Question 1

Payments or receipts of equal dollar amounts are referred to as __________________.

Accepted Answer

The answer of Payments or receipts of equal dollar amounts...

Question 2

If an investor owns less than 20% of the common stock of another corporation as an investment

Accepted Answer

A)  the equity method of accounting for the investment should be employed. 
B)  no dividends can be expected. 
C)  it is presumed that the investor has relatively little influence on the investee. 
D)  it is presumed that the investor has significant influence on the investee. 
A)  the equity method of accounting for the investment should be employed. 
B)  no dividends can be expected. 
C)  it is presumed that the investor has relatively little influence on the investee. 
D)  it is presumed that the investor has significant influence on the investee.

Question 3

On January 1, Bay View Company purchased as an investment a $1,000, 6% bond for $1,000. The bond pays interest on January 1 and July 1. The bond is sold on September 1 for $1,050 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 4

When investing excess cash for short periods of time, corporations invest in

Accepted Answer

A)  stocks of companies in a related industry. 
B)  debt securities. 
C)  low-risk, highly liquid securities. 
D)  stock securities. 
A)  stocks of companies in a related industry. 
B)  debt securities. 
C)  low-risk, highly liquid securities. 
D)  stock securities.

Question 5

If the single amount of $5,000 is to be received in 3 years and discounted at 6%, its present value is

Accepted Answer

A)  $4,198.10. 
B)  $4,717.30. 
C)  $4,450.00. 
D)  $4,395.45. 
A)  $4,198.10. 
B)  $4,717.30. 
C)  $4,450.00. 
D)  $4,395.45.

Question 6

Eglin Company owns 30% interest in the stock of Bosco Corporation. During the year, Rhodes pays $10,000 in dividends to Eglin, and reports a net loss of $250,000. Eglin Company's investment in Bosco will affect Eglin net income by a

Accepted Answer

A)  $10,000 increase. 
B)  $75,000 increase. 
C)  $75,000 decrease. 
D)  $10,000 decrease. 
A)  $10,000 increase. 
B)  $75,000 increase. 
C)  $75,000 decrease. 
D)  $10,000 decrease.

Question 7

Fair Value Adjustment is a valuation ____________ account, which is _______________ to (from) the cost of the investments.

Accepted Answer

allowance

Question 8

Which of the following is not a method of accounting for stock investments?

Accepted Answer

A)  Cost method. 
B)  Stock method. 
C)  Consolidated financial statements. 
D)  Equity method. 
A)  Cost method. 
B)  Stock method. 
C)  Consolidated financial statements. 
D)  Equity method.

Question 9

When a company owns more than 50% of the common stock of another company

Accepted Answer

A)  affiliated financial statements are prepared. 
B)  consolidated financial statements are prepared. 
C)  controlling financial statements are prepared. 
D)  significant financial statements are prepared. 
A)  affiliated financial statements are prepared. 
B)  consolidated financial statements are prepared. 
C)  controlling financial statements are prepared. 
D)  significant financial statements are prepared.

Question 10

Compound interest is computed on the principal and any interest earned that has not been withdrawn.

Accepted Answer

A) True 
 B)False

Question 11

The Stock Investments account is debited at acquisition under both the equity method and cost method of accounting for investments in common stock.

Accepted Answer

A) True 
 B)False

Question 12

King George Company has these data at December 31, 2014: $\begin{array}{lrr}\text { Securities } & \text { Cost } & \text { Fair Value } \
\text { Trading } & \$ 110,000 & \$ 119,000 \
\text { Available-for-sale } & 100,000 & 95,000
\end{array}$ 
The available-for-sale securities are held as a long-term investment.
Instructions
(a) Prepare the adjusting entries to report each class of securities at fair value.
(b) Indicate the statement presentation of each class of securities and the related unrealized gain (loss) accounts.

Accepted Answer

The answer of King George Company has these data at...

Question 13

La Bouisse Inc. obtained significant influence over E-Stock Corporation by buying 40% of E-Stock 30,000 outstanding shares common stock at a total cost of $11 per share on January 1, 2014. On June 15 E-Stock declared and paid a cash dividend of $32,000. On December 31 E-Stock reported a net income of $120,000 for the year.
Instructions
Prepare all the necessary journal entries for 2014 for La Bouisse Inc.

