Question 1

When an investor has insignificant influence over another company's stock,presumably when it owns less than 20%,the stock investment is reported at fair value.

Accepted Answer

A) True 
 B)False

Question 2

On January 1,Jewel Company buys $200,000 of Marcelo Corp.12%,36-month notes.Interest is paid on the last day of each month.The notes are classified as available-for-sale securities.This is the company's first and only investment in available-for-sale securities.On December 31,the notes have a fair value of $204,000.The journal entry to record the receipt of the monthly interest on January 31 is:

Accepted Answer

A) Debit Cash $24,000; credit Debt Investments-AFS $24,000. 
B) Debit Cash $2,000; credit Debt Investments-AFS $2,000. 
C) Debit Cash $2,000; credit Fair Value Adjustment-AFS (LT)$2,000. 
D) Debit Cash $2,000; credit Interest Revenue $2,000. 
E) Debit Cash $2,000; credit Fair Value Adjustment-AFS (ST)$2,000. 
A) Debit Cash $24,000; credit Debt Investments-AFS $24,000. 
B) Debit Cash $2,000; credit Debt Investments-AFS $2,000. 
C) Debit Cash $2,000; credit Fair Value Adjustment-AFS (LT)$2,000. 
D) Debit Cash $2,000; credit Interest Revenue $2,000. 
E) Debit Cash $2,000; credit Fair Value Adjustment-AFS (ST)$2,000.

Question 3

Accounting for long-term investments in equity securities with controlling influence uses the:

Accepted Answer

A) Controlling method. 
B) Equity method with consolidation. 
C) Investor method. 
D) Investment method. 
E) Consolidated method. 
A) Controlling method. 
B) Equity method with consolidation. 
C) Investor method. 
D) Investment method. 
E) Consolidated method.

Question 4

Consolidated financial statements:

Accepted Answer

A) Show the results of operations,cash flows,and the financial position of all entities under a parent's control,including all subsidiaries. 
B) Show the results of operations,cash flows,and the financial position of the parent only. 
C) Show the results of operations,cash flows,and the financial position of the subsidiary only. 
D) Include the investments in the subsidiaries on the balance sheet. 
E) Do not include a balance sheet. 
A) Show the results of operations,cash flows,and the financial position of all entities under a parent's control,including all subsidiaries. 
B) Show the results of operations,cash flows,and the financial position of the parent only. 
C) Show the results of operations,cash flows,and the financial position of the subsidiary only. 
D) Include the investments in the subsidiaries on the balance sheet. 
E) Do not include a balance sheet.

Question 5

A company purchased $60,000 of 5% bonds on May 1 at par value.The bonds pay interest on March 1 and September 1.The amount of interest accrued on December 31 (the company's year-end)would be:

Accepted Answer

A) $1,000. 
B) $500. 
C) $1,250. 
D) $2,500. 
E) $1,500. 
A) $1,000. 
B) $500. 
C) $1,250. 
D) $2,500. 
E) $1,500.

Question 6

A company has an investment in 9% bonds with a par value of $100,000 that pay interest on October 1 and April 1.The amount of interest accrued on December 31 (the company's year-end)would be:

Accepted Answer

A) $750. 
B) $1,500. 
C) $2,250. 
D) $4,500. 
E) $9,000. 
A) $750. 
B) $1,500. 
C) $2,250. 
D) $4,500. 
E) $9,000.

Question 7

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 Debt 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 Debt Investments-HTM $160,000; credit Cash $160,000. 
E) debit Cash,$160,000; credit Long-Term Debt Investments-HTM $160,000. 
A) debit Short-Term Debt 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 Debt Investments-HTM $160,000; credit Cash $160,000. 
E) debit Cash,$160,000; credit Long-Term Debt Investments-HTM $160,000.

Question 8

An investor presumed to have significant influence owns at least 20% but not more than 50% of another company's voting stock.

Accepted Answer

A) True 
 B)False

Question 9

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 Debt Investments-HTM $300,000; credit Cash $300,000. 
B) Debit Cash $300,000; credit Interest Revenue $300,000. 
C) Debit Cash $300,000; credit Debt Investments-HTM $300,000. 
D) Debit Cash $300,000; credit Interest Receivable $300,000. 
E) Debit Cash $300,000; credit Bonds Payable $300,000. 
A) Debit Debt Investments-HTM $300,000; credit Cash $300,000. 
B) Debit Cash $300,000; credit Interest Revenue $300,000. 
C) Debit Cash $300,000; credit Debt Investments-HTM $300,000. 
D) Debit Cash $300,000; credit Interest Receivable $300,000. 
E) Debit Cash $300,000; credit Bonds Payable $300,000.

Question 10

Long-term investments in available-for-sale securities are reported at fair value on the balance sheet.

Accepted Answer

A) True 
 B)False

Question 11

Unrealized Loss−Equity and Unrealized Gain−Equity are permanent equity accounts.

Accepted Answer

A) True 
 B)False

Question 12

________ securities reflect a creditor relationship while ________ securities reflect an owner relationship.

Accepted Answer

The answer of ________ securities reflect a creditor relationship while...

Question 13

At the end of the accounting period,the owners of debt securities:

Accepted Answer

A) Must report the dividend income accrued on the debt securities. 
B) Must retire the debt. 
C) Must record a gain or loss on the interest income earned. 
D) Must record a gain or loss on the dividend income earned. 
E) Must record any interest earned on the debt securities during the period. 
A) Must report the dividend income accrued on the debt securities. 
B) Must retire the debt. 
C) Must record a gain or loss on the interest income earned. 
D) Must record a gain or loss on the dividend income earned. 
E) Must record any interest earned on the debt securities during the period.

