Question 1

Bond sinking funds are examples of short-term investments.

Accepted Answer

A) True 
 B)False  False

Question 2

Comprehensive income refers to all changes in equity during a period except those from owners' investments and dividends.

Accepted Answer

A) True 
 B)False  True

Question 3

Identify the classifications for investments in securities. Briefly comment on the differences among the features of equities that are classified as held-for-trading, available-for-sale, those with significant influence, and those with control. 
Accounting for investments in securities depends on some or all of the following:
1. purpose, e.g. trading or long-term investment, the company's intent to hold the security either short-term or long-term,
2. its contractual characteristics, e.g. debt or equity, 
3. whether it is listed on an exchange, 
4. the industry in which the reporting entity operates, and 
5. the accounting policy choice of the reporting entity.

Accepted Answer

Held-for-trading securities are acquired principally for the purpose of selling or repurchasing them in the near term, with a pattern of short-term profit-taking.
Available-for-sale securities are purchased to yield dividends or increases in fair value. They are not actively managed like held-for-trading securities.
A long-term investment classified as equity with significant influence implies that the investor can exert significant influence over the investee. An investor that owns 20% or more (but not more than 50%) of a company's voting shares is usually presumed to have a significant influence over the investee.
A long-term investment classified as equity with control implies that the investor can exert a controlling influence over the investee. An investor who owns more than 50% of a company's voting shares has control over the investee.

Question 4

Explain how investors report investments in equity securities when the investor has control over an investee.

Accepted Answer

If an investing company controls another

Question 5

When an investor company owns more than 25% of the voting shares of an investee company, it has a controlling influence.

Accepted Answer

A) True 
 B)False

Question 6

Define the return on total assets and explain how it is used to measure a company's financial performance.

Accepted Answer

The return on total assets is calculated

Question 7

An investor purchased bonds and holds them to maturity. The investor's journal entry to record the interest accrued at the end of the period should include a debit to Interest Receivable and a credit to Interest Revenue.

Accepted Answer

A) True 
 B)False

Question 8

The consolidation method is used in accounting for long-term investments in equity securities with controlling influence.

Accepted Answer

A) True 
 B)False

Question 9

Accounting for investments in securities depends on, among ther things, the contractual characteristics, e.g. debt or equity.

Accepted Answer

A) True 
 B)False

Question 10

Explain the difference between short-term and long-term investments. Cite examples of each.

Accepted Answer

Short-term investments are securities ex

Question 11

Any cash dividends received from equity securities are recorded as Dividend Expense.

Accepted Answer

A) True 
 B)False

Question 12

Cash equivalents are investments that are readily converted to known amounts of cash and mature within three months.

Accepted Answer

A) True 
 B)False

Question 13

Explain how to record the sale of held-for-trading securities.

Accepted Answer

When held-for-trading securities are sol

Question 14

___________________________ are investments in securities that management intends to convert to cash within the longer of one year or the operating cycle, and are readily convertible to cash.

Accepted Answer

Short-term

Question 15

Investments in held-for-trading securities are always classified as ______________ and are reported as _______________ on the balance sheet.

Accepted Answer

short-term

Question 16

Acadia had no investments prior to the current year. It had the following transactions involving available-for-sale and held-to-maturity securities during the year. The share purchases are considered short-term available-for-sale securities. Prepare journal entries to record the transactions and events associated with the investment purchases.

Accepted Answer

The answer of Acadia had no investments prior to the...

Question 17

Equity securities giving an investor significant influence over an investee are always considered short-term investments.

Accepted Answer

A) True 
 B)False

Question 18

Any unrealized gain or loss for the portfolio of available-for-sale securities is reported as profit or loss on the income statement.

Accepted Answer

A) True 
 B)False

Question 19

When using the equity method for investments in equity securities, the investor records the receipt of cash dividends as revenue.

Accepted Answer

A) True 
 B)False

Question 20

Investments in held-for-trading securities:

Accepted Answer

A)  Include only equity securities. 
B)  Are reported as current assets. 
C)  Include only debt securities. 
D)  Are reported at their cost, no matter what their market value. 
E)  Are long-term investments. 
A)  Include only equity securities. 
B)  Are reported as current assets. 
C)  Include only debt securities. 
D)  Are reported at their cost, no matter what their market value. 
E)  Are long-term investments.

Exam 15: Investments and International Operations

Bond sinking funds are examples of short-term investments.

Comprehensive income refers to all changes in equity during a period except those from owners' investments and dividends.

Explain how investors report investments in equity securities when the investor has control over an investee.

When an investor company owns more than 25% of the voting shares of an investee company, it has a controlling influence.

Define the return on total assets and explain how it is used to measure a company's financial performance.

An investor purchased bonds and holds them to maturity. The investor's journal entry to record the interest accrued at the end of the period should include a debit to Interest Receivable and a credit to Interest Revenue.

The consolidation method is used in accounting for long-term investments in equity securities with controlling influence.

Accounting for investments in securities depends on, among ther things, the contractual characteristics, e.g. debt or equity.

Explain the difference between short-term and long-term investments. Cite examples of each.

Any cash dividends received from equity securities are recorded as Dividend Expense.

Cash equivalents are investments that are readily converted to known amounts of cash and mature within three months.

Explain how to record the sale of held-for-trading securities.

___________________________ are investments in securities that management intends to convert to cash within the longer of one year or the operating cycle, and are readily convertible to cash.

Investments in held-for-trading securities are always classified as ______________ and are reported as _______________ on the balance sheet.

Equity securities giving an investor significant influence over an investee are always considered short-term investments.

Any unrealized gain or loss for the portfolio of available-for-sale securities is reported as profit or loss on the income statement.

When using the equity method for investments in equity securities, the investor records the receipt of cash dividends as revenue.

Investments in held-for-trading securities:

Accounting in Business

Analyzing and Recording Transactions

Adjusting Accounts and Preparing Financial Statements

Completing the Accounting Cycle

Accounting for Merchandising Operations

Inventories and Cost of Sales

Accounting Information Systems

Cash and Internal Controls

Accounting for Receivables

Long-Term Assets

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Accounting for Corporations

Long-Term Liabilities

Statement of Cash Flows

Analysis of Financial Statements

Managerial Accounting Concepts and Principles

Job Order Cost Accounting

Process Cost Accounting

Cost Allocation and Performance Measurement

Cost-Volume-Profit Analysis

Master Budgets and Planning

Flexible Budgets and Standard Costs

Capital Budgeting and Managerial Decisions

Filters

Investments in held-for-trading securities are always classified as and are reported as _ on the balance sheet.