Question 1

Unrealized gains and losses are recognized on trading debt securities.

Accepted Answer

A) True 
 B)False

Question 2

Vangaurd Co. purchased 80, 5% McLaughlin Company bonds for $80,000 cash. Interest is payable annually on January 1. The entry to record the purchase would include debit to

Accepted Answer

A)  Debt Investments for $82,000. 
B)  Cash for $84,000. 
C)  Debt Investments for $80,000. 
D)  Stock Investments for $80,000. 
A)  Debt Investments for $82,000. 
B)  Cash for $84,000. 
C)  Debt Investments for $80,000. 
D)  Stock Investments for $80,000.

Question 3

If an investor owns between 20% and 50% of an investee's common stock, it is presumed that the investor has significant influence on the investee.

Accepted Answer

A) True 
 B)False

Question 4

On January 1, 2017, the LaRoche Company purchased at face value, a $1,000, 4%, bond that pays interest on January 1. LaRoche Company has a calendar year end. The entry for the receipt of interest on January 1, 2018, is

Accepted Answer

The answer of On January 1, 2017, the LaRoche Company...

Question 5

Crosby Corporation sells 400 shares of common stock being held as an investment. The shares were acquired six months ago at a cost of $50 a share. Crosby sold the shares for $46 a share. The entry to record the sale is:

Accepted Answer

The answer of Crosby Corporation sells 400 shares of common...

Question 6

The company whose stock is owned by the parent company is called the

Accepted Answer

A)  controlled company. 
B)  subsidiary company. 
C)  investor company. 
D)  sibling company. 
A)  controlled company. 
B)  subsidiary company. 
C)  investor company. 
D)  sibling company.

Question 7

At January 1, 2017, the equity securities portfolio held by Darma Corporation consisted of the following investments:
1. 2,500 shares of H2 common stock purchased for $43 per share.
2. 1,500 shares of Krypto common stock purchased for $50 per share.
At December 31, 2017, the fair values per share were H2 $36 and Krypto $54.
Instructions
(a) Prepare a schedule showing the cost and fair value of the portfolio at December 31, 2017.
(b) Prepare the adjusting entry to report the portfolio at fair value at December 31, 2017.

Accepted Answer

The answer of At January 1, 2017, the equity securities...

Question 8

Which of the following is not a category used for valuing and reporting investments?

Accepted Answer

A)  Securities held for investing purposes. 
B)  Trading securities. 
C)  Held-to-maturity securities. 
D)  Available-for-sale securities. 
A)  Securities held for investing purposes. 
B)  Trading securities. 
C)  Held-to-maturity securities. 
D)  Available-for-sale securities.

Question 9

Deutsche Corporation's equity securities portfolio at the end of the year is as follows:   Deutsche subsequently sells Common Stock B for $15,000. What entry is made to record the sale?

Accepted Answer

The answer of Deutsche Corporation's equity securities portfolio at the...

Question 10

On January 5, 2017, JBC Company purchased the following stock investments:
300 shares Getz Corporation common stock for $4,800.
500 shares Keller Corporation common stock for $10,000.
600 shares R-tel Corporation common stock for $18,000.
Assume that JBC Company cannot exercise significant influence over the activities of the investee companies and that the cost method is used to account for the investments.
On June 30, 2017, JBC Company received the following cash dividends:   On November 15, 2017, JBC Company sold 100 shares of R-tel Corporation common stock for $3,600.
On December 31, 2017, the fair value of the securities held by JBC Company is as follows: $\begin{array}{lr}&\text { Per Share }\
\text { Getz Corporation common stock } & \$ 12 \
\text { Keller Corporation common stock } & 16 \
\text { R-tel Corporation common stock } & 33
\end{array}$ Instructions
Prepare the appropriate journal entries that the JBC Company should make on the following dates: January 5,2017
June 30,2017
November 15, 2017
December 31,2017

Accepted Answer

The answer of On January 5, 2017, JBC Company purchased...

Question 11

In accordance with the historical cost principle, the cost of debt investments includes brokerage fees and accrued interest.

