Question 1

Which of the following is the correct matching concerning the appropriate accounting for long-term stock investments?

Accepted Answer

A)    
B)    
C)    
D)    
A)    
B)    
C)    
D)

Question 2

If a U.S. Company has a foreign subsidiary, the financial statements of the subsidiary are not consolidated with the parent company's financial statements.

Accepted Answer

A) True 
 B)False

Question 3

The Allowance to Adjust Investments to Market account has a current credit balance of $1,150 after adjustment. Available-for-sale investments have a current market value of $20,000. The carrying value of the investments is:

Accepted Answer

A)  $20,000. 
B)  $21,150. 
C)  $18,850. 
D)  unknown. The carrying value cannot be computed without knowing the cost of the investment. 
A)  $20,000. 
B)  $21,150. 
C)  $18,850. 
D)  unknown. The carrying value cannot be computed without knowing the cost of the investment.

Question 4

Carmel Corporation purchased 5% bonds for $42,000 on January 1, 2012. On July 1, 2012, Carmel received cash interest of $1,050. The journal entry to record the purchase on January 1 would include a:

Accepted Answer

A)  debit to Cash $ 1,050. 
B)  debit to Long-Term Investment in Bonds $42,000. 
C)  credit to Interest Revenue $1,050. 
D)  credit to Interest Revenue $42,000. 
A)  debit to Cash $ 1,050. 
B)  debit to Long-Term Investment in Bonds $42,000. 
C)  credit to Interest Revenue $1,050. 
D)  credit to Interest Revenue $42,000.

Question 5

Receiving a stock dividend affects what part of the balance sheet?

Accepted Answer

A)  Increases assets and increases paid-in-capital 
B)  Increases assets and decreases stockholders' equity 
C)  Increases assets and increases retained earnings 
D)  Has no effect on assets or total equity 
A)  Increases assets and increases paid-in-capital 
B)  Increases assets and decreases stockholders' equity 
C)  Increases assets and increases retained earnings 
D)  Has no effect on assets or total equity

Question 6

Goodwill occurs when a parent company:

Accepted Answer

A)  pays less to acquire a subsidiary company than the market value of the subsidiary's net assets. 
B)  pays less to acquire a subsidiary company than the book value of the subsidiary's net assets. 
C)  pays more to acquire a subsidiary company than the market value of the subsidiary's net assets. 
D)  pays more to acquire a subsidiary company than the book value of the subsidiary's net assets. 
A)  pays less to acquire a subsidiary company than the market value of the subsidiary's net assets. 
B)  pays less to acquire a subsidiary company than the book value of the subsidiary's net assets. 
C)  pays more to acquire a subsidiary company than the market value of the subsidiary's net assets. 
D)  pays more to acquire a subsidiary company than the book value of the subsidiary's net assets.

Question 7

When the equity method is used to account for stock investments, the carrying value of an investment is computed as the cost of the investment and adjusted to fair value as of the balance sheet date.

Accepted Answer

A) True 
 B)False

Question 8

If the market interest rate is greater than the face rate of interest on a bond, the bond will sell at a discount.

Accepted Answer

A) True 
 B)False

Question 9

A year-end elimination entry is required to remove the subsidiary company's equity from the books of the parent company.

Accepted Answer

A) True 
 B)False

Question 10

The Unrealized Gain or the Unrealized Loss Account appears:

Accepted Answer

A)  in Other expense. 
B)  in Other comprehensive income. 
C)  in Other comprehensive income and Accumulated other comprehensive income. 
D)  in Other revenue. 
A)  in Other expense. 
B)  in Other comprehensive income. 
C)  in Other comprehensive income and Accumulated other comprehensive income. 
D)  in Other revenue.

Question 11

Available-for-sale investments are adjusted from cost to market value.

Accepted Answer

A) True 
 B)False

Question 12

The process of determining the present value is called discounting because the present value is more than the future value.

Accepted Answer

A) True 
 B)False

Question 13

GAAP requires companies to adjust their available-for-sale-securities to market value as of the balance sheet date.

Accepted Answer

A) True 
 B)False

Question 14

The Allowance to Adjust Investment to Market account has a current credit balance of $892. Available-for-sale investments with a cost of $17,000 have a current market value of $18,500. The adjusting entry will require a:

Accepted Answer

A)  credit to Allowance to Adjust Investments to Market for $608. 
B)  credit to Allowance to Adjust Investments to Market for $2,392. 
C)  debit to Allowance to Adjust Investments to Market for $608. 
D)  debit to Allowance to Adjust Investments to Market for $2,392. 
A)  credit to Allowance to Adjust Investments to Market for $608. 
B)  credit to Allowance to Adjust Investments to Market for $2,392. 
C)  debit to Allowance to Adjust Investments to Market for $608. 
D)  debit to Allowance to Adjust Investments to Market for $2,392.

Question 15

When accounting for available-for-sale securities, which of the following is used to compute net income?

Accepted Answer

A)  Unrealized gains 
B)  Realized gains 
C)  Both unrealized gains and realized gains 
D)  Neither realized gains nor unrealized gains 
A)  Unrealized gains 
B)  Realized gains 
C)  Both unrealized gains and realized gains 
D)  Neither realized gains nor unrealized gains

Question 16

The Allowance to Adjust Investment to Market is a companion to Interest Receivable.

