Question 1

Trading securities appear as current assets on the balance sheet at their historical cost regardless of subsequent increases or decreases in market value.

Accepted Answer

A) True 
 B)False

Question 2

When the equity method is used to account for a long-term investment in the stock of another company,the carrying value of the investment is affected by

Accepted Answer

A) declines in the market value of the stock. 
B) the earnings and dividends of the investee. 
C) an excess of market price over cost. 
D) neither the earnings nor the dividends of the investee. 
A) declines in the market value of the stock. 
B) the earnings and dividends of the investee. 
C) an excess of market price over cost. 
D) neither the earnings nor the dividends of the investee.

Question 3

Unrealized Loss (Gain)on Short-Term Investments is a contra-asset account that will appear on the balance sheet.

Accepted Answer

A) True 
 B)False

Question 4

It is not possible for one company to influence the operating policies of another company unless it owns more than a 50 percent interest in that company.

Accepted Answer

A) True 
 B)False

Question 5

The Allowance to Adjust Long-Term Investments to Market and the Unrealized Loss on Long-Term Investments are reciprocal accounts,each with the same dollar balance.

Accepted Answer

A) True 
 B)False

Question 6

A short-term investment in a U.S.Treasury bill costs $24,200 and will mature in six months at $25,000.Management intends to hold the investment until it matures.The entry to record receipt of cash at maturity is: (No prior entries were made to recognize revenue. )

Accepted Answer

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

Question 7

Use this information to answer the following question.These facts concern the long-term stock investments of DeBord Corporation:   
-The entry to set up the Allowance to Adjust Long-Term Investments to Market in 2014 is:

Accepted Answer

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

Question 8

Held-to-maturity securities are valued on the balance sheet at cost adjusted for the effects of interest.

Accepted Answer

A) True 
 B)False

Question 9

The Allowance to Adjust Long-Term Investments to Market account appears in the assets section of the balance sheet.

Accepted Answer

A) True 
 B)False

Question 10

Held-to-maturity securities that will mature within one year are classified as short-term investments and valued on the balance sheet at fair value.

Accepted Answer

A) True 
 B)False

Question 11

All the interest income on U.S.Treasury bills is recorded at maturity.

Accepted Answer

A) True 
 B)False

Question 12

The account Allowance to Adjust Short-Term Investments to Market appears as a contra-asset on the balance sheet.

Accepted Answer

A) True 
 B)False

Question 13

An increase or decrease in the fair value of a company's total trading portfolio is included in net income in the period in which the increase or decrease occurs.

Accepted Answer

A) True 
 B)False

Question 14

Barkely Corporation has invested in the stock of two other corporations,Hayes Corporation and Motz Corporation.Barkely does not own a controlling interest or exercise significant influence over either corporation.Barkely's accountant is preparing financial statements and has compiled the following information:   What should be the balance in the Allowance to Adjust Long-Term Investments to Market account,based on the above information?

Accepted Answer

A) $2,000 credit 
B) $4,000 debit 
C) $4,000 credit 
D) $2,000 debit 
A) $2,000 credit 
B) $4,000 debit 
C) $4,000 credit 
D) $2,000 debit

Question 15

Under the cost-adjusted-to-market method of accounting for an investment,

Accepted Answer

A) Dividend Income is credited when dividends are received. 
B) the investment account is credited when dividends are received. 
C) the investment account is credited when the investee reports a net income. 
D) Investment Income is credited when the invested reports a net income. 
A) Dividend Income is credited when dividends are received. 
B) the investment account is credited when dividends are received. 
C) the investment account is credited when the investee reports a net income. 
D) Investment Income is credited when the invested reports a net income.

Question 16

It is possible that an investor with less than a 50 percent ownership interest may qualify for accounting recognition of control and appropriately prepare consolidated financial statements.

Accepted Answer

A) True 
 B)False

Question 17

If a long-term investment suffers a permanent decline in value,a loss only has to be recorded if the investment is sold.

