Question 1

Unless there is evidence to the contrary, an investor owning 25% of the stock of an investee is assumed to have significant influence.

Accepted Answer

A) True 
 B)False

Question 2

Which one of the following would not be classified as a short-term investment?

Accepted Answer

A)  Marketable equity securities. 
B)  Marketable merchandise. 
C)  Marketable debt securities. 
D)  Short-term paper. 
A)  Marketable equity securities. 
B)  Marketable merchandise. 
C)  Marketable debt securities. 
D)  Short-term paper.

Question 3

Unrealized gains or losses on available-for-sale securities are reported where in the financial statements?

Accepted Answer

A)  Nowhere since only realized gains are reported. 
B)  In the "Other revenues and gains" or "Other expenses and losses" sections of the income statement. 
C)  Below discontinued operations items in the income statement. 
D)  In the stockholders' equity section of the balance sheet. 
A)  Nowhere since only realized gains are reported. 
B)  In the "Other revenues and gains" or "Other expenses and losses" sections of the income statement. 
C)  Below discontinued operations items in the income statement. 
D)  In the stockholders' equity section of the balance sheet.

Question 4

Which of the following would not be reported under "Other Revenues and Gains" on the income statement?

Accepted Answer

A)  Unrealized gain on available-for-sale securities. 
B)  Dividend revenue. 
C)  Interest revenue. 
D)  Gain on sale of debt investments. 
A)  Unrealized gain on available-for-sale securities. 
B)  Dividend revenue. 
C)  Interest revenue. 
D)  Gain on sale of debt investments.

Question 5

At the time of acquisition of a debt investment

Accepted Answer

A)  no journal entry is required. 
B)  the historical cost principle applies. 
C)  the Stock Investments account is debited when bonds are purchased. 
D)  the investment account is credited for its cost plus brokerage fees. 
A)  no journal entry is required. 
B)  the historical cost principle applies. 
C)  the Stock Investments account is debited when bonds are purchased. 
D)  the investment account is credited for its cost plus brokerage fees.

Question 6

On January 1, U.K. Enterprise purchased as an investment a $1,000, 7% bond for $1,000. The bond pays interest on January 1. The bond is sold on July 1 for $1,120 plus accrued interest. Interest has not been accrued since the last interest payment date. What is the entry to record the cash proceeds at the time the bond is sold?

Accepted Answer

The answer of On January 1, U.K. Enterprise purchased as...

Question 7

If a stock investment is sold at a gain, the gain

Accepted Answer

A)  is reported as operating revenue. 
B)  is reported under a special section, "Discontinued investments," on the income statement. 
C)  is reported in the Other Revenue and Gain section of the income statement. 
D)  contributes to gross profit on the income statement. 
A)  is reported as operating revenue. 
B)  is reported under a special section, "Discontinued investments," on the income statement. 
C)  is reported in the Other Revenue and Gain section of the income statement. 
D)  contributes to gross profit on the income statement.

Question 8

If the cost method is used to account for an investment in common stock, dividends received should be

Accepted Answer

A)  credited to the Stock Investments account. 
B)  credited to the Dividend Revenue account. 
C)  debited to the Stock Investments account. 
D)  recorded only when 20% or more of the stock is owned. 
A)  credited to the Stock Investments account. 
B)  credited to the Dividend Revenue account. 
C)  debited to the Stock Investments account. 
D)  recorded only when 20% or more of the stock is owned.

Question 9

On January 1, 2017, the Express Corporation purchased 30% of the common stock outstanding of the Bangor Corporation for $300,000. During 2017, the Bangor Corporation reported net income of $120,000 and paid cash dividends of $30,000. The balance of the Stock Investments-Bangor account on the books of Express Corporation at December 31, 2017, is

Accepted Answer

A)  $300,000. 
B)  $330,000. 
C)  $420,000. 
D)  $327,000. 
A)  $300,000. 
B)  $330,000. 
C)  $420,000. 
D)  $327,000.

Question 10

On January 1, Vega Company purchased as an investment a $1,000, 6% bond for $1,000. The bond pays interest on January 1. The bond is sold on July 1 for $1,100 plus accrued interest. Interest has not been accrued since the last interest payment date. What is the entry to record the cash proceeds at the time the bond is sold?

Accepted Answer

The answer of On January 1, Vega Company purchased as...

Question 11

The receipt of dividends on an investment affects the Stock Investment account when which of the following methods is used?

Accepted Answer

A)  Cost method. 
B)  Equity method. 
C)  Combination method. 
D)  Market method. 
A)  Cost method. 
B)  Equity method. 
C)  Combination method. 
D)  Market method.

Question 12

On January 1, Bay View Company purchased as an investment a $1,000, 5% bond for $1,000. The bond pays interest on January 1. The bond is sold on July 1 for $1,070 plus accrued interest. Interest has not been accrued since the last interest payment date. What is the entry to record the cash proceeds at the time the bond is sold?

Accepted Answer

The answer of On January 1, Bay View Company purchased...

Question 13

On January 1, 2017, JBT Company purchased at face value, a $1,000 6%, bond that pays interest on January 1. JBT Company has a calendar year end. The adjusting entry on December 31, 2017, is

Accepted Answer

The answer of On January 1, 2017, JBT Company purchased...

