Question 1

________ financial statements show the financial position,results of operations,and cash flows of all entities under the parent company's control,including all subsidiaries.

Accepted Answer

The answer of ________ financial statements show the financial position,results...

Question 2

Investments in trading securities are always classified as ________ and are reported as ________ on the balance sheet.

Accepted Answer

answers m...

Question 3

Long-term investments in held-to-maturity debt securities are accounted for using the:

Accepted Answer

A)   Fair value method with fair value adjustment to income.
B)   Fair value method with fair value adjustment to equity.
C)   Cost method without amortization.
D)   Cost method with amortization.
E)   Equity method.F) A) and B)
G) B) and E)

Question 4

Strickland Corporation has invested in 10% of the outstanding stock of Nez Corporation.Strickland intends to actively manage this investment for profit.This investment is classified as:

Accepted Answer

A)   an available-for-sale security.
B)   a held-to-maturity security.
C)   a trading security.
D)   a significant influence security.
E)   a controlling influence security.F) All of the above
G) A) and D)

Question 5

Kendall Corp.purchased at par value $160,000 of Barker Company's 7% bonds that mature in 10 months.The bonds pay interest semiannually on June 1 and December 1.Kendall plans to hold the bonds until they mature.The journal entry to record Kendall's purchase of the bonds is:

Accepted Answer

A)   debit Short-Term Investments-HTM $160,000; credit Cash, $160,000.
B)   debit Cash, $169,333; credit, Short-Term Investments-HTM $169,333.
C)   debit Cash, $160,000; credit Short-Term Investments-HTM $160,000.
D)   debit Long-Term Investments-HTM $160,000; credit Cash $160,000.
E)   debit Cash, $160,000; credit Long-Term Investments-HTM $160,000.F) B) and C)
G) A) and B)

Question 6

Define the foreign exchange rate between two currencies.Explain its effect on business transactions conducted in a foreign currency.

Accepted Answer

A foreign exchange rate is the price of ...

Question 7

Long-term investments cannot include:

Accepted Answer

A)   Held-to-maturity debt securities.
B)   Securities with maturity dates within one operating cycle.
C)   Available-for-sale equity securities.
D)   Equity securities giving an investor significant influence over an investee.
E)   Available-for-sale debt securities.F) B) and E)
G) C) and D)

Question 8

Both U.S.GAAP and IFRS permit companies to use fair value in reporting available-for-sale and held-to-maturity securities.

Accepted Answer

A) True 
 B)False

Question 9

In the current year,Largo Co.purchased bonds of MacDermott Corp.with a cost of $125,000 and a market value of $127,000.Largo also purchased 1,500 shares of Armistead common stock with a cost of $25,000 and a market value of $24,700.These are classified as long-term available-for-sale securities.Prepare the journal entry to record the market value of the investments as of December 31.

Accepted Answer

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Question 10

A company paid $600,000 for 10% bonds with a par value of $600,000 on September 1.The bonds pay 5% interest semiannually on September 1 and March 1.The company intends to hold the bonds until they mature.Prepare the journal entries for the following dates and transactions related to this bond acquisition.
(1)Bonds purchased on September 1.
(2)Year-end adjusting entry,December 31.
(3)Receipt of semiannual interest March 1.
(4)Redemption of the bonds at maturity on August 31.

Accepted Answer

None...

Question 11

A company had net income of $45,000,net sales of $390,000,and average total assets of $450,000 for the current year.Calculate the company's profit margin,total asset turnover,and return on total assets.

Accepted Answer

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Question 12

Landers,Inc.,held 1,500 of Shipman Company common stock with a cost of $36,900.These shares were classified as a long-term available-for-sale investment.It sold the shares on December 13 for $42,100.Prepare Lander's journal entry to record this sale.

Accepted Answer

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Question 13

If a company owns more than 20% of the stock of another company and the stock is being held as a long-term investment,which method would the investor normally use to account for this investment?

