond investment between interest payment periods,Investment in Bonds would be debited and Cash and Interest Revenue would be credited.

Accepted Answer

A) True 
 B)False

Question 8

On May 1,2012,Chase Inc.purchases $60,000 of 10-year,Manus Corporation 8% bonds dated March 1,2012 at 100 plus accrued interest.What entry would Chase record when receiving its semiannual interest on March 1,2013?

Accepted Answer

The answer of On May 1,2012,Chase Inc.purchases $60,000 of 10-year,Manus...

Question 9

Which of the following statements below is not a reason a company may purchase another company's stock?

Accepted Answer

A) earning a return on excess cash 
B) sustain the other company's stock price 
C) gaining control of another company's operations 
D) developing or maintaining business relationships 
A) earning a return on excess cash 
B) sustain the other company's stock price 
C) gaining control of another company's operations 
D) developing or maintaining business relationships

Question 10

Define (1)debt securities and (2)equity securities.Include their similarities and differences in your discussion.

Accepted Answer

Debt securities are notes and bonds that

Question 11

Ruben Company purchased $100,000 of Evans Company bonds at 100 plus $1,500 in accrued interest.The bond interest rate is 8% and interest is paid semi-annually.The journal entry to record the receipt of interest on the next interest payment date would be:

Accepted Answer

A) Debit: Cash $4,000;Credit: Interest Revenue $4,000 
B) Debit: Cash $4,000;Credit: Interest Receivable $4,000 
C) Debit: Cash $4,000;Credit: Interest Receivable $1,500 and Interest Revenue $2,500 
D) Debit: Cash $2,500;Credit: Interest Revenue $2,500 
A) Debit: Cash $4,000;Credit: Interest Revenue $4,000 
B) Debit: Cash $4,000;Credit: Interest Receivable $4,000 
C) Debit: Cash $4,000;Credit: Interest Receivable $1,500 and Interest Revenue $2,500 
D) Debit: Cash $2,500;Credit: Interest Revenue $2,500

Question 12

Armando Company owns 17,000 of the 70,000 shares of common stock outstanding of Tito Company and exercises a significant influence over its operating and financial policies.The investment should be accounted for by the

Accepted Answer

A) equity method 
B) market method 
C) cost or market method 
D) cost method 
A) equity method 
B) market method 
C) cost or market method 
D) cost method

Question 13

Ruben Company purchased $100,000 of Evans Company bonds at 100 plus $1,500 in accrued interest.The bond interest rate is 8% and interest is paid semi-annually.The journal entry to record the purchase would be:

Accepted Answer

A) Debit: Investment in Bonds $101,500;Credit: Cash $101,500 
B) Debit: Investment in Bonds $100,000;Credit: Interest Revenue $1,500 and Cash $98,500 
C) Debit: Investment in Bonds $100,000 and Interest Receivable $1,500;Credit: Cash $101,500 
D) Investment in Bonds $100,000;Credit: Cash $100,000 
A) Debit: Investment in Bonds $101,500;Credit: Cash $101,500 
B) Debit: Investment in Bonds $100,000;Credit: Interest Revenue $1,500 and Cash $98,500 
C) Debit: Investment in Bonds $100,000 and Interest Receivable $1,500;Credit: Cash $101,500 
D) Investment in Bonds $100,000;Credit: Cash $100,000

Question 14

Available-for-sale securities are securities that management expects to sell in the future,but are not actively traded for profit.

Accepted Answer

A) True 
 B)False

Question 15

Investment in Bonds is listed on the balance sheet after Bonds Payable.

Accepted Answer

A) True 
 B)False

Question 16

Sutton Company purchased 10% of the outstanding stock of Roberts Company on January 1,2012.Roberts reported net income of $155,000 and declared dividends of $40,000 during 2012.How would these events be reported by Sutton using the cost method?

Accepted Answer

When using the cost method,there is no a

Question 17

The cumulative effects of other comprehensive income items is included in retained earnings,on the balance sheet.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following is not a reason to invest excess cash in temporary investments?

Accepted Answer

A) earn interest revenue 
B) influence the operations of another company 
C) receive dividends 
D) realize gains from the increase in market value of the securities 
A) earn interest revenue 
B) influence the operations of another company 
C) receive dividends 
D) realize gains from the increase in market value of the securities

Question 19

Investment in Bonds are reported on the balance sheet at lower of cost or market.

Accepted Answer

A) True 
 B)False

Question 20

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

Most companies invest excess cash in bonds as investments in order to profit long-term from the growth of the investment.

(1)Discuss factors contributing to the trend to fair value accounting. (2)What are some of the disadvantages associated with using fair value?

Generally accepted accounting principles (GAAP)require the use of fair value accounting for all assets and liabilities.

Unrealized gains and losses on trading securities are not included in the calculation of net income.

On April 1,2015,ValueTime,Inc.had a market price per common share of $24.For the previous year ValueTime paid a dividend of $1.50 per share.Compute the dividend yield for ValueTime,Inc.

