Question 1

Match each of the definitions that follow with the appropriate investment term a-j) .
-the value assigned to held-to-maturity securities

Accepted Answer

A)  equity method
B)  parent company
C)  subsidiary company
D)  consolidated financial statements
E)  fair valueF) unrealized gain or loss on investments.G) valuation allowance for investmentsH) dividend yieldI) amortized costJ) cost methodK) E) and G)
L) I) and J)

Question 2

On February 12, Addison, Inc. purchased 6,000 shares of Lucas Company at $22 per share plus a $240 brokerage fee. On August 22, Lucas paid a $0.42 dividend per share. On November 10, 4,000 shares of Lucas stock were sold for $28 per share less a $160 brokerage fee. The journal entry for the sale would include a

Accepted Answer

A)   debit to Cash, $111,840
B)   credit to Investments, $112,000
C)   credit to Loss on Sale, $23,680
D)   debit to Cash, $112,000E) A) and B)
F) A) and C)

Question 3

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 securitiesE) B) and D)
F) All of the above

Question 4

a) What is comprehensive income? b) How is it calculated? c) What are some examples of items included in other comprehensive income? d) Where is comprehensive income reported?

Accepted Answer

a) Comprehensive income is all changes i...

Question 5

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 6

The equity method of accounting for investments

Accepted Answer

A)   requires a year-end adjustment to revalue the stock to lower of cost or market
B)   requires the investment to be reported at its original cost
C)   requires the investment be increased by the reported net income of the investee
D)   requires the investment be increased by the dividends paid by the investeeE) A) and C)
F) A) and B)

Question 7

Interest revenue on bonds is reported

Accepted Answer

A)   as an addition to the Investment in Bonds account
B)   as part of comprehensive income but not as part of net income
C)   as part of other income
D)   as part of operating incomeE) B) and C)
F) C) and D)

Question 8

Match each of the definitions that follow with the appropriate investment term a-j) .
-when using this, dividends are treated as a reduction of the investment

Accepted Answer

A)  debt securities
B)  equity securities
C)  investor
D)  investee
E)  cost methodF) trading securitiesG) available-for-sale securitiesH) held-to-maturity securitiesI) equity methodJ) business combinationK) A) and B)
L) A) and C)

Question 9

In general, consolidated financial statements should be prepared

Accepted Answer

A)   when a corporation owns more than 20% and less than 40% of the common stock of another company
B)   when a corporation owns more than 50% of the common stock of another company
C)   only when a corporation owns 100% of the common stock of another company
D)   whenever the market value of the stock investment is significantly lower than its costE) C) and D)
F) B) and D)

Question 10

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 11

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 12

When shares of stock held as an investment are sold, the difference between the proceeds and the carrying amount of the investment is recorded as an)

Accepted Answer

A)   prior period adjustment
B)   operating income and losses
C)   paid-in capital addition
D)   gain or lossE) C) and D)
F) All of the above

Question 13

Match each of the definitions that follow with the appropriate investment term a-j) .
-a corporation owning all or the majority of the voting stock of another corporation

Accepted Answer

A)  equity method
B)  parent company
C)  subsidiary company
D)  consolidated financial statements
E)  fair valueF) unrealized gain or loss on investments.G) valuation allowance for investmentsH) dividend yieldI) amortized costJ) cost methodK) B) and H)
L) E) and I)

Question 14

Trading securities are reported on the balance sheet at cost.

Accepted Answer

A) True 
 B)False

Question 15

Under the equity method, a stock purchase is recorded at its original cost and is not adjusted to fair market value each accounting period.

Accepted Answer

A) True 
 B)False

Question 16

Journalize the entries to record the following selected equity investment transactions completed by Perry Company during the current year. Perry accounts for this investment using the cost method.

Accepted Answer

Feb. 2 Investments-Dexter Co. Stock 49,0...

Question 17

Gale Company owns 87% of the outstanding stock of Leonardo Company. Leonardo Company is referred to as the

Accepted Answer

A)   parent
B)   minority interest
C)   affiliate
D)   subsidiaryE) A) and D)
F) B) and C)

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

Match each of the definitions that follow with the appropriate investment term a-j) .
-the method of reporting an investment that represents less than 20% of the voting stock of another company

Accepted Answer

A)  debt securities
B)  equity securities
C)  investor
D)  investee
E)  cost methodF) trading securitiesG) available-for-sale securitiesH) held-to-maturity securitiesI) equity methodJ) business combinationK) G) and I)
L) B) and H)

Question 20

Match each of the definitions that follow with the appropriate investment term a-j) .
-the company whose stock is purchased by another entity

Accepted Answer

A)  debt securities
B)  equity securities
C)  investor
D)  investee
E)  cost methodF) trading securitiesG) available-for-sale securitiesH) held-to-maturity securitiesI) equity methodJ) business combinationK) A) and B)
L) A) and I)

Exam 13: Investments and Fair Value Accounting

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

Correct Answer
verified

Under the equity method, a stock purchase is recorded at its original cost and is not adjusted to fair market value each accounting period.

