Question 1

Accounting for long-term investments in equity securities with controlling influence uses the:

Accepted Answer

A)  Controlling method. 
B)  Equity method with consolidation. 
C)  Investor method. 
D)  Investment method. 
E)  Consolidated method. 
A)  Controlling method. 
B)  Equity method with consolidation. 
C)  Investor method. 
D)  Investment method. 
E)  Consolidated method.

Question 2

A company has an investment in 9% bonds with a par value of $100,000 that pay interest on October 1 and April 1.The amount of interest accrued on December 31 (the company's year-end)would be:

Accepted Answer

A)  $750. 
B)  $1,500. 
C)  $2,250. 
D)  $4,500. 
E)  $9,000. 
A)  $750. 
B)  $1,500. 
C)  $2,250. 
D)  $4,500. 
E)  $9,000.

Question 3

Investments in equity securities where the investor has a controlling influence are accounted for using the ________.

Accepted Answer

equity met

Question 4

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

Accepted Answer

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

Question 5

When using the equity method,receipt of cash dividends increases the carrying (book)value of an investment in equity securities.

Accepted Answer

A) True 
 B)False

Question 6

Long-term investments include:

Accepted Answer

A)  Investments in bonds and stocks that are not readily convertible to cash or not intended to be converted to cash in the short term. 
B)  Investments in marketable stocks that are intended to be converted into cash in the short-term. 
C)  Investments in marketable bonds that are intended to be converted into cash in the short-term. 
D)  Only investments readily convertible to cash. 
E)  Investments intended to be converted to cash within one year. 
A)  Investments in bonds and stocks that are not readily convertible to cash or not intended to be converted to cash in the short term. 
B)  Investments in marketable stocks that are intended to be converted into cash in the short-term. 
C)  Investments in marketable bonds that are intended to be converted into cash in the short-term. 
D)  Only investments readily convertible to cash. 
E)  Investments intended to be converted to cash within one year.

Question 7

Rainier Importers purchases automotive parts from Austria.Prepare journal entries for the following transactions of Rainier.

Accepted Answer

None

Question 8

Explain how equity securities having significant influence are accounted for and reported in the financial statements.Include a discussion of the criterion for these securities in terms of an investee's voting stock.

Accepted Answer

The equity method of accounting for secu

Question 9

________ are debt securities a company intends and is able to hold until the maturity date.

Accepted Answer

The answer of ________ are debt securities a company intends...

Question 10

All of the following statements regarding equity securities are true except:

Accepted Answer

A)  Equity securities should be recorded at cost when acquired. 
B)  Equity securities are valued at fair value if classified as trading securities. 
C)  Equity securities are valued at fair value if classified as significant influence securities. 
D)  Equity securities are valued at fair value if classified as available-for-sale securities. 
E)  Equity securities classified as available-for-sale record the dividend revenue when received. 
A)  Equity securities should be recorded at cost when acquired. 
B)  Equity securities are valued at fair value if classified as trading securities. 
C)  Equity securities are valued at fair value if classified as significant influence securities. 
D)  Equity securities are valued at fair value if classified as available-for-sale securities. 
E)  Equity securities classified as available-for-sale record the dividend revenue when received.

Question 11

A controlling investor is called the parent,and the investee company is called the subsidiary.

Accepted Answer

A) True 
 B)False

Question 12

Investments in trading securities are accounted for using the equity method with consolidation.

Accepted Answer

A) True 
 B)False

Question 13

If a U.S.company's credit sale to an international customer allows payment to be made in a foreign currency,the sale transaction is recorded using the exchange rate on the date of sale.

Accepted Answer

A) True 
 B)False

Question 14

On January 2,Froxel Company purchased 10,000 shares of Sandia Corp.common stock at $19 per share plus a $3,000 commission.This represents 30% of Sandia Corp.'s outstanding stock.On August 6,Sandia Corp.declared and paid cash dividends of $1.75 per share,and on December 31 it reported net income of $150,000.Prepare the necessary entries for Froxel to account for these transactions and events.

Accepted Answer

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Question 15

Profit margin is net sales divided by net income.

Accepted Answer

A) True 
 B)False

Question 16

A company has net income of $130,500.Its net sales were $1,740,000 and its average total assets were $2,750,000.Its profit margin equals 7.5%.

Accepted Answer

A) True 
 B)False

Question 17

Unrealized Loss-Equity and Unrealized Gain-Equity are permanent equity accounts.