The company whose more than 50% stock is owned by the another company is called the

To record a bond investment between interest payment periods,Investment in Bonds would be debited and Cash and Interest Revenue would be credited.

On May 1,2012,Chase Inc.purchases $60,000 of 10-year,Manus Corporation 8% bonds dated March 1,2012 at 100 plus accrued interest.What entry would Chase record when receiving its semiannual interest on March 1,2013?

Which of the following statements below is not a reason a company may purchase another company's stock?

Define (1)debt securities and (2)equity securities.Include their similarities and differences in your discussion.

Ruben Company purchased $100,000 of Evans Company bonds at 100 plus $1,500 in accrued interest.The bond interest rate is 8% and interest is paid semi-annually.The journal entry to record the receipt of interest on the next interest payment date would be:

Armando Company owns 17,000 of the 70,000 shares of common stock outstanding of Tito Company and exercises a significant influence over its operating and financial policies.The investment should be accounted for by the

Ruben Company purchased $100,000 of Evans Company bonds at 100 plus $1,500 in accrued interest.The bond interest rate is 8% and interest is paid semi-annually.The journal entry to record the purchase would be:

Available-for-sale securities are securities that management expects to sell in the future,but are not actively traded for profit.

Investment in Bonds is listed on the balance sheet after Bonds Payable.

Sutton Company purchased 10% of the outstanding stock of Roberts Company on January 1,2012.Roberts reported net income of $155,000 and declared dividends of $40,000 during 2012.How would these events be reported by Sutton using the cost method?

The cumulative effects of other comprehensive income items is included in retained earnings,on the balance sheet.

Which of the following is not a reason to invest excess cash in temporary investments?

Investment in Bonds are reported on the balance sheet at lower of cost or market.

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.

Introduction to Accounting and Business

Analyzing Transactions

The Adjusting Process

Completing the Accounting Cycle

Accounting for Merchandising Businesses

Inventories

Sarbanes-Oxley, internal Control, and Cash

Receivables

Fixed Assets and Intangible Assets

Current Liabilities and Payroll

Corporations: Organization, stock Transactions, and Dividends

Long-Term Liabilities: Bonds and Notes

Statement of Cash Flows

Financial Statement Analysis

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Exam 13: Investments and Fair Value Accounting

Most companies invest excess cash in bonds as investments in order to profit long-term from the growth of the investment.

(1)Discuss factors contributing to the trend to fair value accounting. (2)What are some of the disadvantages associated with using fair value?

Generally accepted accounting principles (GAAP)require the use of fair value accounting for all assets and liabilities.

Unrealized gains and losses on trading securities are not included in the calculation of net income.

On April 1,2015,ValueTime,Inc.had a market price per common share of $24.For the previous year ValueTime paid a dividend of $1.50 per share.Compute the dividend yield for ValueTime,Inc.

The company whose more than 50% stock is owned by the another company is called the

To record a bond investment between interest payment periods,Investment in Bonds would be debited and Cash and Interest Revenue would be credited.

On May 1,2012,Chase Inc.purchases $60,000 of 10-year,Manus Corporation 8% bonds dated March 1,2012 at 100 plus accrued interest.What entry would Chase record when receiving its semiannual interest on March 1,2013?

Which of the following statements below is not a reason a company may purchase another company's stock?

Define (1)debt securities and (2)equity securities.Include their similarities and differences in your discussion.

Ruben Company purchased $100,000 of Evans Company bonds at 100 plus $1,500 in accrued interest.The bond interest rate is 8% and interest is paid semi-annually.The journal entry to record the receipt of interest on the next interest payment date would be:

Armando Company owns 17,000 of the 70,000 shares of common stock outstanding of Tito Company and exercises a significant influence over its operating and financial policies.The investment should be accounted for by the

Ruben Company purchased $100,000 of Evans Company bonds at 100 plus $1,500 in accrued interest.The bond interest rate is 8% and interest is paid semi-annually.The journal entry to record the purchase would be:

Available-for-sale securities are securities that management expects to sell in the future,but are not actively traded for profit.

Investment in Bonds is listed on the balance sheet after Bonds Payable.

Sutton Company purchased 10% of the outstanding stock of Roberts Company on January 1,2012.Roberts reported net income of $155,000 and declared dividends of $40,000 during 2012.How would these events be reported by Sutton using the cost method?

The cumulative effects of other comprehensive income items is included in retained earnings,on the balance sheet.

Which of the following is not a reason to invest excess cash in temporary investments?

Investment in Bonds are reported on the balance sheet at lower of cost or market.

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.

Introduction to Accounting and Business

Analyzing Transactions

The Adjusting Process

Completing the Accounting Cycle

Accounting for Merchandising Businesses

Inventories

Sarbanes-Oxley, internal Control, and Cash

Receivables

Fixed Assets and Intangible Assets

Current Liabilities and Payroll

Corporations: Organization, stock Transactions, and Dividends

Long-Term Liabilities: Bonds and Notes

Statement of Cash Flows

Financial Statement Analysis

Filters