Question 14

An unrealized loss on trading securities is reported under Other ____________________ in the income statement.

Accepted Answer

The answer of An unrealized loss on trading securities is...

Question 15

On January 1, Belvedere Company purchased as an investment a $1,000, 7% bond for $1,000. The bond pays interest on January 1. What is the entry to record the interest accrual on December 31?

Accepted Answer

The answer of On January 1, Belvedere Company purchased as...

Question 16

On January 1, 2017, Valentine Corporation purchased 25% of the common stock outstanding of Betz Corporation for $200,000. During 2017, Betz Corporation reported net income of $80,000 and paid cash dividends of $48,000. The balance of the Stock Investments-Betz account on the books of Valentine Corporation at December 31, 2017, is

Accepted Answer

A)  $200,000. 
B)  $208,000. 
C)  $220,000. 
D)  $192,000. 
A)  $200,000. 
B)  $208,000. 
C)  $220,000. 
D)  $192,000.

Question 17

The balance in the Unrealized Loss-Equity account will

Accepted Answer

A)  appear on the balance sheet as a contra asset. 
B)  appear on the income statement under Other Expenses and Losses. 
C)  appear as a deduction in the stockholders' equity section. 
D)  not be shown on the financial statements until the securities are sold. 
A)  appear on the balance sheet as a contra asset. 
B)  appear on the income statement under Other Expenses and Losses. 
C)  appear as a deduction in the stockholders' equity section. 
D)  not be shown on the financial statements until the securities are sold.

Question 18

The equity method should generally be used to account for an investment in stock when the level of ownership is

Accepted Answer

A)  less than 10%. 
B)  between 10% and 20%. 
C)  between 20% and 50%. 
D)  10% or more. 
A)  less than 10%. 
B)  between 10% and 20%. 
C)  between 20% and 50%. 
D)  10% or more.

Question 19

Unrealized gains and losses on available-for-sale debt securities are reported on the income statement.

Accepted Answer

A) True 
 B)False

Question 20

King Corporation purchased 2,000 shares of Cable common stock ($50 par) at $73 per share as a short-term investment. The shares were subsequently sold at $77 per share. The cost of the securities purchased and gain or loss on the sale were

Accepted Answer

The answer of King Corporation purchased 2,000 shares of Cable...

Unless there is evidence to the contrary, an investor owning 25% of the stock of an investee is assumed to have significant influence.

Which one of the following would not be classified as a short-term investment?

Unrealized gains or losses on available-for-sale securities are reported where in the financial statements?

Which of the following would not be reported under "Other Revenues and Gains" on the income statement?

At the time of acquisition of a debt investment

If a stock investment is sold at a gain, the gain

If the cost method is used to account for an investment in common stock, dividends received should be

The receipt of dividends on an investment affects the Stock Investment account when which of the following methods is used?

On January 1, 2017, JBT Company purchased at face value, a $1,000 6%, bond that pays interest on January 1. JBT Company has a calendar year end. The adjusting entry on December 31, 2017, is

An unrealized loss on trading securities is reported under Other ____________________ in the income statement.

On January 1, Belvedere Company purchased as an investment a $1,000, 7% bond for $1,000. The bond pays interest on January 1. What is the entry to record the interest accrual on December 31?

The balance in the Unrealized Loss-Equity account will

The equity method should generally be used to account for an investment in stock when the level of ownership is

Unrealized gains and losses on available-for-sale debt securities are reported on the income statement.

King Corporation purchased 2,000 shares of Cable common stock ($50 par) at $73 per share as a short-term investment. The shares were subsequently sold at $77 per share. The cost of the securities purchased and gain or loss on the sale were

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

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Exam 15: Specimen Financial Statements: Pepsico, Inc

Unless there is evidence to the contrary, an investor owning 25% of the stock of an investee is assumed to have significant influence.

Which one of the following would not be classified as a short-term investment?

Unrealized gains or losses on available-for-sale securities are reported where in the financial statements?

Which of the following would not be reported under "Other Revenues and Gains" on the income statement?

At the time of acquisition of a debt investment

If a stock investment is sold at a gain, the gain

If the cost method is used to account for an investment in common stock, dividends received should be

The receipt of dividends on an investment affects the Stock Investment account when which of the following methods is used?

On January 1, 2017, JBT Company purchased at face value, a $1,000 6%, bond that pays interest on January 1. JBT Company has a calendar year end. The adjusting entry on December 31, 2017, is

An unrealized loss on trading securities is reported under Other ____________________ in the income statement.

On January 1, Belvedere Company purchased as an investment a $1,000, 7% bond for $1,000. The bond pays interest on January 1. What is the entry to record the interest accrual on December 31?

The balance in the Unrealized Loss-Equity account will

The equity method should generally be used to account for an investment in stock when the level of ownership is

Unrealized gains and losses on available-for-sale debt securities are reported on the income statement.

King Corporation purchased 2,000 shares of Cable common stock ($50 par) at $73 per share as a short-term investment. The shares were subsequently sold at $77 per share. The cost of the securities purchased and gain or loss on the sale were

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