Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

On June 1, $50,000 of treasury bonds were purchased between interest dates. The broker commission was $500. The bonds pay interest at 12%, which is paid semiannually on January 1 and July 1. What is the total cost to be debited to the Investment - Treasury Bonds account?

Accepted Answer

A)  $50,000 
B)  $50,500 
C)  $49,500 
D)  $53,000

Question 3

An equity investment in less than 20% of another company's stock is accounted for using the cost method.

Accepted Answer

A) True 
 B)False

Question 4

Newville Corporation reported net income of $50,000 in 2015. They have 10,000 shares of $100 par, 6% preferred stock and 50,000 shares of $2 common stock outstanding. During 2012 Newville paid the preferred stockholder's a $6 per share dividend and also paid $30,000 to common shareholders. The market value of Newville's stock is: Preferred - $105 and Common - $10.
(1) Calculate Newville's dividend yield.
(2) Why does the dividend yield vary widely across firms?

Accepted Answer

The answer of Newville Corporation reported net income of $50,000...

Question 5

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 6

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

Question 7

Mangrill, Inc. reported net income for the year ending December 31, 2012 of $483,500. Dividends paid during the year totaled $42,900. The company holds available-for-sale securities with an original cost of $162,000 and a fair value of $171,000 at the end of the year. They also hold trading securities with an original cost of $150,000 and a fair value of $147,000. Retained Earnings on January 1, 2012 was $736,400 and Accumulated Other Comprehensive Income on January 1, 2012 was $16,200.
Required:
Calculate the following balances to be reported in the financial statements dated December 31, 2012.
(1) Valuation Allowance for Available-for-Sale securities
(2) Comprehensive Income
(3) Retained Earnings
(4) Accumulated Other Comprehensive Income

Accepted Answer

The answer of Mangrill, Inc. reported net income for the...

Question 8

All of the following are factors contributing to the trend for regulators to adopt accounting principles using fair value concepts except:

Accepted Answer

A)  a greater percentage of total assets existing as receivables and securities. 
B)  pressure on regulators to adopt an international set of accounting principles and standards. 
C)  hybrid measurement methods within GAAP that conflict with each other. 
D)  the ease of applying market values to assets and liabilities.

Question 9

For accounting purposes, the method used to account for investments in common stock is determined by

Accepted Answer

A)  the amount paid for the stock by the investor. 
B)  whether the acquisition of the stock by the investor was "friendly" or "hostile." 
C)  the extent of an investor's influence over the operating and financial affairs of the investee. 
D)  whether the stock has paid dividends in past years.

Question 10

Edison Corporation paid a dividend of $10 per share on its $100 par preferred stock and $4 per share on its $20 par common stock. The market value of the common stock is $80 per share. Edison's dividend yield is:

Accepted Answer

A)  5% 
B)  10% 
C)  25% 
D)  20%

Question 11

The investor carrying an investment by the equity method records cash dividends received as an increase in the carrying amount of the investment.

Accepted Answer

A) True 
 B)False

Question 12

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.

Question 13

Match each of the following investment terms with the appropriate definition below.

Accepted Answer

The answer of Match each of the following investment terms...

Exam 15: Investments and Fair Value Accounting

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

On June 1, $50,000 of treasury bonds were purchased between interest dates. The broker commission was $500. The bonds pay interest at 12%, which is paid semiannually on January 1 and July 1. What is the total cost to be debited to the Investment - Treasury Bonds account?

An equity investment in less than 20% of another company's stock is accounted for using the cost method.

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.

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?

All of the following are factors contributing to the trend for regulators to adopt accounting principles using fair value concepts except:

For accounting purposes, the method used to account for investments in common stock is determined by

Edison Corporation paid a dividend of $10 per share on its $100 par preferred stock and $4 per share on its $20 par common stock. The market value of the common stock is $80 per share. Edison's dividend yield is:

The investor carrying an investment by the equity method records cash dividends received as an increase in the carrying amount of the investment.

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

Match each of the following investment terms with the appropriate definition below.