Accepted Answer

A)   Equity method.
B)   Fair value method.
C)   Historical cost method.
D)   Cost with amortization method.
E)   Effective method.F) A) and B)
G) B) and C)

Question 14

All of the following statements regarding accounting for trading securities under U.S.GAAP are true except:

Accepted Answer

A)   The entire portfolio of trading securities is reported at fair value.
B)   An unrealized gain or loss from a change in fair value is reported on the income statement.
C)   A realized gain or loss is recorded when the securities are sold and reported on the income statement.
D)   When the period-end fair value adjustment for the portfolio of trading securities is computed, it includes the cost and fair value of any securities sold.
E)   Any prior period fair value adjustment to the portfolio is not used to compute the gain or loss from sale of individual transactions.F) D) and E)
G) None of the above

Question 15

On July 31,Potter Co.purchased 2,000 shares of GigaTech stock for $16,000.The investment is classified as available-for-sale securities.This is the company's first and only investment in available-for-sale securities.On October 31,which is Potter's year-end,the stock had a fair value of $20,000.Potter should record a:

Accepted Answer

A)   Credit to Unrealized Gain-Equity for $4,000.
B)   Credit to Market Adjustment-Available-for-Sale for $4,000.
C)   Credit to Investment Revenue for $4,000.
D)   Debit to Unrealized Loss-Equity for $4,000.
E)   Debit to Unrealized Gain-Equity for $4,000.F) B) and E)
G) B) and C)

Question 16

Landmark Corp.buys $300,000 of Schroeter Company's 8%,5-year bonds payable at par value on September 1.Interest payments are made semiannually.Landmark plans to hold the bonds for the 5-year life.When the bonds mature,the journal entry to record the proceeds will be:

Accepted Answer

A)   Debit Long-Term Investments-HTM $300,000; credit Cash $300,000.
B)   Debit Cash $300,000; credit Interest Revenue $300,000.
C)   Debit Cash $300,000; credit Long-Term Investments-HTM $300,000.
D)   Debit Cash $300,000; credit Interest Receivable $300,000.
E)   Debit Cash $300,000; credit Bonds Payable $300,000.F) A) and C)
G) B) and E)

Question 17

On November 12,Higgins,Inc.,a U.S.Company,sold merchandise on credit to Kagome of Japan at a price of 1,500,000 yen.The exchange rate was $0.00837 on the date of sale.On December 31,when Higgins prepared its financial statements,the exchange rate was $0.00843.Kagome paid in full on January 12,when the exchange rate was $0.00861.On January 12,Higgins should prepare the following journal entry:

Accepted Answer

A)   Debit Cash $12,915; credit Accounts Receivable-Kagome $12,555; credit Foreign Exchange Gain $360.
B)   Debit Cash $12,555; debit Foreign Exchange Loss $360; credit Accounts Receivable-Kagome $12,915.
C)   Debit Cash $12,915; credit Accounts Receivable-Kagome $12,645; credit Foreign Exchange Gain $90.
D)   Debit Cash $12,645; debit Foreign Exchange Loss $90; credit Accounts Receivable-Kagome $12,915.
E)   Debit Cash $12,915; credit Accounts Receivable-Kagome $12,645; credit Foreign Exchange Gain $270.F) C) and D)
G) A) and E)

Question 18

J.P.Industries purchased 2,000 shares of Yang's common stock for $143,000 as a long-term investment.The investment is classified as available-for-sale securities.The par value of the stock was $1 per share.J.P.paid $375 in commissions on the transaction.J.P.'s entry to record the purchase transaction would include a:

Accepted Answer

A)   Credit to Common Stock for $2,000.
B)   Credit to Common Stock for $143,000.
C)   Credit to Common Stock for $143,375.
D)   Debit to Long-Term Investments-AFS for $143,000.
E)   Debit to Long-Term Investments-AFS for $143,375.F) D) and E)
G) B) and D)

Question 19

Explain how to account for available-for-sale debt and equity securities at and after acquisition and how they are reported in financial statements.

Accepted Answer

Available-for-sale debt and equity secur...

Question 20

Unrealized gains and losses on trading securities are reported on the income statement.

Accepted Answer

A) True 
 B)False

Exam 15: Investments

Correct Answer
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View Answer

Both U.S.GAAP and IFRS permit companies to use fair value in reporting available-for-sale and held-to-maturity securities.

Correct Answer
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Unrealized gains and losses on trading securities are reported on the income statement.

Correct Answer
verified

Landmark Corp.buys $300,000 of Schroeter Company's 8%,5-year bonds payable at par value on September 1.Interest payments are made semiannually.Landmark plans to hold the bonds for the 5-year life.When the bonds mature,the journal entry to record the proceeds will be:

Correct Answer
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Correct Answer
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None...
View Answer

Strickland Corporation has invested in 10% of the outstanding stock of Nez Corporation.Strickland intends to actively manage this investment for profit.This investment is classified as:

Correct Answer
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Correct Answer
verified

________ financial statements show the financial position,results of operations,and cash flows of all entities under the parent company's control,including all subsidiaries.

