Question 1

Compound interest is the return on principal:

Accepted Answer

A)  only. 
B)  for one or more periods. 
C)  plus interest or two or more periods. 
D)  for one period. 
A)  only. 
B)  for one or more periods. 
C)  plus interest or two or more periods. 
D)  for one period. C

Question 2

The future value of 1 will always be:

Accepted Answer

A)  equal to 1. 
B)  greater than 1. 
C)  less than 1. 
D)  equal to the interest rate. 
A)  equal to 1. 
B)  greater than 1. 
C)  less than 1. 
D)  equal to the interest rate. B

Question 3

On the statement of cash flows, the cash paid for 40% of a corporation to be accounted for under the equity method is shown as a(n):

Accepted Answer

A)  increase in financing activities. 
B)  decrease in financing activities. 
C)  increase in investing activities. 
D)  decrease in investing activities. 
A)  increase in financing activities. 
B)  decrease in financing activities. 
C)  increase in investing activities. 
D)  decrease in investing activities. D

Question 4

Receiving a cash dividend from an available-for-sale investment requires the following journal entry:

Accepted Answer

A)  a debit to Cash and a credit to Dividend Revenue. 
B)  a debit to Cash and a credit to Unrealized Gain on Investments. 
C)  a debit to Unrealized Gain on Investment and a credit to Dividend Revenue. 
D)  no journal entry. Investor makes a memorandum entry in the accounting records. 
A)  a debit to Cash and a credit to Dividend Revenue. 
B)  a debit to Cash and a credit to Unrealized Gain on Investments. 
C)  a debit to Unrealized Gain on Investment and a credit to Dividend Revenue. 
D)  no journal entry. Investor makes a memorandum entry in the accounting records.

Question 5

If an investor company owns 35% of the common stock of another business, income received from the investee company are generally recorded by the investor company by:

Accepted Answer

A)  decreasing the investor company's Common Stock account. 
B)  increasing the value of the investor's Investment account. 
C)  increasing the Dividend Revenue account. 
D)  decreasing the value of the investor's Investment account. 
A)  decreasing the investor company's Common Stock account. 
B)  increasing the value of the investor's Investment account. 
C)  increasing the Dividend Revenue account. 
D)  decreasing the value of the investor's Investment account.

Question 6

If an investor owns less than 20% of the common stock of another company as a long-term investment:

Accepted Answer

A)  the equity method of accounting should be used for the investment. 
B)  no dividends are expected to be received. 
C)  the investor usually has little or no influence on the investee. 
D)  the investor has significant influence on the investee. 
A)  the equity method of accounting should be used for the investment. 
B)  no dividends are expected to be received. 
C)  the investor usually has little or no influence on the investee. 
D)  the investor has significant influence on the investee.

Question 7

Unrealized Gain/Loss on investments account appears under other comprehensive income on a separate section of the income statement.

Accepted Answer

A) True 
 B)False

Question 8

Perdue Company had the following transactions pertaining to stock investments: - February 1, Purchased 3,000 shares of Hudson Company (10% ownership) at the market price of $17 per share.
- June 1, Received cash dividends of $6,000 on Hudson Company stock.
- October 1, Sold 3,000 shares of Hudson stock for $54,000.
The entry to record the receipt of the dividends would include a:

Accepted Answer

A)  debit to Long-Term Investment for $6,000. 
B)  credit to Long-Term Investment for $6,000. 
C)  credit to Dividend Revenue for $6,000. 
D)  debit to Dividend Revenue for $6,000. 
A)  debit to Long-Term Investment for $6,000. 
B)  credit to Long-Term Investment for $6,000. 
C)  credit to Dividend Revenue for $6,000. 
D)  debit to Dividend Revenue for $6,000.

Question 9

Unrealized gains and losses result from changes in the investments fair value.

Accepted Answer

A) True 
 B)False

Question 10

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 11

An investment is a held-to-maturity investment if it is management's intent to sell the investment.

Accepted Answer

A) True 
 B)False

Question 12

Long-term investments are more liquid than property, plant, and equipment, but less liquid than current assets.

Accepted Answer

A) True 
 B)False

Question 13

As a result of a stock dividend:

Accepted Answer

A)  the investor's total cost in the investment increases. 
B)  the investor's cost per share decreases. 
C)  a journal entry is needed to record the receipt of the stock dividend 
D)  dividend revenue increases. 
A)  the investor's total cost in the investment increases. 
B)  the investor's cost per share decreases. 
C)  a journal entry is needed to record the receipt of the stock dividend 
D)  dividend revenue increases.

Question 14

Market prices of bonds have no correlation to market interest rate.

Accepted Answer

A) True 
 B)False

Question 15

Consolidated financial statements present all of the following EXCEPT the:

Accepted Answer

A)  individual assets and liabilities of the parent company. 
B)  cash of the subsidiary company. 
C)  total revenues and expenses of the subsidiary company. 
D)  stockholders' equity accounts of the subsidiary company. 
A)  individual assets and liabilities of the parent company. 
B)  cash of the subsidiary company. 
C)  total revenues and expenses of the subsidiary company. 
D)  stockholders' equity accounts of the subsidiary company.

Question 16

When a U.S. Company owns a foreign company, a foreign-currency translation adjustment is made before consolidation entries are prepared.

Accepted Answer

A) True 
 B)False

Question 17

The journal entry to record the sale of an available-for-sale investment includes a gain on sale of investment of $500. The income statement will reflect:

Accepted Answer

A)  an increase in net sales of $500. 
B)  another income of $500. 
C)  an extraordinary gain of $500. 
D)  nothing, since the entry impacts only asset accounts. 
A)  an increase in net sales of $500. 
B)  another income of $500. 
C)  an extraordinary gain of $500. 
D)  nothing, since the entry impacts only asset accounts.

