Question 1

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) A) and B)
F) All of the above

Question 2

Purchased $400,000 of ABC Co. 5% bonds at 100 plus accrued interest of $4,500. Sold $250,000 of bonds at 97. The journal entry for the purchase would include:

Accepted Answer

A)   a credit to Interest Receivable for $4,500
B)   a credit to Interest Revenue for $4,500
C)   a debit to Interest Receivable for $4,500
D)   a debit to Interest Revenue for $4,500E) C) and D)
F) None of the above

Question 3

As with other assets, the cost of a bond investment includes all costs related to the purchase.

Accepted Answer

A) True 
 B)False

Question 4

The account Unrealized Gain (Loss)  on Available-For-Sale Securities should be included in the

Accepted Answer

A)   Income statement as Other Revenue (Expenses) 
B)   Balance sheet as an adjustment to the asset account
C)   Balance sheet as an adjustment to Stockholders' Equity
D)   Statement of Retained EarningsE) B) and C)
F) A) and C)

Question 5

On May 1, 2014, Stanton Company purchased $60,000 of Harris Company's 12% bonds at 100 plus accrued interest of $2,400. On June 30, 2014, Stanton received its first semiannual interest. On February 1, 2015, Stanton sold $50,000 of the bonds at 103 plus accrued interest. What are the total proceeds from the February 1, 2015 sale?

Accepted Answer

A)   $52,400
B)   $51,500
C)   $50,000
D)   $52,000E) A) and D)
F) All of the above

Question 6

Journalize the entries to record the following selected transactions of Oliver Co.:

Accepted Answer

(a)

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Question 7

Match between columns
                        Premises: Cost Method
Consolidated Financial Statements
Dividend Yield
Unrealized Gain or Loss on Investments.
Subsidiary Company
Amortized Cost
Equity Method
Fair Value
Valuation Allowance for Investments
Parent Company

Accepted Answer

The Answer of Appropriate method for accounting for small stock is...

Question 8

Ordinarily, a corporation owning a significant portion of the voting stock of another corporation accounts for the investment using the equity method.

Accepted Answer

A) True 
 B)False

Question 9

An investor purchased 500 shares of common stock, $25 par, for $19,250. Subsequently, 100 shares were sold for $35 per share. What is the amount of gain or loss on the sale?

Accepted Answer

A)   $3,500 gain
B)   $350 gain
C)   $350 loss
D)   $500 gainE) None of the above
F) C) and D)

Question 10

If one company owns more than 50% of the common stock of another company

Accepted Answer

A)   a partnership exists.
B)   a parent-subsidiary relationship exists.
C)   the company whose stock is owned must be liquidated
D)   the cost method should be used to account for the investment.E) B) and C)
F) C) and D)

Question 11

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 12

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 13

Comprehensive income must be reported on the income statement.

Accepted Answer

A) True 
 B)False

Question 14

Temporary investments such as in trading securities are

Accepted Answer

A)   recorded at cost but reported at fair market value
B)   recorded at cost and reported at cost
C)   recorded at cost but reported at lower of cost or fair market value
D)   recorded at fair market value and reported at fair market valueE) C) and D)
F) A) and B)

Question 15

The method of accounting for investments in equity securities in which the investor records its share of periodic net income of the investee is the

Accepted Answer

A)   cost method
B)   market method
C)   income method
D)   equity methodE) B) and D)
F) B) and C)

Question 16

Which one of the following items below would not affect the investor's income for the period?

Accepted Answer

A)   interest received on a temporary investment in bonds
B)   dividends received on a long-term investment in stock where the investor owns 10% of the investee's stock
C)   dividends received on a long-term investment in stock where the investor owns 30% of the investee's stock
D)   interest received on a long-term investment in bondsE) A) and B)
F) None of the above

Question 17

When long-term investments in bonds are sold before their maturity date, the seller deducts any accrued interest since the last interest payment date from the selling price.

Accepted Answer

A) True 
 B)False

Question 18

Parker Company owns 83% of the outstanding stock of Tadeo Company. Parker Company is referred to as the

Accepted Answer

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

Question 19

Blanton Corporation purchased 35% of the outstanding shares of common stock of Worton Corporation as a long-term investment. Subsequently, Worton Corporation reported net income and declared and paid cash dividends. What journal entry would Blanton Corporation use to record the dividends it receives from Worton Corporation?

