Question 1

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On January 1, 2022, Burkett Corporation purchased, as a long-term investment, a $25,000, 5% bond, for $21,595.At this time, the market rate of interest was approximately 7%.The bond pays interest on January 1 and July 1.On December 31, 2022, the fair value of the bonds was $23,950.
-What is the entry (if any) to record the fair value adjustment on December 31, 2022? Assume the adjusting entry for the interest accrual has already been recorded.

Accepted Answer

The answer of Use the following information for questions 
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Question 2

Corporations purchase investments in debt or equity securities for the income tax write-off.

Accepted Answer

A) True 
 B)False

Question 3

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On January 1, 2021, Soo Park Corp.purchased at face value, a $5,000, 5%, bond investment that pays interest on January 1 and July 1.Soo Park classified the investment as long-term.Soo Park has a calendar year end.
-The adjusting entry on December 31, 2021, is

Accepted Answer

The answer of Use the following information for questions 
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Question 4

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On January 1, 2022, Warner Inc.purchased 3.5%, $50,000 face value Jackson Corp.bonds at face value.Interest is payable semi-annually on July 1 and January 1.The bonds are classified as trading investments.The bonds were sold on July 2, 2022 for $53,000.
-Warner's entry to record the purchase would include a debit to

Accepted Answer

A) Trading Investments for $50,000. 
B) Cash for $50,000. 
C) Bonds Payable for $50,000. 
D) Long-Term Investments for $50,000.

Question 5

Debt investments earn interest income over time and the borrower has an obligation to return the original amount of the investment on a fixed maturity date.

Accepted Answer

A) True 
 B)False

Question 6

Premiums and discounts must be amortized on all bond investments.

Accepted Answer

A) True 
 B)False

Question 7

Trading investment(s)

Accepted Answer

A) may be a source of comprehensive income when unrealized gains and losses are recorded. 
B) are always classified as current assets. 
C) are not a source of comprehensive income but a source of always classified as long-term assets. 
D) unrealized gains and losses are recorded differently under the fair value through profit or loss model as realized gains and losses.

Question 8

Corporations invest in other companies for all the following reasons except to

Accepted Answer

A) use excess cash until needed. 
B) generate investment revenue. 
C) meet strategic goals. 
D) influence the market value.

Question 9

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On January 1, 2021, Marianne Corp.purchased $50,000, of Robin Ltd.'s 4%, 10-year bonds for $48,000, since the market interest rate was approximately 4.5%.The bonds pay interest on January 1 and July 1.Marianne has a calendar year end, and classified the bonds as long-term investments.The fair value on December 31, 2021 was $48,500.Marianne sold the bonds on January 2, 2022 for $48,500.
-The entry to adjust to fair value on December 31, 2021 is

Accepted Answer

The answer of Use the following information for questions 
On...

Question 10

When an investor owns more than 50% of the common shares of another company,

Accepted Answer

A) consolidated financial statements are usually prepared. 
B) the fair value through profit or loss model is used. 
C) the investor is called a subsidiary. 
D) the investor recognizes income only when dividends are received.

Question 11

If 30% of the common shares of an investee are purchased as a long-term investment, the appropriate classification for this investment is most likely

Accepted Answer

A) trading investments. 
B) equity investments. 
C) non-strategic investments. 
D) investment in associates.

Question 12

Strategic investments are debt or equity securities that are usually purchased to generate investment income.

Accepted Answer

A) True 
 B)False

Question 13

Which one of the following statements is false?

Accepted Answer

A) Under the equity method, revenue is recognized when net income is earned by the associate. 
B) When the equity method is used to account for an investment in shares, dividends received are accounted for as a reduction in the investment account. 
C) Under the equity method, the investment account is adjusted annually for a portion of associate's net income and for dividends received. 
D) Under the equity method, revenue is recognized when net income is earned by the investor which may not be when it is earned by the investee.

Question 14

Interest income is calculated by multiplying the carrying amount of the bond investment by the market rate of interest when the bond was purchased prorated by the portion of the payment period covered during the year.

Accepted Answer

A) True 
 B)False

Question 15

Under the equity method, the Investment in Associates account is increased when the

Accepted Answer

A) associate reports net income. 
B) associate pays a dividend. 
C) associate reports a loss. 
D) investment is sold at a gain.

Question 16

Which of the following is the correct match concerning an investor's influence on the operations and financial affairs of an investee?

Accepted Answer

The answer of Which of the following is the correct...

Question 17

Preferred shares are often purchased as strategic investments.

Accepted Answer

A) True 
 B)False

Question 18

Securities that can be purchased for strategic purposes

Accepted Answer

A) include only equity securities to influence relationships between companies. 
B) include only debt investments. 
C) include both equity securities and debt investments. 
D) exclude both equity securities and debt investments.

Question 19

Trading Investments are all of the following except

Accepted Answer

A) debt or equity securities. 
B) securities purchased to generate a net income from short-term price fluctuations. 
C) securities held for the purpose of earning capital gains. 
D) strategic investments.

Question 20

When the cost method is used to account for an equity investment, the carrying amount of the investment is affected by

Accepted Answer

A) the net income of the investee. 
B) dividend distributions of the investee. 
C) both the net income and the dividend distributions of the investee. 
D) neither the net income nor the dividend distributions of the investee.

Exam 12: Reporting and Analyzing Investments

Corporations purchase investments in debt or equity securities for the income tax write-off.

Debt investments earn interest income over time and the borrower has an obligation to return the original amount of the investment on a fixed maturity date.

Premiums and discounts must be amortized on all bond investments.

Trading investment(s)

Corporations invest in other companies for all the following reasons except to

When an investor owns more than 50% of the common shares of another company,

If 30% of the common shares of an investee are purchased as a long-term investment, the appropriate classification for this investment is most likely

Strategic investments are debt or equity securities that are usually purchased to generate investment income.

Which one of the following statements is false?

Interest income is calculated by multiplying the carrying amount of the bond investment by the market rate of interest when the bond was purchased prorated by the portion of the payment period covered during the year.

Under the equity method, the Investment in Associates account is increased when the

Which of the following is the correct match concerning an investor's influence on the operations and financial affairs of an investee?

Preferred shares are often purchased as strategic investments.

Securities that can be purchased for strategic purposes

Trading Investments are all of the following except

When the cost method is used to account for an equity investment, the carrying amount of the investment is affected by