Accepted Answer

The answer of La Bouisse Inc. obtained significant influence over...

Question 14

Common Ground Corporation issued $8,000,000, 10-year bonds and agreed to make annual sinking fund deposits of $620,000. The deposits are made at the end of each year into an account paying 6% annual interest. Common Ground has the following values related to the time value of money and compounded interest decisions. $\begin{array}{lr}
\text { Present value of } 1 \text { for } 10 \text { periods at } 6 \% & 0.55839 \
\text { Future value of } 1 \text { for } 10 \text { periods at } 6 \% & 1.79085 \
\text { Present value of an annuity of } 1 \text { for } 10 \text { periods at } 6 \% & 7.36009 \
\text { Future value of an annuity of } 1 \text { for } 10 \text { periods at } 6 \% & 13.18079
\end{array}$ To the closest dollar, what amount will be in the sinking fund at the end of 10 years?

Accepted Answer

A)  $4,467,120 
B)  $4,563,256 
C)  $8,172,090 
D)  $12,800,000 
A)  $4,467,120 
B)  $4,563,256 
C)  $8,172,090 
D)  $12,800,000

Question 15

Short-term investments are listed on the balance sheet immediately below

Accepted Answer

A)  cash. 
B)  inventory. 
C)  accounts receivable. 
D)  prepaid expenses. 
A)  cash. 
B)  inventory. 
C)  accounts receivable. 
D)  prepaid expenses.

Question 16

Charleston Co. purchased 60, 6% APS Company bonds for $60,000 cash plus brokerage fees of $500. Interest is payable semiannually on July 1 and January 1. The entry to record the December 31 interest accrual would include a

Accepted Answer

A)  debit to Interest Receivable for $1,800. 
B)  debit to Interest Revenue for $1,800. 
C)  credit to Interest Revenue for $3,600. 
D)  debit to Debt Investments for $1,800. 
A)  debit to Interest Receivable for $1,800. 
B)  debit to Interest Revenue for $1,800. 
C)  credit to Interest Revenue for $3,600. 
D)  debit to Debt Investments for $1,800.

Question 17

On January 1, Connid Company purchased as an investment a $1,000, 8% bond for $1,000. The bond pays interest on January 1 and July 1. What is the entry to record the interest payment on July 1?

Accepted Answer

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

Question 18

Mazzeo Company acquires 80 Dodd's 10%, 5 year, $1,000 bonds on January 1, 2014 for $80,000. If Mazzeo sells all of its Dodd's Bonds for $78,400 what gain or loss is recognized?

Accepted Answer

A)  Loss of $9,600 
B)  Loss of $1,600 
C)  Gain of $1,600 
D)  Gain of $9,600 
A)  Loss of $9,600 
B)  Loss of $1,600 
C)  Gain of $1,600 
D)  Gain of $9,600

Question 19

Why do pension and mutual funds invest in debt and equity securities?

Accepted Answer

A)  They have excess cash. 
B)  They want to generate earnings from investment income. 
C)  They invest for strategic reasons. 
D)  They invest for speculative reasons. 
A)  They have excess cash. 
B)  They want to generate earnings from investment income. 
C)  They invest for strategic reasons. 
D)  They invest for speculative reasons.

Question 20

McComb Inc. earns $900,000 and pays cash dividends for $300,000 during 2014. SFX Corporation owns 70,000 of the 210,000 outstanding shares of McComb. What amount should SFX show in the investment account at December 31, 2014 if the beginning of the year balance in the account was $100,000?

Accepted Answer

A)  $300,000 
B)  $200,000 
C)  $280,000 
D)  $400,000 
A)  $300,000 
B)  $200,000 
C)  $280,000 
D)  $400,000

Payments or receipts of equal dollar amounts are referred to as __________________.

If an investor owns less than 20% of the common stock of another corporation as an investment

When investing excess cash for short periods of time, corporations invest in

If the single amount of $5,000 is to be received in 3 years and discounted at 6%, its present value is

Eglin Company owns 30% interest in the stock of Bosco Corporation. During the year, Rhodes pays $10,000 in dividends to Eglin, and reports a net loss of $250,000. Eglin Company's investment in Bosco will affect Eglin net income by a

Fair Value Adjustment is a valuation account, which is ___ to (from) the cost of the investments.