Correct Answer
verified

Kendall Corp.purchased at par value $160,000 of Barker Company's 7% bonds that mature in 10 months.The bonds pay interest semiannually on June 1 and December 1.Kendall plans to hold the bonds until they mature.The journal entry to record Kendall's purchase of the bonds is:

Correct Answer
verified

Landers,Inc.,held 1,500 of Shipman Company common stock with a cost of $36,900.These shares were classified as a long-term available-for-sale investment.It sold the shares on December 13 for $42,100.Prepare Lander's journal entry to record this sale.

Correct Answer
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View Answer

Explain how to account for available-for-sale debt and equity securities at and after acquisition and how they are reported in financial statements.

Correct Answer
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Available-for-sale debt and equity secur...
View Answer

Correct Answer
verified

If a company owns more than 20% of the stock of another company and the stock is being held as a long-term investment,which method would the investor normally use to account for this investment?

Correct Answer
verified

Correct Answer
verified

Long-term investments in held-to-maturity debt securities are accounted for using the:

Correct Answer
verified

Define the foreign exchange rate between two currencies.Explain its effect on business transactions conducted in a foreign currency.

Correct Answer
verified
A foreign exchange rate is the price of ...
View Answer

Investments in trading securities are always classified as and are reported as on the balance sheet.

Correct Answer
verified
answers m...
View Answer

A company had net income of $45,000,net sales of $390,000,and average total assets of $450,000 for the current year.Calculate the company's profit margin,total asset turnover,and return on total assets.

Correct Answer
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View Answer

Long-term investments cannot include:

Correct Answer
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All of the following statements regarding accounting for trading securities under U.S.GAAP are true except:

Correct Answer
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Exam 15: Investments

Correct Answerverified\[\begin{array} { | l | c | r | c | } \...View AnswerShow Answer

Both U.S.GAAP and IFRS permit companies to use fair value in reporting available-for-sale and held-to-maturity securities.

Correct AnswerverifiedShow Answer

Unrealized gains and losses on trading securities are reported on the income statement.

Correct AnswerverifiedShow Answer

Landmark Corp.buys $300,000 of Schroeter Company's 8%,5-year bonds payable at par value on September 1.Interest payments are made semiannually.Landmark plans to hold the bonds for the 5-year life.When the bonds mature,the journal entry to record the proceeds will be:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedNone...View AnswerShow Answer

Strickland Corporation has invested in 10% of the outstanding stock of Nez Corporation.Strickland intends to actively manage this investment for profit.This investment is classified as:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

________ financial statements show the financial position,results of operations,and cash flows of all entities under the parent company's control,including all subsidiaries.

Correct AnswerverifiedShow Answer

Kendall Corp.purchased at par value $160,000 of Barker Company's 7% bonds that mature in 10 months.The bonds pay interest semiannually on June 1 and December 1.Kendall plans to hold the bonds until they mature.The journal entry to record Kendall's purchase of the bonds is:

Correct AnswerverifiedShow Answer

Landers,Inc.,held 1,500 of Shipman Company common stock with a cost of $36,900.These shares were classified as a long-term available-for-sale investment.It sold the shares on December 13 for $42,100.Prepare Lander's journal entry to record this sale.

Correct Answerverified\[\begin{array} { | l | l | l | l | } \...View AnswerShow Answer

Explain how to account for available-for-sale debt and equity securities at and after acquisition and how they are reported in financial statements.

Correct AnswerverifiedAvailable-for-sale debt and equity secur...View AnswerShow Answer

Correct AnswerverifiedShow Answer

If a company owns more than 20% of the stock of another company and the stock is being held as a long-term investment,which method would the investor normally use to account for this investment?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Long-term investments in held-to-maturity debt securities are accounted for using the:

Correct AnswerverifiedShow Answer

Define the foreign exchange rate between two currencies.Explain its effect on business transactions conducted in a foreign currency.

Correct AnswerverifiedA foreign exchange rate is the price of ...View AnswerShow Answer

Investments in trading securities are always classified as ________ and are reported as ________ on the balance sheet.

Correct Answerverified answers m...View AnswerShow Answer

A company had net income of $45,000,net sales of $390,000,and average total assets of $450,000 for the current year.Calculate the company's profit margin,total asset turnover,and return on total assets.

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Long-term investments cannot include:

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All of the following statements regarding accounting for trading securities under U.S.GAAP are true except:

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A foreign exchange rate is the price of ...
View Answer

Investments in trading securities are always classified as and are reported as on the balance sheet.

Correct Answer
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