Question 1

Investments in long-term bonds are shown on the balance sheet at their current market value.

Accepted Answer

A) True 
 B)False

Question 2

Power Generation Corp.owns 38% of Electric Limited.Net income for Electric Limited for the year ending December 31,2017,is $450,000.The journal entry prepared by Power Generation Corp.on December 31,2017,includes a:

Accepted Answer

A)  debit to Cash for $171,000 
B)  credit to Long-Term Investment for $171,000 
C)  debit to Long-Term Investment for $450,000 
D)  debit to Long-Term Investment for $171,000

Question 3

An investment in common shares at fair value through other comprehensive income acquired during 2014 at a cost of $46,000 has a market value on December 31,2014,of $46,721.The adjusting entry requires a debit to long term investments (at fair value through other comprehensive income)for $721.

Accepted Answer

A) True 
 B)False

Question 4

Short term investment purchases are initially recorded at their cost.

Accepted Answer

A) True 
 B)False

Question 5

On January 1,2017,bonds with a face value of $94,000 were sold.The bonds mature on January 1,2027.The face interest rate is 8% annually.The bonds pay interest semiannually on July 1 and January 1.The market rate of interest is 10% annually.What is the market price of the bonds? The present value of $1 for 20 periods at 5% is 0.377.The present value of an ordinary annuity of $1 for 20 periods at 5% is 12.462.The present value of $1 for 10 periods at 10% is 0.463.The present value of an ordinary annuity of $1 for 10 periods at 10% is 6.145.(Round your final answer to the nearest dollar.)

Accepted Answer

A)  $82,295 
B)  $66,627 
C)  $94,000 
D)  $97,760

Question 6

A gain or loss on sale of a long-term investment using the equity method is determined by comparing the cash received with the:

Accepted Answer

A)  cost of the long-term investment 
B)  market value of the long-term investment 
C)  cost of the long-term investment adjusted for the investor's share of the investee's net income and cash dividends while the investment was held by the investor company 
D)  lower-of-cost-or-market value of the long-term investment

Question 7

Corporations invest in a short-term investment:

Accepted Answer

A)  to park cash temporarily 
B)  to sell it for more than its cost 
C)  to generate a higher profile 
D)  to invest excess cash temporarily and to increase income

Question 8

Goodwill is a(n)________ on the ________.

Accepted Answer

A)  current asset; subsidiary's balance sheet 
B)  intangible asset; subsidiary's balance sheet 
C)  intangible asset; consolidated balance sheet 
D)  long-term investment; consolidated balance sheet

Question 9

On the cash flow statement,the purchase and sale of bonds of other companies to be held for an extended time are reported as:

Accepted Answer

A)  operating activities 
B)  financing activities 
C)  investing activities 
D)  would not appear on a cash flow statement

Question 10

Unrealized gains or losses on short-term investments are reported using:

Accepted Answer

A)  a liability account 
B)  an asset account 
C)  an expense account 
D)  a revenue account

Question 11

Retail Energy Corporation paid $1,300,000 on January 1,2017,to purchase 32% of the outstanding shares of Natural Gas Limited.In 2017 Natural Gas Limited reported $450,000 of net income and paid $100,000 in dividends.If this investment is accounted for using the equity method of accounting,what will be the impact on the books of Retail Energy Corporation?

Accepted Answer

A)  income of $32,000 will be recorded 
B)  income of $144,000 will be recorded 
C)  the Investment account will be increased by $144,000 
D)  the Investment account will be decreased by $144,000

Question 12

Non-strategic investments are recorded at market value and are reported on the balance sheet at cost.

Accepted Answer

A) True 
 B)False

Question 13

If a parent company and its subsidiary have accounts receivable from mutually exclusive external sources in the amounts of $35,000 and $20,000,respectively,the consolidated balance sheet for the parent and its subsidiary will show:

Accepted Answer

A)  one accounts receivable balance of $55,000 
B)  only the parent's accounts receivable balance 
C)  net accounts receivable of $15,000 
D)  both amounts, but it will list them in two separate accounts

Question 14

Yukon Electrical Company owns all of the stock of Simmons Corporation and 80% of the stock of I-Tek Corporation.In 2017,Yukon earned net income of $450,000,Simmons earned $120,000,and I-Tek earned $180,000.Yukon's consolidated income statement would report consolidated net income of:

Accepted Answer

A)  $450,000 
B)  $570,000 
C)  $750,000 
D)  $714,000

Question 15

Olive Corporation purchases Branch Inc shares on June 21 for $220,000.On October 1 Olive receives a cash dividend of $2,500 from Branch Inc.On December 31^st the value of Olive Corporation's investment in Branch has decreased in value to $210,000. Prepare journal entries needed on June 21,October 1,and December 31,2014.

Accepted Answer

The answer of Olive Corporation purchases Branch Inc shares on...

Question 16

Zeep Company purchased shares of Zoop Inc on June 30,2016 for $7,500.At the end of August these shares are now worth $6,500.Zeep has an unrealized loss on this investment.

Accepted Answer

A) True 
 B)False

Question 17

When preparing a consolidated balance sheet:

Accepted Answer

A)  the shareholders' equity of the parent will be eliminated but investment in subsidiary will be presented 
B)  both investment in subsidiary and the shareholders' equity of the parent will be eliminated 
C)  neither investment in subsidiary nor the subsidiary's shareholders' equity will be presented 
D)  investment in subsidiary will be presented but the shareholders' equity of the subsidiary will be eliminated

Question 18

The Gain/Loss on Investment account may appear on which financial statement?