Accepted Answer

A) True 
 B)False

Question 12

Hardin Park Company had these transactions pertaining to stock investments Feb. 1 Purchased 5,000 shares of Raley Company (10%) for $89,000 cash.
June 1 Received cash dividends of $1 per share on Raley stock.
Oct) 1 Sold 2,000 shares of Raley stock for 39,000.
Dec) 1 Received cash dividends of $2 per share on Reley stock.
The entry to record the purchase of the Raley stock would include a

Accepted Answer

A)  credit to the Stock Investments account for $89,000. 
B)  credit to Cash for $90,000 
C)  debit to the Stock Investments account for $89,000. 
D)  debit to Investment Expense for $1,000. 
A)  credit to the Stock Investments account for $89,000. 
B)  credit to Cash for $90,000 
C)  debit to the Stock Investments account for $89,000. 
D)  debit to Investment Expense for $1,000.

Question 13

Eaton Company had the following transactions pertaining to its short-term stock investments.
Jan. 1 Purchased 900 shares of Stafford Company stock for $11,880 cash.
June 1 Received cash dividends of $0.60 per share on the Stafford Company stock.
Sept. 15 Sold 450 shares of the Stafford Company stock for $5,200.
Dec. 1 Received cash dividends of $0.60 per share on the Stafford Company stock.
Instructions
(a) Journalize the transactions.
(b) Indicate the income statement effects of the transactions.

Accepted Answer

@#IMG-DLM& (b) Dividend Revenue is repor

Question 14

Barcelona Company owns 40% interest in the stock of ABX Corporation. During the year, ABX pays $40,000 in dividends to Barcelona, and reports $300,000 in net income. Barcelona Company's investment in ABX will increase Barcelona net income by

Accepted Answer

A)  $104,000. 
B)  $120,000. 
C)  $80,000. 
D)  $16,000. 
A)  $104,000. 
B)  $120,000. 
C)  $80,000. 
D)  $16,000.

Question 15

Information pertaining to stock investments in 2017 by Com-ex Corporation follows:
Acquired 15% of the 200,000 shares of common stock of Buffalo Company at a total cost of $9 per share on January 1, 2017. On July 1, Buffalo Company declared and paid a cash dividend of $1.90 per share. On December 31, Buffalo reported net income was $675,000 for the year.
Obtained significant influence over Eta Company by buying 30% of Eta's 120,000 outstanding shares of common stock at a total cost of $25 per share on January 1, 2017. On June 15, Eta Company declared and paid a cash dividend of $2.50 per share. On December 31, Eta's reported net income was $330,000.
Instructions
Prepare all necessary journal entries for 2017 for Com-ex Corporation.

Accepted Answer

The answer of Information pertaining to stock investments in 2017...

Question 16

Distinguish between the cost and equity methods of accounting for investments in stocks.

Accepted Answer

Under the cost method an investment is o

Question 17

When investing excess cash for short periods of time, corporations invest in debt securities and stock securities.

Accepted Answer

A) True 
 B)False

Question 18

Under the equity method, the Stock Investments account is increased when the

Accepted Answer

A)  investee company reports net income. 
B)  investee company pays a dividend. 
C)  investee company reports a loss. 
D)  stock investment is sold at a gain. 
A)  investee company reports net income. 
B)  investee company pays a dividend. 
C)  investee company reports a loss. 
D)  stock investment is sold at a gain.

Question 19

In recognizing a decline in the fair value of short-term stock investments, an Unrealized Loss account is debited because

Accepted Answer

A)  management intends to realize this loss in the near future. 
B)  the securities have not been sold. 
C)  the stock market is volatile. 
D)  management cannot determine the exact amount of the loss in value. 
A)  management intends to realize this loss in the near future. 
B)  the securities have not been sold. 
C)  the stock market is volatile. 
D)  management cannot determine the exact amount of the loss in value.

Question 20

FTX Company owns 10% interest in the stock of Zip Corporation. During the year, Zip pays $5,000 in dividends to FTX, and reports a net loss of $100,000. FTX Company's investment in Zip will affect FTX net income by a

Accepted Answer

A)  $5,000 increase. 
B)  $10,000 increase. 
C)  $10,000 decrease. 
D)  $5,000 decrease. 
A)  $5,000 increase. 
B)  $10,000 increase. 
C)  $10,000 decrease. 
D)  $5,000 decrease.

Unrealized gains and losses are recognized on trading debt securities.

Vangaurd Co. purchased 80, 5% McLaughlin Company bonds for $80,000 cash. Interest is payable annually on January 1. The entry to record the purchase would include debit to

If an investor owns between 20% and 50% of an investee's common stock, it is presumed that the investor has significant influence on the investee.

