Question 1

If the bonds are purchased between interest dates, the purchase price includes accrued interest since the last interest payment.

Accepted Answer

A) True 
 B)False

Question 2

The income statement for Dodson Corporation reported net income of $22,400 for the year ended December 31 before considering the following:
$\bullet$During the year the company purchased available-for-sale securities.
$\bullet$At year end, the fair value of the investment portfolio was $2,100 more than cost.
$\bullet$The balance of Retained Earnings was $83,000 on January 1.
$\bullet$Dodson Corporation paid $9,000 in cash dividends during the year.
Calculate the balance of Retained Earnings on December 31.

Accepted Answer

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Question 3

Accounting for the sale of stock is the same for both the fair value and the equity methods of accounting for investments.

Accepted Answer

A) True 
 B)False

Question 4

On May 1, Cedar Inc. purchases $150,000 of 10-year, Knox Corporation 8% bonds dated March 1 at 100 plus accrued interest. What entry would Cedar record when receiving its semiannual interest on March 1?

Accepted Answer

The answer of On May 1, Cedar Inc. purchases $150,000...

Question 5

On June 1, $50,000 of treasury bonds were purchased between interest dates. The broker commission was $500. The bonds pay interest at 12%, which is paid semiannually on January 1 and July 1. What is the total cost to be debited to the Investment-Treasury Bonds account?

Accepted Answer

A)  $50,000 
B)  $50,500 
C)  $49,500 
D)  $53,000 
A)  $50,000 
B)  $50,500 
C)  $49,500 
D)  $53,000

Question 6

Skyline, Inc. purchased a portfolio of trading securities during the current fiscal year. The cost and fair value of this portfolio on December 31 was as follows:
​ $$\begin{array} { | l | c | r | r | } 
\hline \text { Name } & \text { Number of Shares } & \text { Total Cost } & \text { Total Fair Value } \
\hline \text { Alcon, Inc. } & 1,200 & \$ 16,000 & \$ 15,000 \
\hline \text { Easton Company } & 700 & 23,000 & 21,500 \
\hline \text { Panther Company } & 300 & 9,000 & 9,200 \
\hline \text { Total } & & \$ 48,000 & \$ 45,700 \
\hline
\end{array}$$ ​
(a) Provide the journal entry to record the adjustment of the trading security portfolio to fair value on December 31.
(b) Where will the information from the journal entry be reported on the financial statements?

Accepted Answer

@#IMG-DLM&_TB2281_00 ​
(b) The unrealized loss wil

Question 7

Which of the following stock investments should be accounted for using the fair value method?

Accepted Answer

A)  investments of less than 20% 
B)  investments between 20% and 50% 
C)  investments of less than 20% and investments between 20% and 50% 
D)  all stock investments should be accounted for using the fair value method 
A)  investments of less than 20% 
B)  investments between 20% and 50% 
C)  investments of less than 20% and investments between 20% and 50% 
D)  all stock investments should be accounted for using the fair value method

Question 8

Yankton Company began the year without an investment portfolio. During the year, it purchased investments classified as trading securities at a cost of $13,000. At the end of the year, the market value of the securities was $11,000. Yankton Company's financial statements for the current year should show

Accepted Answer

A)  an unrealized loss of $2,000 on the income statement and net trading securities of $13,000 on the balance sheet 
B)  no unrealized loss on the income statement and net trading securities of $13,000 on the balance sheet 
C)  no unrealized loss on the income statement; net trading securities of $11,000 and an unrealized loss of $2,000 as a stockholders' equity adjustment on the balance sheet 
D)  an unrealized loss of $2,000 on the income statement and temporary investments of $11,000 on the balance sheet 
A)  an unrealized loss of $2,000 on the income statement and net trading securities of $13,000 on the balance sheet 
B)  no unrealized loss on the income statement and net trading securities of $13,000 on the balance sheet 
C)  no unrealized loss on the income statement; net trading securities of $11,000 and an unrealized loss of $2,000 as a stockholders' equity adjustment on the balance sheet 
D)  an unrealized loss of $2,000 on the income statement and temporary investments of $11,000 on the balance sheet

Question 9

On May 1, Knox Inc. purchases $100,000 of 10-year, 6% Madison Corporation bonds dated March 1 at 100 plus accrued interest. What entry would Knox record when purchasing the bonds?

Accepted Answer

The answer of On May 1, Knox Inc. purchases $100,000...

Question 10

Any gains or losses on the sale of bonds normally would be reported in the Other revenue (loss) section of the income statement.