Question 18

The Allowance to Adjust Investment to Market account will always have a debit balance.

Accepted Answer

A) True 
 B)False

Question 19

Perdue Company had the following transactions pertaining to stock investments: - February 1, Purchased 3,000 shares of Hudson Company (10% ownership) at the market price of $17 per share.
- June 1, Received cash dividends of $6,000 on Hudson Company stock.
- October 1, Sold 3,000 shares of Hudson stock for $54,000.
The entry to record the purchase of the Hudson stock would include a:

Accepted Answer

A)  debit to Long-Term Investment for $51,000. 
B)  credit to Long-Term Investment for $51,000. 
C)  credit to Dividend Revenue for $6,000. 
D)  debit to Short-Term Investment for $6,000. 
A)  debit to Long-Term Investment for $51,000. 
B)  credit to Long-Term Investment for $51,000. 
C)  credit to Dividend Revenue for $6,000. 
D)  debit to Short-Term Investment for $6,000.

Question 20

On January 1, Bucket Company purchased as an investment a $1,000, 7% bond for $760. Bucket plans to hold the bond for two years. The bond pays interest on January 1 and July 1. The entry to record the amortization of the bond on December 31 would include a:

Accepted Answer

A)  debit to Interest Receivable for $35. 
B)  debit to Long-Term Investment in Bonds for $35. 
C)  debit to Interest Receivable for $10. 
D)  debit to Long-Term Investment in Bonds for $10. 
A)  debit to Interest Receivable for $35. 
B)  debit to Long-Term Investment in Bonds for $35. 
C)  debit to Interest Receivable for $10. 
D)  debit to Long-Term Investment in Bonds for $10.

Compound interest is the return on principal:

The future value of 1 will always be:

On the statement of cash flows, the cash paid for 40% of a corporation to be accounted for under the equity method is shown as a(n):

Receiving a cash dividend from an available-for-sale investment requires the following journal entry:

If an investor company owns 35% of the common stock of another business, income received from the investee company are generally recorded by the investor company by:

If an investor owns less than 20% of the common stock of another company as a long-term investment:

Unrealized Gain/Loss on investments account appears under other comprehensive income on a separate section of the income statement.

Unrealized gains and losses result from changes in the investments fair value.

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

An investment is a held-to-maturity investment if it is management's intent to sell the investment.

Long-term investments are more liquid than property, plant, and equipment, but less liquid than current assets.

As a result of a stock dividend:

Market prices of bonds have no correlation to market interest rate.

Consolidated financial statements present all of the following EXCEPT the:

When a U.S. Company owns a foreign company, a foreign-currency translation adjustment is made before consolidation entries are prepared.

The journal entry to record the sale of an available-for-sale investment includes a gain on sale of investment of $500. The income statement will reflect:

The Allowance to Adjust Investment to Market account will always have a debit balance.

On January 1, Bucket Company purchased as an investment a $1,000, 7% bond for $760. Bucket plans to hold the bond for two years. The bond pays interest on January 1 and July 1. The entry to record the amortization of the bond on December 31 would include a:

The Financial Statements

Transaction Analysis

Accrual Accounting Income

Internal Control Cash

Short-Term Investments Receivables

Inventory Cost of Goods Sold

Plant Assets, Natural Resources, Intangibles

Liabilities

Stockholders Equity

The Income Statement, the Statement of Comprehensive Income, the Statement of Stockholders Equity

The Statement of Cash Flows

Financial Statement Analysis

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Exam 8: Long-Term Investments the Time Value of Money

Compound interest is the return on principal:

The future value of 1 will always be:

On the statement of cash flows, the cash paid for 40% of a corporation to be accounted for under the equity method is shown as a(n):

Receiving a cash dividend from an available-for-sale investment requires the following journal entry:

If an investor company owns 35% of the common stock of another business, income received from the investee company are generally recorded by the investor company by:

If an investor owns less than 20% of the common stock of another company as a long-term investment:

Unrealized Gain/Loss on investments account appears under other comprehensive income on a separate section of the income statement.

Unrealized gains and losses result from changes in the investments fair value.

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

An investment is a held-to-maturity investment if it is management's intent to sell the investment.

Long-term investments are more liquid than property, plant, and equipment, but less liquid than current assets.

As a result of a stock dividend:

Market prices of bonds have no correlation to market interest rate.

Consolidated financial statements present all of the following EXCEPT the:

When a U.S. Company owns a foreign company, a foreign-currency translation adjustment is made before consolidation entries are prepared.

The journal entry to record the sale of an available-for-sale investment includes a gain on sale of investment of $500. The income statement will reflect:

The Allowance to Adjust Investment to Market account will always have a debit balance.

On January 1, Bucket Company purchased as an investment a $1,000, 7% bond for $760. Bucket plans to hold the bond for two years. The bond pays interest on January 1 and July 1. The entry to record the amortization of the bond on December 31 would include a:

The Financial Statements

Transaction Analysis

Accrual Accounting Income

Internal Control Cash

Short-Term Investments Receivables

Inventory Cost of Goods Sold

Plant Assets, Natural Resources, Intangibles

Liabilities

Stockholders Equity

The Income Statement, the Statement of Comprehensive Income, the Statement of Stockholders Equity

The Statement of Cash Flows

Financial Statement Analysis

Filters