Accepted Answer

A) True 
 B)False

Question 18

Define the return on total assets and explain how it is used to measure a company's financial performance.

Accepted Answer

The return on total assets is calculated

Question 19

Lessington Corporation purchases 4,000 shares of Gonzalez Company common stock for $150,000 as a long-term investment.The investment is classified as available-for-sale securities.Gonzalez has 500,000 shares of stock currently outstanding and the par value of the stock is $1 per share.Lessington's entry to record the purchase transaction would include a:

Accepted Answer

A)  Debit to Long-Term Investments-AFS for $150,000. 
B)  Credit to Common Stock for $150,000. 
C)  Credit Gain on Long-Term Investment $146,000. 
D)  Debit to Long-Term Investments-AFS for $4,000. 
E)  Credit to Common Stock for $4,000. 
A)  Debit to Long-Term Investments-AFS for $150,000. 
B)  Credit to Common Stock for $150,000. 
C)  Credit Gain on Long-Term Investment $146,000. 
D)  Debit to Long-Term Investments-AFS for $4,000. 
E)  Credit to Common Stock for $4,000.

Question 20

Cash equivalents are investments that are readily converted to known amounts of cash and mature within three months.

Accepted Answer

A) True 
 B)False

Accounting for long-term investments in equity securities with controlling influence uses the:

A company has an investment in 9% bonds with a par value of $100,000 that pay interest on October 1 and April 1.The amount of interest accrued on December 31 (the company's year-end)would be:

Investments in equity securities where the investor has a controlling influence are accounted for using the ________.

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

When using the equity method,receipt of cash dividends increases the carrying (book)value of an investment in equity securities.

Long-term investments include:

Rainier Importers purchases automotive parts from Austria.Prepare journal entries for the following transactions of Rainier.

Explain how equity securities having significant influence are accounted for and reported in the financial statements.Include a discussion of the criterion for these securities in terms of an investee's voting stock.

________ are debt securities a company intends and is able to hold until the maturity date.

All of the following statements regarding equity securities are true except:

A controlling investor is called the parent,and the investee company is called the subsidiary.

Investments in trading securities are accounted for using the equity method with consolidation.

If a U.S.company's credit sale to an international customer allows payment to be made in a foreign currency,the sale transaction is recorded using the exchange rate on the date of sale.

Profit margin is net sales divided by net income.

A company has net income of $130,500.Its net sales were $1,740,000 and its average total assets were $2,750,000.Its profit margin equals 7.5%.

Unrealized Loss-Equity and Unrealized Gain-Equity are permanent equity accounts.

Define the return on total assets and explain how it is used to measure a company's financial performance.

Cash equivalents are investments that are readily converted to known amounts of cash and mature within three months.

Accounting in Business

Analyzing 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

Time Value of Money

Partnership Accounting

Filters

Exam 15: Investments

Accounting for long-term investments in equity securities with controlling influence uses the:

A company has an investment in 9% bonds with a par value of $100,000 that pay interest on October 1 and April 1.The amount of interest accrued on December 31 (the company's year-end)would be:

Investments in equity securities where the investor has a controlling influence are accounted for using the ________.

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

When using the equity method,receipt of cash dividends increases the carrying (book)value of an investment in equity securities.

Long-term investments include:

Rainier Importers purchases automotive parts from Austria.Prepare journal entries for the following transactions of Rainier.

Explain how equity securities having significant influence are accounted for and reported in the financial statements.Include a discussion of the criterion for these securities in terms of an investee's voting stock.

________ are debt securities a company intends and is able to hold until the maturity date.

All of the following statements regarding equity securities are true except:

A controlling investor is called the parent,and the investee company is called the subsidiary.

Investments in trading securities are accounted for using the equity method with consolidation.

If a U.S.company's credit sale to an international customer allows payment to be made in a foreign currency,the sale transaction is recorded using the exchange rate on the date of sale.

Profit margin is net sales divided by net income.

A company has net income of $130,500.Its net sales were $1,740,000 and its average total assets were $2,750,000.Its profit margin equals 7.5%.

Unrealized Loss-Equity and Unrealized Gain-Equity are permanent equity accounts.

Define the return on total assets and explain how it is used to measure a company's financial performance.

Cash equivalents are investments that are readily converted to known amounts of cash and mature within three months.

Accounting in Business

Analyzing 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

Time Value of Money

Partnership Accounting

Filters