Accepted Answer

A) True 
 B)False

Question 18

When a company purchases debt securities,it records them at

Accepted Answer

A) cost,ignoring any commissions and fees. 
B) cost plus commissions and fees. 
C) cost less commissions and fees. 
D) the value expected at maturity. 
A) cost,ignoring any commissions and fees. 
B) cost plus commissions and fees. 
C) cost less commissions and fees. 
D) the value expected at maturity.

Question 19

Which of the following statements is true about investments categorized as trading securities?

Accepted Answer

A) They are valued on the balance sheet at cost. 
B) They can consist of debt,but not equity,securities. 
C) They are purchased to be held to maturity. 
D) Changes in market value are reflected in net income. 
A) They are valued on the balance sheet at cost. 
B) They can consist of debt,but not equity,securities. 
C) They are purchased to be held to maturity. 
D) Changes in market value are reflected in net income.

Question 20

Significant influence is defined as owning what percent of the stock of another company?

Accepted Answer

A) 15 to 60 percent 
B) More than 50 percent 
C) 20 to 50 percent 
D) 75 percent 
A) 15 to 60 percent 
B) More than 50 percent 
C) 20 to 50 percent 
D) 75 percent

Exam 28: Accounting for Investments

Trading securities appear as current assets on the balance sheet at their historical cost regardless of subsequent increases or decreases in market value.

When the equity method is used to account for a long-term investment in the stock of another company,the carrying value of the investment is affected by

Unrealized Loss (Gain)on Short-Term Investments is a contra-asset account that will appear on the balance sheet.

It is not possible for one company to influence the operating policies of another company unless it owns more than a 50 percent interest in that company.

The Allowance to Adjust Long-Term Investments to Market and the Unrealized Loss on Long-Term Investments are reciprocal accounts,each with the same dollar balance.

A short-term investment in a U.S.Treasury bill costs $24,200 and will mature in six months at $25,000.Management intends to hold the investment until it matures.The entry to record receipt of cash at maturity is: (No prior entries were made to recognize revenue. )

Use this information to answer the following question.These facts concern the long-term stock investments of DeBord Corporation: -The entry to set up the Allowance to Adjust Long-Term Investments to Market in 2014 is:

Held-to-maturity securities are valued on the balance sheet at cost adjusted for the effects of interest.

The Allowance to Adjust Long-Term Investments to Market account appears in the assets section of the balance sheet.

Held-to-maturity securities that will mature within one year are classified as short-term investments and valued on the balance sheet at fair value.

All the interest income on U.S.Treasury bills is recorded at maturity.

The account Allowance to Adjust Short-Term Investments to Market appears as a contra-asset on the balance sheet.

An increase or decrease in the fair value of a company's total trading portfolio is included in net income in the period in which the increase or decrease occurs.

Under the cost-adjusted-to-market method of accounting for an investment,

It is possible that an investor with less than a 50 percent ownership interest may qualify for accounting recognition of control and appropriately prepare consolidated financial statements.

If a long-term investment suffers a permanent decline in value,a loss only has to be recorded if the investment is sold.

When a company purchases debt securities,it records them at

Which of the following statements is true about investments categorized as trading securities?

Significant influence is defined as owning what percent of the stock of another company?

Uses of Accounting Information and the Financial Statements

Measurement Concepts: Recording Business Transactions

Measuring Business Income: Adjusting the Accounts

Foundations of Financial Reporting and the Classified Balance Sheet

Accounting for Merchandising Operations

Inventories

Cash and Internal Control

Receivables

Long-Term Assets

Current Liabilities and Fair Value Accounting

Long-Term Liabilities

Stockholders Equity

The Statement of Cash Flows

Financial Statement Analysis

Managerial Accounting and Cost Concepts

Costing Systems: Job Order Costing

Costing Systems: Process Costing

Value-Based Systems: Activity-Based Costing and Lean Accounting

Cost-Volume-Profit Analysis

The Budgeting Process

Flexible Budgets and Performance Analysis

Standard Costing and Variance Analysis

Short-Run Decision Analysis

Capital Investment Analysis

Pricing Decisions, including Target Costing and Transfer Pricing

Quality Management and Measurement

Accounting for Unincorporated Businesses

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