Exam 14: Investments

General Investment Co.(GIC)purchased bonds on January 1,2015.GIC's accountant has projected the following amortization schedule from purchase until maturity: GIC purchased the bonds for:

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Question 1

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Discuss the meaning of consolidated financial statements.When is it appropriate to consolidate financial statements of two companies?

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Question 2

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Consolidated financial statements combine the parent's and subsidiary's operating activities as if the two companies were a single reporting company,even though both companies continue to operate as separate legal entities.
It is appropriate to consolidate financial statements of two companies when the parent company owns a controlling interest (more than 50%)in the voting stock of the subsidiary.

General Investment Co.(GIC)purchased bonds on January 1,2015.GIC's accountant has projected the following amortization schedule from purchase until maturity: What is the annual market interest rate on the bonds?

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Question 3

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Sports Spectacular purchased 100,000 shares of stock in The Athletic Warehouse for $30 per share.The investment is properly recorded using the equity method.By the end of the year,the stock price has increased to $32 per share.How would the change in stock price affect Sports Spectacular's net income under the equity method?

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Question 4

Companies with large expansion plans,called growth companies,prefer to reinvest earnings in the growth of the company rather than distribute earnings back to investors in the form of cash dividends.

(True/False)

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Question 5

Consolidated financial statements are prepared when one company has:

(Multiple Choice)

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Question 6

The statement of comprehensive income is a statement in which we report all changes in stockholders' equity other than investment by stockholders and payment of dividends.

(True/False)

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Question 7

Investments are reported at fair value when a company has an insignificant influence over another company in which it invests.

(True/False)

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Question 8

One of the primary reasons for investing in equity securities includes:

(Multiple Choice)

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Question 9

Sports Spectacular purchased 1,000 shares of stock in The Athletic Warehouse for $30 per share.The investment is properly classified as an available-for-sale security.By the end of the year,the stock price has increased to $32 per share.How would the change in stock price affect Sports Spectacular's net income?

(Multiple Choice)

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Question 10

General Investment Co.(GIC)purchased bonds on January 1,2015.GIC's accountant has projected the following amortization schedule from purchase until maturity: GIC purchased the bonds:

(Multiple Choice)

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Question 11

General Investment Co.(GIC)purchased bonds on January 1,2015.GIC's accountant has projected the following amortization schedule from purchase until maturity: The investment in bonds has a maturity in:

(Multiple Choice)

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Question 12

Sports Spectacular purchased 1,000 shares of stock in The Athletic Warehouse for $30 per share.The investment is properly classified as a trading security.By the end of the year,the stock price has increased to $32 per share.How would the change in stock price affect Sports Spectacular's net income?

(Multiple Choice)

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Question 13

Under the equity method,the investor includes in net income its portion of the investee's net income.

(True/False)

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Question 14

Investments are reported at fair value when a company has a significant influence over another company in which it invests.

(True/False)

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Question 15

Because the carrying value of bonds purchased at a discount increases over time,interest revenue will also increase each semi-annual interest period.

(True/False)

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Question 16

The equity method of accounting for investments in voting common stock is appropriate when:

(Multiple Choice)

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Question 17

Investments in debt securities are classified for reporting purposes in one of three categories.List these three categories and explain which investments are included in each category.Also briefly describe how the reporting differs for each category.

(Essay)

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Question 18

Because the carrying value of bonds purchased at a premium increases over time,interest revenue will also increase each semi-annual interest period.

(True/False)

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Question 19

Unrealized gains and losses from changes in the fair value of available-for-sale securities are reported as part of current net income.

(True/False)

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Question 20

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General Investment Co.(GIC)purchased bonds on January 1,2015.GIC's accountant has projected the following amortization schedule from purchase until maturity: GIC purchased the bonds for:

Discuss the meaning of consolidated financial statements.When is it appropriate to consolidate financial statements of two companies?

General Investment Co.(GIC)purchased bonds on January 1,2015.GIC's accountant has projected the following amortization schedule from purchase until maturity: What is the annual market interest rate on the bonds?

Companies with large expansion plans,called growth companies,prefer to reinvest earnings in the growth of the company rather than distribute earnings back to investors in the form of cash dividends.

Consolidated financial statements are prepared when one company has:

The statement of comprehensive income is a statement in which we report all changes in stockholders' equity other than investment by stockholders and payment of dividends.

Investments are reported at fair value when a company has an insignificant influence over another company in which it invests.

One of the primary reasons for investing in equity securities includes:

General Investment Co.(GIC)purchased bonds on January 1,2015.GIC's accountant has projected the following amortization schedule from purchase until maturity: GIC purchased the bonds:

General Investment Co.(GIC)purchased bonds on January 1,2015.GIC's accountant has projected the following amortization schedule from purchase until maturity: The investment in bonds has a maturity in:

Sports Spectacular purchased 1,000 shares of stock in The Athletic Warehouse for $30 per share.The investment is properly classified as a trading security.By the end of the year,the stock price has increased to $32 per share.How would the change in stock price affect Sports Spectacular's net income?

Under the equity method,the investor includes in net income its portion of the investee's net income.

Investments are reported at fair value when a company has a significant influence over another company in which it invests.

Because the carrying value of bonds purchased at a discount increases over time,interest revenue will also increase each semi-annual interest period.

The equity method of accounting for investments in voting common stock is appropriate when:

Investments in debt securities are classified for reporting purposes in one of three categories.List these three categories and explain which investments are included in each category.Also briefly describe how the reporting differs for each category.

Because the carrying value of bonds purchased at a premium increases over time,interest revenue will also increase each semi-annual interest period.

Unrealized gains and losses from changes in the fair value of available-for-sale securities are reported as part of current net income.

A Framework for Financial Accounting

The Accounting Cycle: During the Period

The Accounting Cycle: End of the Period

Cash and Internal Controls

Receivables and Sales

Inventory and Cost of Goods Sold

Long-Term Assets

Current Liabilities

Long-Term Liabilities

Stockholders Equity

Statement of Cash Flows

Financial Statement Analysis

Time Value of Money

International Financial Reporting Standards

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