Question 1

If the exchange rate for Canadian and U.S.dollars is 0.82777 to 1,this implies that 3 Canadian dollars will buy ________ worth of U.S.dollars.

Accepted Answer

A) $0.2759 
B) $0.82777 
C) $1.82777 
D) $2.48 
E) $1.00 
A) $0.2759 
B) $0.82777 
C) $1.82777 
D) $2.48 
E) $1.00

Question 2

Explain how to account for held-to-maturity debt securities at and after acquisition and how they are reported in the financial statements.

Accepted Answer

Held-to-maturity (HTM)debt securities ar

Question 3

Select the correct statement from the following:

Accepted Answer

A) Profit margin reflects a company's ability to produce net sales from total assets. 
B) Total asset turnover reflects the percent of net income in each dollar of net sales. 
C) Return on total assets can be separated into the gross margin ratio and debt ratio. 
D) A high return on total assets is desirable. 
E) Analysis of return on total assets is not beneficial in evaluating profitability. 
A) Profit margin reflects a company's ability to produce net sales from total assets. 
B) Total asset turnover reflects the percent of net income in each dollar of net sales. 
C) Return on total assets can be separated into the gross margin ratio and debt ratio. 
D) A high return on total assets is desirable. 
E) Analysis of return on total assets is not beneficial in evaluating profitability.

Question 4

________ are investments in securities that are not readily convertible to cash,or are not intended to be converted to cash in the short-term.

Accepted Answer

Long-term

Question 5

Equity securities reflect a creditor relationship such as investments in notes,bonds,and certificates of deposit.

Accepted Answer

A) True 
 B)False

Question 6

Foreign exchange rates fluctuate due to changes in all but which of the following?

Accepted Answer

A) Political conditions. 
B) Economic conditions. 
C) Supply and demand for currencies. 
D) Expectations of future events. 
E) Whether the companies are considered multinational. 
A) Political conditions. 
B) Economic conditions. 
C) Supply and demand for currencies. 
D) Expectations of future events. 
E) Whether the companies are considered multinational.

Question 7

Barnes Company purchased $50,000 of 8% bonds at par.The bonds mature in six years and are classified as a held-to-maturity security.Which of the following is the correct journal entry to record the receipt of the usual semiannual interest payment?

Accepted Answer

A) debit Cash,$4,000; credit Long-Term Investments-HTM,$4,000. 
B) debt Cash,$2,000; credit Long-Term Investments-HTM,$2000. 
C) debit Cash,$2,000; credit Interest Revenue,$2,000. 
D) debit Unrealized Gain-Equity,$2,000; credit Cash,$2,000. 
E) debit Cash,$4,000; credit Unrealized Gain-Equity,$4,000. 
A) debit Cash,$4,000; credit Long-Term Investments-HTM,$4,000. 
B) debt Cash,$2,000; credit Long-Term Investments-HTM,$2000. 
C) debit Cash,$2,000; credit Interest Revenue,$2,000. 
D) debit Unrealized Gain-Equity,$2,000; credit Cash,$2,000. 
E) debit Cash,$4,000; credit Unrealized Gain-Equity,$4,000.

Question 8

Investments in debt securities that the company actively manages and trades for profit are referred to as short-term debt investments in:

Accepted Answer

A) Available-for-sale securities. 
B) Held-to-maturity securities. 
C) Trading securities. 
D) Realizable securities. 
E) Liquid securities. 
A) Available-for-sale securities. 
B) Held-to-maturity securities. 
C) Trading securities. 
D) Realizable securities. 
E) Liquid securities.

Question 9

McVeigh Corp.owns 40% of Gondor Company's common stock.McVeigh received $41,200 in cash dividends from Gondor.The entry to record the cash dividend received from Gondor would include a:

Accepted Answer

A) Debit to Dividends for $103,000. 
B) Credit to Equity Method Investments for $41,200. 
C) Debit to Dividend Revenue for $41,200. 
D) Credit to Equity Method Investments for $103,000. 
E) Credit to Cash for $41,200. 
A) Debit to Dividends for $103,000. 
B) Credit to Equity Method Investments for $41,200. 
C) Debit to Dividend Revenue for $41,200. 
D) Credit to Equity Method Investments for $103,000. 
E) Credit to Cash for $41,200.