Accepted Answer

A)  the balance sheet under the "liabilities" section 
B)  the balance sheet as part of the shareholders' equity 
C)  the balance sheet under the "assets" section as a contra asset 
D)  the income statement under the "other income/expense" section

Question 19

On January 1,2015 Blue Cat Corporation purchased 1,000 shares (5%)of Mike Mouse Co.for $14,000 as a long term investment.On May 31,2016 Mike Mouse pays a $0.70 dividend.At year end December 31,2014 Mike Mouse shares are trading at $15 per share.Blue Cat then sells their investment in Mike Mouse Co for $13,500 on February 20,2017.Prepare Blue Cat's journal entries for 2015,2016 and 2017.

Accepted Answer

The answer of On January 1,2015 Blue Cat Corporation purchased...

Question 20

Brighton Beach Limited owns 40% of Alberta Based Inc.Total cash dividends paid by Alberta Based Inc.for the year ending December 31,2017,amount to $47,919.The journal entry prepared by Brighton Beach Limited on December 31,2017,includes a:

Accepted Answer

A)  debit to Cash for $47,918 
B)  credit to Dividend Revenue for $19,168 
C)  credit to Long-Term Investment for $19,168 
D)  debit to Long-Term Investment for $19,168

Exam 7: Investments and the Time Value of Money

Investments in long-term bonds are shown on the balance sheet at their current market value.

Power Generation Corp.owns 38% of Electric Limited.Net income for Electric Limited for the year ending December 31,2017,is $450,000.The journal entry prepared by Power Generation Corp.on December 31,2017,includes a:

An investment in common shares at fair value through other comprehensive income acquired during 2014 at a cost of $46,000 has a market value on December 31,2014,of $46,721.The adjusting entry requires a debit to long term investments (at fair value through other comprehensive income)for $721.

Short term investment purchases are initially recorded at their cost.

A gain or loss on sale of a long-term investment using the equity method is determined by comparing the cash received with the:

Corporations invest in a short-term investment:

Goodwill is a(n) on the .

On the cash flow statement,the purchase and sale of bonds of other companies to be held for an extended time are reported as:

Unrealized gains or losses on short-term investments are reported using:

Non-strategic investments are recorded at market value and are reported on the balance sheet at cost.

If a parent company and its subsidiary have accounts receivable from mutually exclusive external sources in the amounts of $35,000 and $20,000,respectively,the consolidated balance sheet for the parent and its subsidiary will show:

Yukon Electrical Company owns all of the stock of Simmons Corporation and 80% of the stock of I-Tek Corporation.In 2017,Yukon earned net income of $450,000,Simmons earned $120,000,and I-Tek earned $180,000.Yukon's consolidated income statement would report consolidated net income of:

Zeep Company purchased shares of Zoop Inc on June 30,2016 for $7,500.At the end of August these shares are now worth $6,500.Zeep has an unrealized loss on this investment.

When preparing a consolidated balance sheet:

The Gain/Loss on Investment account may appear on which financial statement?

Brighton Beach Limited owns 40% of Alberta Based Inc.Total cash dividends paid by Alberta Based Inc.for the year ending December 31,2017,amount to $47,919.The journal entry prepared by Brighton Beach Limited on December 31,2017,includes a:

Exam 7: Investments and the Time Value of Money

Investments in long-term bonds are shown on the balance sheet at their current market value.

Power Generation Corp.owns 38% of Electric Limited.Net income for Electric Limited for the year ending December 31,2017,is $450,000.The journal entry prepared by Power Generation Corp.on December 31,2017,includes a:

An investment in common shares at fair value through other comprehensive income acquired during 2014 at a cost of $46,000 has a market value on December 31,2014,of $46,721.The adjusting entry requires a debit to long term investments (at fair value through other comprehensive income)for $721.

Short term investment purchases are initially recorded at their cost.

A gain or loss on sale of a long-term investment using the equity method is determined by comparing the cash received with the:

Corporations invest in a short-term investment:

Goodwill is a(n) ________ on the ________.

On the cash flow statement,the purchase and sale of bonds of other companies to be held for an extended time are reported as:

Unrealized gains or losses on short-term investments are reported using:

Non-strategic investments are recorded at market value and are reported on the balance sheet at cost.

If a parent company and its subsidiary have accounts receivable from mutually exclusive external sources in the amounts of $35,000 and $20,000,respectively,the consolidated balance sheet for the parent and its subsidiary will show:

Yukon Electrical Company owns all of the stock of Simmons Corporation and 80% of the stock of I-Tek Corporation.In 2017,Yukon earned net income of $450,000,Simmons earned $120,000,and I-Tek earned $180,000.Yukon's consolidated income statement would report consolidated net income of:

Zeep Company purchased shares of Zoop Inc on June 30,2016 for $7,500.At the end of August these shares are now worth $6,500.Zeep has an unrealized loss on this investment.

When preparing a consolidated balance sheet:

The Gain/Loss on Investment account may appear on which financial statement?

Brighton Beach Limited owns 40% of Alberta Based Inc.Total cash dividends paid by Alberta Based Inc.for the year ending December 31,2017,amount to $47,919.The journal entry prepared by Brighton Beach Limited on December 31,2017,includes a:

Goodwill is a(n) on the .