Question 14

A company had a profit margin of 10.5% and total asset turnover of 1.84.Its return on total assets was:

Accepted Answer

A) 5.71% 
B) 8.66% 
C) 12.34% 
D) 13.61% 
E) 19.32% 
A) 5.71% 
B) 8.66% 
C) 12.34% 
D) 13.61% 
E) 19.32%

Question 15

Long-term investments include investments in land or other assets not used in a company's operations.

Accepted Answer

A) True 
 B)False

Question 16

Consolidated financial statements show the financial statements of all entities under the parent's control,including all subsidiaries.

Accepted Answer

A) True 
 B)False

Question 17

Unrealized gains and losses on stock investments with insignificant influence are reported as a component of stockholders' equity.

Accepted Answer

A) True 
 B)False

Question 18

When the cost of a short-term held-to-maturity debt security is different from the maturity value,the difference is amortized over the remaining life of the security.

Accepted Answer

A) True 
 B)False

Question 19

Investments can be classified as all but which of the following:

Accepted Answer

A) Intangible investments. 
B) Held-to-maturity debt securities. 
C) Available-for-sale debt securities. 
D) Available-for-sale equity securities. 
E) Trading securities. 
A) Intangible investments. 
B) Held-to-maturity debt securities. 
C) Available-for-sale debt securities. 
D) Available-for-sale equity securities. 
E) Trading securities.

Question 20

Explain how to record the sale of non-influential equity securities.

Accepted Answer

When non-influential equity securities a

When an investor has insignificant influence over another company's stock,presumably when it owns less than 20%,the stock investment is reported at fair value.

Accounting for long-term investments in equity securities with controlling influence uses the:

Consolidated financial statements:

A company purchased $60,000 of 5% bonds on May 1 at par value.The bonds pay interest on March 1 and September 1.The amount of interest accrued on December 31 (the company's year-end)would be:

A company has an investment in 9% bonds with a par value of $100,000 that pay interest on October 1 and April 1.The amount of interest accrued on December 31 (the company's year-end)would be:

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:

An investor presumed to have significant influence owns at least 20% but not more than 50% of another company's voting stock.

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:

Long-term investments in available-for-sale securities are reported at fair value on the balance sheet.

Unrealized Loss−Equity and Unrealized Gain−Equity are permanent equity accounts.

securities reflect a creditor relationship while securities reflect an owner relationship.

At the end of the accounting period,the owners of debt securities:

A company had a profit margin of 10.5% and total asset turnover of 1.84.Its return on total assets was:

Long-term investments include investments in land or other assets not used in a company's operations.

Consolidated financial statements show the financial statements of all entities under the parent's control,including all subsidiaries.

Unrealized gains and losses on stock investments with insignificant influence are reported as a component of stockholders' equity.

When the cost of a short-term held-to-maturity debt security is different from the maturity value,the difference is amortized over the remaining life of the security.

Investments can be classified as all but which of the following:

Explain how to record the sale of non-influential equity securities.

Introducing Financial Statements

Financial Statements and the Accounting System

Adjusting Accounts for Financial Statements

Reporting and Analyzing Merchandising Operations

Reporting and Analyzing Inventories

Reporting and Analyzing Cash,fraud,and Internal Control

Reporting and Analyzing Receivables

Reporting and Analyzing Long-Term Assets

Reporting and Analyzing Current Liabilities

Reporting and Analyzing Long-Term Liabilities

Reporting and Analyzing Equity

Reporting and Analyzing Cash Flows

Analyzing and Interpreting Financial Statements

Applying Present and Future Values

International Operations

Filters

Exam 15: Investments

When an investor has insignificant influence over another company's stock,presumably when it owns less than 20%,the stock investment is reported at fair value.

Accounting for long-term investments in equity securities with controlling influence uses the:

Consolidated financial statements:

A company purchased $60,000 of 5% bonds on May 1 at par value.The bonds pay interest on March 1 and September 1.The amount of interest accrued on December 31 (the company's year-end)would be:

A company has an investment in 9% bonds with a par value of $100,000 that pay interest on October 1 and April 1.The amount of interest accrued on December 31 (the company's year-end)would be:

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:

An investor presumed to have significant influence owns at least 20% but not more than 50% of another company's voting stock.

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:

Long-term investments in available-for-sale securities are reported at fair value on the balance sheet.

Unrealized Loss−Equity and Unrealized Gain−Equity are permanent equity accounts.

________ securities reflect a creditor relationship while ________ securities reflect an owner relationship.

At the end of the accounting period,the owners of debt securities:

A company had a profit margin of 10.5% and total asset turnover of 1.84.Its return on total assets was:

Long-term investments include investments in land or other assets not used in a company's operations.

Consolidated financial statements show the financial statements of all entities under the parent's control,including all subsidiaries.

Unrealized gains and losses on stock investments with insignificant influence are reported as a component of stockholders' equity.

When the cost of a short-term held-to-maturity debt security is different from the maturity value,the difference is amortized over the remaining life of the security.

Investments can be classified as all but which of the following:

Explain how to record the sale of non-influential equity securities.

Introducing Financial Statements

Financial Statements and the Accounting System

Adjusting Accounts for Financial Statements

Reporting and Analyzing Merchandising Operations

Reporting and Analyzing Inventories

Reporting and Analyzing Cash,fraud,and Internal Control

Reporting and Analyzing Receivables

Reporting and Analyzing Long-Term Assets

Reporting and Analyzing Current Liabilities

Reporting and Analyzing Long-Term Liabilities

Reporting and Analyzing Equity

Reporting and Analyzing Cash Flows

Analyzing and Interpreting Financial Statements

Applying Present and Future Values

International Operations

Filters

securities reflect a creditor relationship while securities reflect an owner relationship.