Question 10

If the exchange rate for Canadian and U.S.dollars is 0.7382 to 1,this implies that 2 Canadian dollars can be purchased for $1.48 U.S.dollars.

Accepted Answer

A) True 
 B)False

Question 11

A company had net income of $350,000 in Year 1 and $520,000 in Year 2.The company had average total assets of $2,500,000 in Year 1 and $3,000,000 in Year 2.Calculate the return on total assets for Year 1 and Year 2.Did the company's performance improve? Explain.

Accepted Answer

(a)Year 1: $350,000 / $2,500,000 = 14.0%

Question 12

When consolidated financial statements are prepared,the parent company uses the equity method and reports the subsidiaries as investment accounts on the balance sheet.

Accepted Answer

A) True 
 B)False

Question 13

Carpark Services began operations in 20X1 and maintains long-term investments in available-for-sale debt securities.The year-end cost and fair values for its portfolio of these debt securities follows.The year-end adjusting entry to record the unrealized gain/loss at December 31,20X1 is:

Accepted Answer

A) Debit Unrealized Gain - Equity $9,000; Credit Fair Value Adjustment - Available-for-Sale (LT)$9,000. 
B) Debit Unrealized Loss - Equity $9,000; Credit Fair Value Adjustment - Available-for-Sale (LT)$9,000. 
C) Debit Realized Loss - Income $9,000; Credit Fair Value Adjustment - Available-for-Sale (ST)$9,000. 
D) Debit Fair Value Adjustment - Available-for-Sale (LT)$9,000; Credit Unrealized Loss - Equity $9,000. 
E) Debit Fair Value Adjustment - Available-for-Sale (LT)$9,000; Credit Unrealized Gain - Equity $9,000. 
A) Debit Unrealized Gain - Equity $9,000; Credit Fair Value Adjustment - Available-for-Sale (LT)$9,000. 
B) Debit Unrealized Loss - Equity $9,000; Credit Fair Value Adjustment - Available-for-Sale (LT)$9,000. 
C) Debit Realized Loss - Income $9,000; Credit Fair Value Adjustment - Available-for-Sale (ST)$9,000. 
D) Debit Fair Value Adjustment - Available-for-Sale (LT)$9,000; Credit Unrealized Loss - Equity $9,000. 
E) Debit Fair Value Adjustment - Available-for-Sale (LT)$9,000; Credit Unrealized Gain - Equity $9,000.

Question 14

Comprehensive income includes all except:

Accepted Answer

A) Revenues and expenses reported in the income statement. 
B) Dividends paid to shareholders. 
C) Unrealized gains and losses on long-term available-for-sale securities. 
D) All changes in equity for a period except those due to investments and distributions to owners. 
E) Gains and losses reported in the income statement. 
A) Revenues and expenses reported in the income statement. 
B) Dividends paid to shareholders. 
C) Unrealized gains and losses on long-term available-for-sale securities. 
D) All changes in equity for a period except those due to investments and distributions to owners. 
E) Gains and losses reported in the income statement.

Question 15

Weston Company had the following stock investments with insignificant influence in its portfolio at December 31,Year 1.Weston had several investment transactions during year 2.
(1)Determine the amount Weston should report on its December 31,Year 1 balance sheet for its stock investments.
(2)Determine the amount Weston should report on its December 31,Year 2 balance sheet for its stock investments.
(3)Prepare the necessary adjusting entry to record the fair value adjustment at December 31,Year 2.

Accepted Answer

The answer of Weston Company had the following stock investments...

Question 16

In the current year,Logic Co.purchased stock of Waterford Co.with a cost of $125,000 and a year-end fair value of $123,700.Logic also purchased 1,500 shares of Jasper Co.common stock with a cost of $25,000 and a year-end fair value of $26,100.These investments are considered stock investments with insignificant influence.Prepare the journal entry to record any necessary fair value adjustment to the stock investments as of its December 31 year-end.

Accepted Answer

The answer of In the current year,Logic Co.purchased stock of...

