Question 1

Interest is the difference between the amount borrowed and the principal.

Accepted Answer

A) True 
 B)False

Question 2

To compute the present value of a bond, both the _______________ payments and the ________________ amount must be discounted.

Accepted Answer

The answer of To compute the present value of a...

Question 3

All of the following statements about financial statement gains and losses on investments are true except

Accepted Answer

A)  the account "Fair Value Adjustment - Available-For-Sale" is reported on the balance sheet. 
B)  unrealized losses on trading securities are reported on the income statement. 
C)  unrealized losses on available-for-sale securities are reported on the income statement. 
D)  the account "Fair Value Adjustment - Trading" is reported on the balance sheet. 
A)  the account "Fair Value Adjustment - Available-For-Sale" is reported on the balance sheet. 
B)  unrealized losses on trading securities are reported on the income statement. 
C)  unrealized losses on available-for-sale securities are reported on the income statement. 
D)  the account "Fair Value Adjustment - Trading" is reported on the balance sheet.

Question 4

The present value of a bond is a function of two variables: (1) the payment amounts and (2) the discount rate.

Accepted Answer

A) True 
 B)False

Question 5

Outer Banks Corporation sells 200 shares of common stock being held as an investment. The shares were acquired six months ago at a cost of $40 a share. Outer Banks sold the shares for $43 a share. The entry to record the sale is

Accepted Answer

The answer of Outer Banks Corporation sells 200 shares of...

Question 6

On January 1, 2014, Valentine Corporation purchased 25% of the common stock outstanding of Betz Corporation for $100,000. During 2014, Betz Corporation reported net income of $40,000 and paid cash dividends of $24,000. The balance of the Stock Investments-Betz account on the books of Valentine Corporation at December 31, 2014, is

Accepted Answer

A)  $100,000. 
B)  $104,000. 
C)  $110,000. 
D)  $96,000. 
A)  $100,000. 
B)  $104,000. 
C)  $110,000. 
D)  $96,000.

Question 7

The process of determining the present value is referred to as _________________ the future amount.

Accepted Answer

The answer of The process of determining the present value...

Question 8

A reason some companies purchase investments is because they generate a significant portion of their earnings from investment income.

Accepted Answer

A) True 
 B)False

Question 9

If the cost of an available-for-sale security exceeds its fair value by $29,000, the entry to recognize the loss

Accepted Answer

A)  is not required since the share prices will likely rebound in the long run. 
B)  will show a debit to an expense account. 
C)  will show a credit to a valuation allowance account that appears in the stockholders' equity section of the balance sheet. 
D)  will show a debit to an unrealized loss account that is deducted in the stockholders' equity section of the balance sheet. 
A)  is not required since the share prices will likely rebound in the long run. 
B)  will show a debit to an expense account. 
C)  will show a credit to a valuation allowance account that appears in the stockholders' equity section of the balance sheet. 
D)  will show a debit to an unrealized loss account that is deducted in the stockholders' equity section of the balance sheet.

Question 10

Akers Company is considering purchasing a machine. The machine will produce the following cash flows: Year $1 \quad \$ 30,000$
Year $2 \quad \$ 45,000$ Akers requires a minimum rate of return of 10%. What is the maximum price Akers should pay for this machine?

Accepted Answer

A)  $64,462.95 
B)  $27,272.70 
C)  $75,000.00 
D)  $37,500.00 
A)  $64,462.95 
B)  $27,272.70 
C)  $75,000.00 
D)  $37,500.00

Question 11

When the discount rate is equal to the contractual rate, the present value of the bonds will equal the bonds' face value.

Accepted Answer

A) True 
 B)False

Question 12

The Chocolate Tree Company receives a $150,000, 6-year note bearing interest of 6% (paid annually) from a customer at a time when the discount rate is 8%. What is the present value of the note received by The Chocolate Tree?

Accepted Answer

The answer of The Chocolate Tree Company receives a $150,000,...

Question 13

Under the equity method the investor records a proportionate share of the investee's income in the year when it is earned.

Accepted Answer

A) True 
 B)False

Question 14

The formula for the present value of a single amount is FV / (1 + i)N.

Accepted Answer

A) True 
 B)False

Question 15

On January 1, 2014, Tri-State Supply Company purchased at face value, a $1,000 7%, bond that pays interest annually on January 1. Tri-State Company has a calendar year end. The adjusting entry on June 30, 2014, is

Accepted Answer

The answer of On January 1, 2014, Tri-State Supply Company...

Question 16

Kalyn Gise is the daughter of Mark Gise, the founder and president of Carolina Blue Sky Enterprises. She has been working in various departments during school vacations throughout high school. She burst into the accounting department excitedly one morning. She said that the stock price of several of the firm's temporary investments are up, and that her father said that the company had made over $10,000 because of this jump in stock prices. She asks to see how the increase is recorded. It is a very busy time in the accounting department, and so her question is deferred.
Required:
Prepare a brief note to answer Kalyn question.