Accepted Answer

A)   debit Investment in Worton Corporation; credit Cash
B)   debit Cash; credit Dividend Revenue
C)   debit Investment in Worton Corporation; credit Income of Worton Corporation
D)   debit Cash; credit Investment in Worton CorporationE) B) and D)
F) A) and B)

Question 20

Prepare the journal entries for the following transactions for Batson Co.

Accepted Answer

(a)

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Exam 15: Investments and Fair Value Accounting

Purchased $400,000 of ABC Co. 5% bonds at 100 plus accrued interest of $4,500. Sold $250,000 of bonds at 97. The journal entry for the purchase would include:

Correct Answer
verified

As with other assets, the cost of a bond investment includes all costs related to the purchase.

Correct Answer
verified

Correct Answer
verified

Comprehensive income must be reported on the income statement.

Correct Answer
verified

Temporary investments such as in trading securities are

Correct Answer
verified

Which one of the following items below would not affect the investor's income for the period?

Correct Answer
verified

Parker Company owns 83% of the outstanding stock of Tadeo Company. Parker Company is referred to as the

Correct Answer
verified

Journalize the entries to record the following selected transactions of Oliver Co.:

Correct Answer
verified
(a)
_TB2085_00_TB20...
View Answer

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

Ordinarily, a corporation owning a significant portion of the voting stock of another corporation accounts for the investment using the equity method.

Correct Answer
verified

The method of accounting for investments in equity securities in which the investor records its share of periodic net income of the investee is the

Correct Answer
verified

Prepare the journal entries for the following transactions for Batson Co.

Correct Answer
verified
(a)
_TB2085_00_TB20...
View Answer

When long-term investments in bonds are sold before their maturity date, the seller deducts any accrued interest since the last interest payment date from the selling price.

Correct Answer
verified

An investor purchased 500 shares of common stock, $25 par, for $19,250. Subsequently, 100 shares were sold for $35 per share. What is the amount of gain or loss on the sale?

Correct Answer
verified

The account Unrealized Gain (Loss) on Available-For-Sale Securities should be included in the

Correct Answer
verified

If one company owns more than 50% of the common stock of another company

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified

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

Correct Answer
verified
Debt securities are notes and bonds that...
View Answer

In general, consolidated financial statements should be prepared

Correct Answer
verified

Exam 15: Investments and Fair Value Accounting

Purchased $400,000 of ABC Co. 5% bonds at 100 plus accrued interest of $4,500. Sold $250,000 of bonds at 97. The journal entry for the purchase would include:

Correct AnswerverifiedShow Answer

As with other assets, the cost of a bond investment includes all costs related to the purchase.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Comprehensive income must be reported on the income statement.

Correct AnswerverifiedShow Answer

Temporary investments such as in trading securities are

Correct AnswerverifiedShow Answer

Which one of the following items below would not affect the investor's income for the period?

Correct AnswerverifiedShow Answer

Parker Company owns 83% of the outstanding stock of Tadeo Company. Parker Company is referred to as the

Correct AnswerverifiedShow Answer

Journalize the entries to record the following selected transactions of Oliver Co.:

Correct Answerverified(a) _TB2085_00_TB20...View AnswerShow Answer

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

Ordinarily, a corporation owning a significant portion of the voting stock of another corporation accounts for the investment using the equity method.

Correct AnswerverifiedShow Answer

The method of accounting for investments in equity securities in which the investor records its share of periodic net income of the investee is the

Correct AnswerverifiedShow Answer

Prepare the journal entries for the following transactions for Batson Co.

Correct Answerverified(a) _TB2085_00_TB20...View AnswerShow Answer

When long-term investments in bonds are sold before their maturity date, the seller deducts any accrued interest since the last interest payment date from the selling price.

Correct AnswerverifiedShow Answer

An investor purchased 500 shares of common stock, $25 par, for $19,250. Subsequently, 100 shares were sold for $35 per share. What is the amount of gain or loss on the sale?

Correct AnswerverifiedShow Answer

The account Unrealized Gain (Loss) on Available-For-Sale Securities should be included in the

Correct AnswerverifiedShow Answer

If one company owns more than 50% of the common stock of another company

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedDebt securities are notes and bonds that...View AnswerShow Answer

In general, consolidated financial statements should be prepared

Correct AnswerverifiedShow Answer

Correct Answer
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(a)
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View Answer

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(a)
_TB2085_00_TB20...
View Answer

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Correct Answer
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Debt securities are notes and bonds that...
View Answer

Correct Answer
verified