On January 1, 2017, the LaRoche Company purchased at face value, a $1,000, 4%, bond that pays interest on January 1. LaRoche Company has a calendar year end. The entry for the receipt of interest on January 1, 2018, is

Crosby Corporation sells 400 shares of common stock being held as an investment. The shares were acquired six months ago at a cost of $50 a share. Crosby sold the shares for $46 a share. The entry to record the sale is:

The company whose stock is owned by the parent company is called the

Which of the following is not a category used for valuing and reporting investments?

Deutsche Corporation's equity securities portfolio at the end of the year is as follows: Deutsche subsequently sells Common Stock B for $15,000. What entry is made to record the sale?

In accordance with the historical cost principle, the cost of debt investments includes brokerage fees and accrued interest.

Barcelona Company owns 40% interest in the stock of ABX Corporation. During the year, ABX pays $40,000 in dividends to Barcelona, and reports $300,000 in net income. Barcelona Company's investment in ABX will increase Barcelona net income by

Distinguish between the cost and equity methods of accounting for investments in stocks.

When investing excess cash for short periods of time, corporations invest in debt securities and stock securities.

Under the equity method, the Stock Investments account is increased when the

In recognizing a decline in the fair value of short-term stock investments, an Unrealized Loss account is debited because

FTX Company owns 10% interest in the stock of Zip Corporation. During the year, Zip pays $5,000 in dividends to FTX, and reports a net loss of $100,000. FTX Company's investment in Zip will affect FTX net income by a

Accounting in Action

The Recording Process

Adjusting the Accounts

Completing the Accounting Cycle

Accounting for Merchandising Operations

Inventories

Fraud, Internal Control, and Cash

Accounting for Receivables

Plant Assets, Natural Resources, and Intangible Assets

Liabilities

Corporations: Organization, Stock Transactions

Statement of Cash Flows

Financial Statement Analysis

Specimen Financial Statements: Apple Inc

Specimen Financial Statements: the Coca-Cola Company

Specimen Financial Statements: Amazoncom, Inc

Specimen Financial Statements: Wal-Mart Stores, Inc

Filters

Exam 15: Specimen Financial Statements: Pepsico, Inc

Unrealized gains and losses are recognized on trading debt securities.

Vangaurd Co. purchased 80, 5% McLaughlin Company bonds for $80,000 cash. Interest is payable annually on January 1. The entry to record the purchase would include debit to

If an investor owns between 20% and 50% of an investee's common stock, it is presumed that the investor has significant influence on the investee.

On January 1, 2017, the LaRoche Company purchased at face value, a $1,000, 4%, bond that pays interest on January 1. LaRoche Company has a calendar year end. The entry for the receipt of interest on January 1, 2018, is

Crosby Corporation sells 400 shares of common stock being held as an investment. The shares were acquired six months ago at a cost of $50 a share. Crosby sold the shares for $46 a share. The entry to record the sale is:

The company whose stock is owned by the parent company is called the

Which of the following is not a category used for valuing and reporting investments?

Deutsche Corporation's equity securities portfolio at the end of the year is as follows: Deutsche subsequently sells Common Stock B for $15,000. What entry is made to record the sale?

In accordance with the historical cost principle, the cost of debt investments includes brokerage fees and accrued interest.

Barcelona Company owns 40% interest in the stock of ABX Corporation. During the year, ABX pays $40,000 in dividends to Barcelona, and reports $300,000 in net income. Barcelona Company's investment in ABX will increase Barcelona net income by

Distinguish between the cost and equity methods of accounting for investments in stocks.

When investing excess cash for short periods of time, corporations invest in debt securities and stock securities.

Under the equity method, the Stock Investments account is increased when the

In recognizing a decline in the fair value of short-term stock investments, an Unrealized Loss account is debited because

FTX Company owns 10% interest in the stock of Zip Corporation. During the year, Zip pays $5,000 in dividends to FTX, and reports a net loss of $100,000. FTX Company's investment in Zip will affect FTX net income by a

Accounting in Action

The Recording Process

Adjusting the Accounts

Completing the Accounting Cycle

Accounting for Merchandising Operations

Inventories

Fraud, Internal Control, and Cash

Accounting for Receivables

Plant Assets, Natural Resources, and Intangible Assets

Liabilities

Corporations: Organization, Stock Transactions

Statement of Cash Flows

Financial Statement Analysis

Specimen Financial Statements: Apple Inc

Specimen Financial Statements: the Coca-Cola Company

Specimen Financial Statements: Amazoncom, Inc

Specimen Financial Statements: Wal-Mart Stores, Inc

Filters