Which of the following is not a method of accounting for stock investments?

When a company owns more than 50% of the common stock of another company

Compound interest is computed on the principal and any interest earned that has not been withdrawn.

The Stock Investments account is debited at acquisition under both the equity method and cost method of accounting for investments in common stock.

Short-term investments are listed on the balance sheet immediately below

Charleston Co. purchased 60, 6% APS Company bonds for $60,000 cash plus brokerage fees of $500. Interest is payable semiannually on July 1 and January 1. The entry to record the December 31 interest accrual would include a

On January 1, Connid Company purchased as an investment a $1,000, 8% bond for $1,000. The bond pays interest on January 1 and July 1. What is the entry to record the interest payment on July 1?

Mazzeo Company acquires 80 Dodd's 10%, 5 year, $1,000 bonds on January 1, 2014 for $80,000. If Mazzeo sells all of its Dodd's Bonds for $78,400 what gain or loss is recognized?

Why do pension and mutual funds invest in debt and equity securities?

McComb Inc. earns $900,000 and pays cash dividends for $300,000 during 2014. SFX Corporation owns 70,000 of the 210,000 outstanding shares of McComb. What amount should SFX show in the investment account at December 31, 2014 if the beginning of the year balance in the account was $100,000?

Introduction to Financial Statements

A Further Look at Financial Statements

The Accounting Information System

Accrual Accounting Concepts

Merchandising Operations and the Multiple-Step Income Statement

Reporting and Analyzing Inventory

Fraud, Internal Control, and Cash

Reporting and Analyzing Receivables

Reporting and Analyzing Long-Lived Assets

Reporting and Analyzing Liabilities

Reporting and Analyzing Stockholders Equity

Statement of Cash Flows

Financial Analysis: The Big Picture

Filters

Exam 14: Understanding Investments and Acquisitions in Accounting

Payments or receipts of equal dollar amounts are referred to as __________________.

If an investor owns less than 20% of the common stock of another corporation as an investment

When investing excess cash for short periods of time, corporations invest in

If the single amount of $5,000 is to be received in 3 years and discounted at 6%, its present value is

Eglin Company owns 30% interest in the stock of Bosco Corporation. During the year, Rhodes pays $10,000 in dividends to Eglin, and reports a net loss of $250,000. Eglin Company's investment in Bosco will affect Eglin net income by a

Fair Value Adjustment is a valuation ____________ account, which is _______________ to (from) the cost of the investments.

Which of the following is not a method of accounting for stock investments?

When a company owns more than 50% of the common stock of another company

Compound interest is computed on the principal and any interest earned that has not been withdrawn.

The Stock Investments account is debited at acquisition under both the equity method and cost method of accounting for investments in common stock.

Short-term investments are listed on the balance sheet immediately below

Charleston Co. purchased 60, 6% APS Company bonds for $60,000 cash plus brokerage fees of $500. Interest is payable semiannually on July 1 and January 1. The entry to record the December 31 interest accrual would include a

On January 1, Connid Company purchased as an investment a $1,000, 8% bond for $1,000. The bond pays interest on January 1 and July 1. What is the entry to record the interest payment on July 1?

Mazzeo Company acquires 80 Dodd's 10%, 5 year, $1,000 bonds on January 1, 2014 for $80,000. If Mazzeo sells all of its Dodd's Bonds for $78,400 what gain or loss is recognized?

Why do pension and mutual funds invest in debt and equity securities?

McComb Inc. earns $900,000 and pays cash dividends for $300,000 during 2014. SFX Corporation owns 70,000 of the 210,000 outstanding shares of McComb. What amount should SFX show in the investment account at December 31, 2014 if the beginning of the year balance in the account was $100,000?

Introduction to Financial Statements

A Further Look at Financial Statements

The Accounting Information System

Accrual Accounting Concepts

Merchandising Operations and the Multiple-Step Income Statement

Reporting and Analyzing Inventory

Fraud, Internal Control, and Cash

Reporting and Analyzing Receivables

Reporting and Analyzing Long-Lived Assets

Reporting and Analyzing Liabilities

Reporting and Analyzing Stockholders Equity

Statement of Cash Flows

Financial Analysis: The Big Picture

Filters

Fair Value Adjustment is a valuation account, which is ___ to (from) the cost of the investments.