Correct Answer
verified

In general, consolidated financial statements should be prepared

Correct Answer
verified

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

Correct Answer
verified
When companies temporarily have excess c...
View Answer

Journalize the entries to record the following selected equity investment transactions completed by Perry Company during the current year. Perry accounts for this investment using the cost method.

Correct Answer
verified
Feb. 2 Investments-Dexter Co. Stock 49,0...
View Answer

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

Correct Answer
verified

Match each of the definitions that follow with the appropriate investment term a-j) . -the value assigned to held-to-maturity securities

Correct Answer
verified

When shares of stock held as an investment are sold, the difference between the proceeds and the carrying amount of the investment is recorded as an)

Correct Answer
verified

Correct Answer
verified

Match each of the definitions that follow with the appropriate investment term a-j) . -the method of reporting an investment that represents less than 20% of the voting stock of another company

Correct Answer
verified

Gale Company owns 87% of the outstanding stock of Leonardo Company. Leonardo Company is referred to as the

Correct Answer
verified

Match each of the definitions that follow with the appropriate investment term a-j) . -a corporation owning all or the majority of the voting stock of another corporation

Correct Answer
verified

Match each of the definitions that follow with the appropriate investment term a-j) . -when using this, dividends are treated as a reduction of the investment

Correct Answer
verified

Trading securities are reported on the balance sheet at cost.

Correct Answer
verified

Match each of the definitions that follow with the appropriate investment term a-j) . -the company whose stock is purchased by another entity

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

a) What is comprehensive income? b) How is it calculated? c) What are some examples of items included in other comprehensive income? d) Where is comprehensive income reported?

Correct Answer
verified
a) Comprehensive income is all changes i...
View Answer

The equity method of accounting for investments

Correct Answer
verified

Interest revenue on bonds is reported

Correct Answer
verified

Exam 13: Investments and Fair Value Accounting

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

Correct AnswerverifiedShow Answer

Under the equity method, a stock purchase is recorded at its original cost and is not adjusted to fair market value each accounting period.

Correct AnswerverifiedShow Answer

In general, consolidated financial statements should be prepared

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedWhen companies temporarily have excess c...View AnswerShow Answer

Journalize the entries to record the following selected equity investment transactions completed by Perry Company during the current year. Perry accounts for this investment using the cost method.

Correct AnswerverifiedFeb. 2 Investments-Dexter Co. Stock 49,0...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

Match each of the definitions that follow with the appropriate investment term a-j) . -the value assigned to held-to-maturity securities

Correct AnswerverifiedShow Answer

When shares of stock held as an investment are sold, the difference between the proceeds and the carrying amount of the investment is recorded as an)

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Match each of the definitions that follow with the appropriate investment term a-j) . -the method of reporting an investment that represents less than 20% of the voting stock of another company

Correct AnswerverifiedShow Answer

Gale Company owns 87% of the outstanding stock of Leonardo Company. Leonardo Company is referred to as the

Correct AnswerverifiedShow Answer

Match each of the definitions that follow with the appropriate investment term a-j) . -a corporation owning all or the majority of the voting stock of another corporation

Correct AnswerverifiedShow Answer

Match each of the definitions that follow with the appropriate investment term a-j) . -when using this, dividends are treated as a reduction of the investment

Correct AnswerverifiedShow Answer

Trading securities are reported on the balance sheet at cost.

Correct AnswerverifiedShow Answer

Match each of the definitions that follow with the appropriate investment term a-j) . -the company whose stock is purchased by another entity

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

a) What is comprehensive income? b) How is it calculated? c) What are some examples of items included in other comprehensive income? d) Where is comprehensive income reported?

Correct Answerverifieda) Comprehensive income is all changes i...View AnswerShow Answer

The equity method of accounting for investments

Correct AnswerverifiedShow Answer

Interest revenue on bonds is reported

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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When companies temporarily have excess c...
View Answer

Correct Answer
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Feb. 2 Investments-Dexter Co. Stock 49,0...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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a) Comprehensive income is all changes i...
View Answer

Correct Answer
verified

Correct Answer
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