Accepted Answer

A) True 
 B)False

Question 11

When long-term investments in bonds are sold before their maturity date, the seller deducts any accrued interest since the last interest payment date from the selling price.

Accepted Answer

A) True 
 B)False

Question 12

On April 1, Alliance Company purchased $50,000 of Tetter Company's 12% bonds at 100 plus accrued interest of $2,000. On June 30, Alliance received its first semiannual interest. On February 1, Alliance sold $40,000 of the bonds at 103 plus accrued interest. The journal entry Alliance will record on April 1 for the purchase of the bonds will include a

Accepted Answer

A)  credit to Interest Payable for $2,000 
B)  debit to Investments-Tetter Company Bonds for $52,000 
C)  debit for Cash of $50,000 
D)  debit to Investments-Tetter Company Bonds for $50,000 
A)  credit to Interest Payable for $2,000 
B)  debit to Investments-Tetter Company Bonds for $52,000 
C)  debit for Cash of $50,000 
D)  debit to Investments-Tetter Company Bonds for $50,000

Question 13

The income statement for Hudson Company reported net income of $345,000 for the year ended December 31 before considering the following:
$\bullet$During the year the company purchased trading securities.
$\bullet$At year end, the fair value of the investment portfolio was $23,000 less than cost.
$\bullet$The balance of Retained Earnings was $823,000 on January 1.
$\bullet$Hudson Company paid $43,000 in cash dividends during the year.
Calculate the balance of Retained Earnings on December 31.

Accepted Answer

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Question 14

Interest revenue on bonds is reported

Accepted Answer

A)  as an addition to the Investment in Bonds account 
B)  as part of comprehensive income but not as part of net income 
C)  as part of other revenue 
D)  as part of operating income 
A)  as an addition to the Investment in Bonds account 
B)  as part of comprehensive income but not as part of net income 
C)  as part of other revenue 
D)  as part of operating income

Question 15

Blanton Corporation purchased 35% of the outstanding shares of common stock of Worton Corporation as a long-term investment. Subsequently, Worton Corporation reported net income and declared and paid cash dividends. What journal entry would Blanton Corporation use to record the dividends it receives from Worton Corporation?

Accepted Answer

A)  debit Investment in Worton Corporation Stock; credit Cash 
B)  debit Cash; credit Dividend Revenue 
C)  debit Investment in Worton Corporation Stock; credit Income of Worton Corporation 
D)  debit Cash; credit Investment in Worton Corporation Stock 
A)  debit Investment in Worton Corporation Stock; credit Cash 
B)  debit Cash; credit Dividend Revenue 
C)  debit Investment in Worton Corporation Stock; credit Income of Worton Corporation 
D)  debit Cash; credit Investment in Worton Corporation Stock

Question 16

On September 1, Parsons Company purchased $84,000, 10-year, 7% government bonds at 100 plus accrued interest. The semi-annual interest payment dates are June 30 and December 31. Interest calculations are done by the month. (a) Journalize the entry to record the bond purchase.
(b) Journalize the receipt of interest on December 31 of the first year.
(c) Journalize the sale of the bonds on February 1 of the second year for $\$ 82,000$ plus accrued interest.

Accepted Answer

The answer of On September 1, Parsons Company purchased $84,000,...

Question 17

Under the equity method, the receipt of cash dividends on an investment in common stock of Vallerio Corporation is accounted for as a debit to Cash and a credit to

Accepted Answer

A)  Investment in Vallerio Corporation Stock 
B)  Retained Earnings 
C)  Dividend Revenue 
D)  Dividend Receivables 
A)  Investment in Vallerio Corporation Stock 
B)  Retained Earnings 
C)  Dividend Revenue 
D)  Dividend Receivables

Question 18

Journalize the entries to record the following selected equity investment transactions completed by Flurry Company during the current year. Flurry's purchase represents less than 20% of the total outstanding Braxter stock.
​

Accepted Answer

The answer of Journalize the entries to record the following...

Question 19

On February 12, Addison, Inc. purchased 6,000 shares of Lucas Company at $22 per share plus a $240 brokerage fee. On August 22, Lucas paid a $0.42 dividend per share. On November 10, 4,000 shares of Lucas stock were sold for $28 per share less a $160 brokerage fee. The journal entry for the sale under the fair value method would include a

Accepted Answer

A)  debit to Cash, $111,840 
B)  credit to Investments, $112,000 
C)  credit to Loss on Sale, $23,680 
D)  debit to Cash, $112,000 
A)  debit to Cash, $111,840 
B)  credit to Investments, $112,000 
C)  credit to Loss on Sale, $23,680 
D)  debit to Cash, $112,000

Question 20

Generally accepted accounting principles (GAAP) require the use of fair value accounting for all assets and liabilities.