Accepted Answer

This communication c

Question 17

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 18

In accordance with the historical cost principle, brokerage fees should be added to the cost of an investment.

Accepted Answer

A) True 
 B)False

Question 19

In present value calculations, the process of determining the present value is called

Accepted Answer

A)  allocating. 
B)  pricing. 
C)  negotiating. 
D)  discounting. 
A)  allocating. 
B)  pricing. 
C)  negotiating. 
D)  discounting.

Question 20

A series of equal periodic receipts or payments are called annuities.

Accepted Answer

A) True 
 B)False

Interest is the difference between the amount borrowed and the principal.

To compute the present value of a bond, both the _ payments and the __ amount must be discounted.

All of the following statements about financial statement gains and losses on investments are true except

The present value of a bond is a function of two variables: (1) the payment amounts and (2) the discount rate.

Outer Banks Corporation sells 200 shares of common stock being held as an investment. The shares were acquired six months ago at a cost of $40 a share. Outer Banks sold the shares for $43 a share. The entry to record the sale is

The process of determining the present value is referred to as _________________ the future amount.

A reason some companies purchase investments is because they generate a significant portion of their earnings from investment income.

If the cost of an available-for-sale security exceeds its fair value by $29,000, the entry to recognize the loss

Akers Company is considering purchasing a machine. The machine will produce the following cash flows: Year $1 \quad \$ 30,000$ Year $2 \quad \$ 45,000$ Akers requires a minimum rate of return of 10%. What is the maximum price Akers should pay for this machine?

When the discount rate is equal to the contractual rate, the present value of the bonds will equal the bonds' face value.

The Chocolate Tree Company receives a $150,000, 6-year note bearing interest of 6% (paid annually) from a customer at a time when the discount rate is 8%. What is the present value of the note received by The Chocolate Tree?

Under the equity method the investor records a proportionate share of the investee's income in the year when it is earned.

The formula for the present value of a single amount is FV / (1 + i)^N.

On January 1, 2014, Tri-State Supply Company purchased at face value, a $1,000 7%, bond that pays interest annually on January 1. Tri-State Company has a calendar year end. The adjusting entry on June 30, 2014, is

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

In accordance with the historical cost principle, brokerage fees should be added to the cost of an investment.

In present value calculations, the process of determining the present value is called

A series of equal periodic receipts or payments are called annuities.

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

Interest is the difference between the amount borrowed and the principal.

To compute the present value of a bond, both the _______________ payments and the ________________ amount must be discounted.

All of the following statements about financial statement gains and losses on investments are true except

The present value of a bond is a function of two variables: (1) the payment amounts and (2) the discount rate.

Outer Banks Corporation sells 200 shares of common stock being held as an investment. The shares were acquired six months ago at a cost of $40 a share. Outer Banks sold the shares for $43 a share. The entry to record the sale is

The process of determining the present value is referred to as _________________ the future amount.

A reason some companies purchase investments is because they generate a significant portion of their earnings from investment income.

If the cost of an available-for-sale security exceeds its fair value by $29,000, the entry to recognize the loss

Akers Company is considering purchasing a machine. The machine will produce the following cash flows: Year 1$30,0001 \quad \$ 30,0001$30,000 Year 2$45,0002 \quad \$ 45,0002$45,000 Akers requires a minimum rate of return of 10%. What is the maximum price Akers should pay for this machine?

When the discount rate is equal to the contractual rate, the present value of the bonds will equal the bonds' face value.

The Chocolate Tree Company receives a $150,000, 6-year note bearing interest of 6% (paid annually) from a customer at a time when the discount rate is 8%. What is the present value of the note received by The Chocolate Tree?

Under the equity method the investor records a proportionate share of the investee's income in the year when it is earned.

The formula for the present value of a single amount is FV / (1 + i)N.

On January 1, 2014, Tri-State Supply Company purchased at face value, a $1,000 7%, bond that pays interest annually on January 1. Tri-State Company has a calendar year end. The adjusting entry on June 30, 2014, is

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

In accordance with the historical cost principle, brokerage fees should be added to the cost of an investment.

In present value calculations, the process of determining the present value is called

A series of equal periodic receipts or payments are called annuities.

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

To compute the present value of a bond, both the _ payments and the __ amount must be discounted.

Akers Company is considering purchasing a machine. The machine will produce the following cash flows: Year $1 \quad \$ 30,000$ Year $2 \quad \$ 45,000$ Akers requires a minimum rate of return of 10%. What is the maximum price Akers should pay for this machine?

The formula for the present value of a single amount is FV / (1 + i)^N.