Accepted Answer

A) True 
 B)False

Question 17

Nantucket Company owns a 30% interest in the stock of Franklin Corporation. During the year, Nantucket debited the Investment account for $22,500 and credited the account for $15,000. Based on this information, Franklin must have paid dividends of:

Accepted Answer

A)  $7,000. 
B)  $15,000. 
C)  $25,000. 
D)  $50,000. 
A)  $7,000. 
B)  $15,000. 
C)  $25,000. 
D)  $50,000.

Question 18

If the equity method is used to account for a long-term investment in common stock, cash dividends received from the investee are recorded by the investor as:

Accepted Answer

A)  a credit to the Investment account. 
B)  a credit to the Dividend Revenue account. 
C)  a debit to the Investment account. 
D)  no entry. There is no entry made to record dividends. 
A)  a credit to the Investment account. 
B)  a credit to the Dividend Revenue account. 
C)  a debit to the Investment account. 
D)  no entry. There is no entry made to record dividends.

Question 19

Dividend revenue is recorded in a stock dividend.

Accepted Answer

A) True 
 B)False

Question 20

When a parent-subsidiary relationship exists, the consolidated statements include:

Accepted Answer

A)  the balance sheet, income statement and the statement of cash flows. 
B)  only the balance sheet. 
C)  only the income statement. 
D)  only the balance sheet and the income statement. 
A)  the balance sheet, income statement and the statement of cash flows. 
B)  only the balance sheet. 
C)  only the income statement. 
D)  only the balance sheet and the income statement.

Which of the following is the correct matching concerning the appropriate accounting for long-term stock investments?

If a U.S. Company has a foreign subsidiary, the financial statements of the subsidiary are not consolidated with the parent company's financial statements.

The Allowance to Adjust Investments to Market account has a current credit balance of $1,150 after adjustment. Available-for-sale investments have a current market value of $20,000. The carrying value of the investments is:

Carmel Corporation purchased 5% bonds for $42,000 on January 1, 2012. On July 1, 2012, Carmel received cash interest of $1,050. The journal entry to record the purchase on January 1 would include a:

Receiving a stock dividend affects what part of the balance sheet?

Goodwill occurs when a parent company:

When the equity method is used to account for stock investments, the carrying value of an investment is computed as the cost of the investment and adjusted to fair value as of the balance sheet date.

If the market interest rate is greater than the face rate of interest on a bond, the bond will sell at a discount.

A year-end elimination entry is required to remove the subsidiary company's equity from the books of the parent company.

The Unrealized Gain or the Unrealized Loss Account appears:

Available-for-sale investments are adjusted from cost to market value.

The process of determining the present value is called discounting because the present value is more than the future value.

GAAP requires companies to adjust their available-for-sale-securities to market value as of the balance sheet date.

The Allowance to Adjust Investment to Market account has a current credit balance of $892. Available-for-sale investments with a cost of $17,000 have a current market value of $18,500. The adjusting entry will require a:

When accounting for available-for-sale securities, which of the following is used to compute net income?

The Allowance to Adjust Investment to Market is a companion to Interest Receivable.

Nantucket Company owns a 30% interest in the stock of Franklin Corporation. During the year, Nantucket debited the Investment account for $22,500 and credited the account for $15,000. Based on this information, Franklin must have paid dividends of:

If the equity method is used to account for a long-term investment in common stock, cash dividends received from the investee are recorded by the investor as:

Dividend revenue is recorded in a stock dividend.

When a parent-subsidiary relationship exists, the consolidated statements include:

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

Which of the following is the correct matching concerning the appropriate accounting for long-term stock investments?

If a U.S. Company has a foreign subsidiary, the financial statements of the subsidiary are not consolidated with the parent company's financial statements.

The Allowance to Adjust Investments to Market account has a current credit balance of $1,150 after adjustment. Available-for-sale investments have a current market value of $20,000. The carrying value of the investments is:

Carmel Corporation purchased 5% bonds for $42,000 on January 1, 2012. On July 1, 2012, Carmel received cash interest of $1,050. The journal entry to record the purchase on January 1 would include a:

Receiving a stock dividend affects what part of the balance sheet?

Goodwill occurs when a parent company:

When the equity method is used to account for stock investments, the carrying value of an investment is computed as the cost of the investment and adjusted to fair value as of the balance sheet date.

If the market interest rate is greater than the face rate of interest on a bond, the bond will sell at a discount.

A year-end elimination entry is required to remove the subsidiary company's equity from the books of the parent company.

The Unrealized Gain or the Unrealized Loss Account appears:

Available-for-sale investments are adjusted from cost to market value.

The process of determining the present value is called discounting because the present value is more than the future value.

GAAP requires companies to adjust their available-for-sale-securities to market value as of the balance sheet date.

The Allowance to Adjust Investment to Market account has a current credit balance of $892. Available-for-sale investments with a cost of $17,000 have a current market value of $18,500. The adjusting entry will require a:

When accounting for available-for-sale securities, which of the following is used to compute net income?

The Allowance to Adjust Investment to Market is a companion to Interest Receivable.

Nantucket Company owns a 30% interest in the stock of Franklin Corporation. During the year, Nantucket debited the Investment account for $22,500 and credited the account for $15,000. Based on this information, Franklin must have paid dividends of:

If the equity method is used to account for a long-term investment in common stock, cash dividends received from the investee are recorded by the investor as:

Dividend revenue is recorded in a stock dividend.

When a parent-subsidiary relationship exists, the consolidated statements include:

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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