Accepted Answer

A) True 
 B)False

If the bonds are purchased between interest dates, the purchase price includes accrued interest since the last interest payment.

Accounting for the sale of stock is the same for both the fair value and the equity methods of accounting for investments.

On May 1, Cedar Inc. purchases $150,000 of 10-year, Knox Corporation 8% bonds dated March 1 at 100 plus accrued interest. What entry would Cedar record when receiving its semiannual interest on March 1?

On June 1, $50,000 of treasury bonds were purchased between interest dates. The broker commission was $500. The bonds pay interest at 12%, which is paid semiannually on January 1 and July 1. What is the total cost to be debited to the Investment-Treasury Bonds account?

Which of the following stock investments should be accounted for using the fair value method?

On May 1, Knox Inc. purchases $100,000 of 10-year, 6% Madison Corporation bonds dated March 1 at 100 plus accrued interest. What entry would Knox record when purchasing the bonds?

Any gains or losses on the sale of bonds normally would be reported in the Other revenue (loss) section of the income statement.

When long-term investments in bonds are sold before their maturity date, the seller deducts any accrued interest since the last interest payment date from the selling price.

Interest revenue on bonds is reported

Under the equity method, the receipt of cash dividends on an investment in common stock of Vallerio Corporation is accounted for as a debit to Cash and a credit to

Journalize the entries to record the following selected equity investment transactions completed by Flurry Company during the current year. Flurry's purchase represents less than 20% of the total outstanding Braxter stock.

Generally accepted accounting principles (GAAP) require the use of fair value accounting for all assets and liabilities.

Accounting and Business

Double-Entry Accounting

Adjustments: Accruals and Deferrals

The Accounting Cycle

Accounting for Retail Businesses

Inventories

Internal Control and Cash

Receivables

Long-Term Assets: Fixed and Intangible

Liabilities: Current, Installment Notes, and Contingencies

Liabilities: Bonds Payable

Corporations: Organization, Stock Transactions, and Dividends

Statement of Cash Flows

Financial Statement Analysis

Filters

Exam 15:Investments

If the bonds are purchased between interest dates, the purchase price includes accrued interest since the last interest payment.

Accounting for the sale of stock is the same for both the fair value and the equity methods of accounting for investments.

On May 1, Cedar Inc. purchases $150,000 of 10-year, Knox Corporation 8% bonds dated March 1 at 100 plus accrued interest. What entry would Cedar record when receiving its semiannual interest on March 1?

On June 1, $50,000 of treasury bonds were purchased between interest dates. The broker commission was $500. The bonds pay interest at 12%, which is paid semiannually on January 1 and July 1. What is the total cost to be debited to the Investment-Treasury Bonds account?

Which of the following stock investments should be accounted for using the fair value method?

On May 1, Knox Inc. purchases $100,000 of 10-year, 6% Madison Corporation bonds dated March 1 at 100 plus accrued interest. What entry would Knox record when purchasing the bonds?

Any gains or losses on the sale of bonds normally would be reported in the Other revenue (loss) section of the income statement.

When long-term investments in bonds are sold before their maturity date, the seller deducts any accrued interest since the last interest payment date from the selling price.

Interest revenue on bonds is reported

Under the equity method, the receipt of cash dividends on an investment in common stock of Vallerio Corporation is accounted for as a debit to Cash and a credit to

Journalize the entries to record the following selected equity investment transactions completed by Flurry Company during the current year. Flurry's purchase represents less than 20% of the total outstanding Braxter stock. ​

Generally accepted accounting principles (GAAP) require the use of fair value accounting for all assets and liabilities.

Accounting and Business

Double-Entry Accounting

Adjustments: Accruals and Deferrals

The Accounting Cycle

Accounting for Retail Businesses

Inventories

Internal Control and Cash

Receivables

Long-Term Assets: Fixed and Intangible

Liabilities: Current, Installment Notes, and Contingencies

Liabilities: Bonds Payable

Corporations: Organization, Stock Transactions, and Dividends

Statement of Cash Flows

Financial Statement Analysis

Filters

Journalize the entries to record the following selected equity investment transactions completed by Flurry Company during the current year. Flurry's purchase represents less than 20% of the total outstanding Braxter stock.