Question 17

A company reported net income for Year 1 of $98,000 and $106,000 for Year 2.It also reported net sales of $835,000 in Year 1 and $918,000 in Year 2.The company's average total assets in Year 1 were $1,850,000 and $1,720,000 in Year 2.Calculate the company's profit margin,total asset turnover and return on total assets for Year 1 and Year 2.Did the company's return on total assets improve? What component(s)might explain this change?

Accepted Answer

@#IMG-DLM& There was an overall increase in return

Question 18

The two business entities involved in an investment in securities with controlling influence,for which consolidated financial statements are prepared,are known as:

Accepted Answer

A) Parent and Investor 
B) Subsidiary and Investee 
C) Consolidator and Parent 
D) Parent and Subsidiary 
E) Both are referred to as partners. 
A) Parent and Investor 
B) Subsidiary and Investee 
C) Consolidator and Parent 
D) Parent and Subsidiary 
E) Both are referred to as partners.

Question 19

A controlling influence over the investee is based on the investor owning voting stock exceeding:

Accepted Answer

A) 10%. 
B) 20%. 
C) 30%. 
D) 40%. 
E) 50%. 
A) 10%. 
B) 20%. 
C) 30%. 
D) 40%. 
E) 50%.

Question 20

Debt securities are recorded at cost when purchased.

Accepted Answer

A) True 
 B)False

Exam 26: Investments

If the exchange rate for Canadian and U.S.dollars is 0.82777 to 1,this implies that 3 Canadian dollars will buy ________ worth of U.S.dollars.

Explain how to account for held-to-maturity debt securities at and after acquisition and how they are reported in the financial statements.

Select the correct statement from the following:

________ are investments in securities that are not readily convertible to cash,or are not intended to be converted to cash in the short-term.

Equity securities reflect a creditor relationship such as investments in notes,bonds,and certificates of deposit.

Foreign exchange rates fluctuate due to changes in all but which of the following?

Barnes Company purchased $50,000 of 8% bonds at par.The bonds mature in six years and are classified as a held-to-maturity security.Which of the following is the correct journal entry to record the receipt of the usual semiannual interest payment?

Investments in debt securities that the company actively manages and trades for profit are referred to as short-term debt investments in:

McVeigh Corp.owns 40% of Gondor Company's common stock.McVeigh received $41,200 in cash dividends from Gondor.The entry to record the cash dividend received from Gondor would include a:

If the exchange rate for Canadian and U.S.dollars is 0.7382 to 1,this implies that 2 Canadian dollars can be purchased for $1.48 U.S.dollars.

A company had net income of $350,000 in Year 1 and $520,000 in Year 2.The company had average total assets of $2,500,000 in Year 1 and $3,000,000 in Year 2.Calculate the return on total assets for Year 1 and Year 2.Did the company's performance improve? Explain.

When consolidated financial statements are prepared,the parent company uses the equity method and reports the subsidiaries as investment accounts on the balance sheet.

Carpark Services began operations in 20X1 and maintains long-term investments in available-for-sale debt securities.The year-end cost and fair values for its portfolio of these debt securities follows.The year-end adjusting entry to record the unrealized gain/loss at December 31,20X1 is:

Comprehensive income includes all except:

The two business entities involved in an investment in securities with controlling influence,for which consolidated financial statements are prepared,are known as:

A controlling influence over the investee is based on the investor owning voting stock exceeding:

Debt securities are recorded at cost when purchased.

Accounting in Business

Accounting for Business Transactions

Adjusting Accounts for Financial Statements

Accounting for Merchandising Operations

Inventories and Cost of Sales

Cash,fraud,and Internal Controls

Accounting for Receivables

Accounting for Long-Term Assets

Accounting for Current Liabilities

Accounting for Long-Term Liabilities

Corporate Reporting and Analysis

Reporting Cash Flows

Analysis of Financial Statements

Managerial Accounting Concepts and Principles

Job Order Costing and Analysis

Process Costing and Analysis

Activity-Based Costing and Analysis

Cost Behavior and Cost-Volume-Profit Analysis

Variable Costing and Analysis

Master Budgets and Performance Planning

Flexible Budgets and Standard Costs

Performance Measurement and Responsibility Accounting

Relevant Costing for Managerial Decisions

Capital Budgeting and Investment Analysis

Time Value of Money

Lean Principles and Accounting

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