Question 1

Another term for short-term investments is marketable securities.

Accepted Answer

A) True 
 B)False  True

Question 2

Gains and losses on the sale of investments appear as adjustments within the financing activities section of the statement of cash flows.

Accepted Answer

A) True 
 B)False  False

Question 3

Discuss the financial statement presentation of the account Allowance to Adjust Short-Term Investments to Market,distinguishing between the effect of a debit balance and the effect of a credit balance in the account.

Accepted Answer

The Allowance to Adjust Short-Term Investments to Market account appears on the balance sheet as a contra-asset account.When Allowance to Adjust Short-Term Investments to Market has a debit balance,it is added to the associated investment account on the asset side of the balance sheet.However,when it has a credit balance,it is deducted from the associated account.

Question 4

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.

Question 5

A controlling investment is defined as owning what percent of the stock of another company?

Accepted Answer

A)  More than 50 percent
B)  100 percent
C)  More than 75 percent
D)  75 percent

Question 6

Held-to-maturity securities are always debt securities,and never equity securities.

Accepted Answer

A) True 
 B)False

Question 7

The purchase and sale of debt and equity securities would appear in which section of the statement of cash flows?

Accepted Answer

A)  Operating activities
B)  Investing activities
C)  Financing activities
D)  Noncash investing and financing activities

Question 8

Detailed information about a company's investments is never disclosed in the notes to the financial statements.

Accepted Answer

A) True 
 B)False

Question 9

Unrealized gains and losses on available-for-sale securities are reported on the balance sheet.

Accepted Answer

A) True 
 B)False

Question 10

A credit balance in the account Allowance to Adjust Long-Term Investments to Market is disclosed in the financial statements as a

Accepted Answer

A)  regular account in the stockholders' equity section of the balance sheet.
B)  contra account to Long-Term Investments.
C)  note to the financial statements.
D)  current asset.

Question 11

When the equity method is used to account for an investment in stock,the investor will report its share of the investee's annual earnings as income in proportion to how much the investee distributes in the form of dividends.

Accepted Answer

A) True 
 B)False

Question 12

Short-term available-for-sale securities are valued on the balance sheet at

Accepted Answer

A)  market value.
B)  cost,adjusted for the effects of interest.
C)  cost.
D)  lower of cost or market.

Question 13

Trading securities are always short-term investments.

Accepted Answer

A) True 
 B)False

Question 14

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.

Question 15

U.S.Treasury bills are considered equity securities.

Accepted Answer

A) True 
 B)False

Question 16

Trading securities are valued on the balance sheet at

Accepted Answer

A)  lower of cost or market.
B)  cost.
C)  market value.
D)  cost,adjusted for the effects of interest.

Question 17

Distinguish between the financial statement presentation of unrealized gains and losses related to trading securities and the financial statement presentation of unrealized gains and losses related to available-for-sale securities.

Accepted Answer

The answer of Distinguish between the financial statement presentation of...

Question 18

Singletary Corporation owns a 40 percent interest in the stock of Fleming Corporation.During 2014,Fleming pays $50,000 in dividends to Singletary and reports $214,000 in net income.Singletary Corporation's investment in Fleming will increase Singletary's income before income taxes by

Accepted Answer

A)  $35,600.
B)  $65,600.
C)  $85,600.
D)  $105,600.

Question 19

When a company holds U.S.Treasury bills,it debits Interest Income and credits Short-Term Investments at the end of the accounting period (assuming it is prior to the T-bills' maturity).

Accepted Answer

A) True 
 B)False

Question 20

When bonds are purchased between interest dates,the buyer must pay (in addition to the bonds' cost)the amount of interest that has accrued since the last interest payment date.

Accepted Answer

A) True 
 B)False

Exam 19: Accounting for Investments

Another term for short-term investments is marketable securities.

Gains and losses on the sale of investments appear as adjustments within the financing activities section of the statement of cash flows.

Discuss the financial statement presentation of the account Allowance to Adjust Short-Term Investments to Market,distinguishing between the effect of a debit balance and the effect of a credit balance in the account.

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

A controlling investment is defined as owning what percent of the stock of another company?

Held-to-maturity securities are always debt securities,and never equity securities.

The purchase and sale of debt and equity securities would appear in which section of the statement of cash flows?

Detailed information about a company's investments is never disclosed in the notes to the financial statements.

Unrealized gains and losses on available-for-sale securities are reported on the balance sheet.

A credit balance in the account Allowance to Adjust Long-Term Investments to Market is disclosed in the financial statements as a

When the equity method is used to account for an investment in stock,the investor will report its share of the investee's annual earnings as income in proportion to how much the investee distributes in the form of dividends.

Short-term available-for-sale securities are valued on the balance sheet at

Trading securities are always short-term investments.

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

U.S.Treasury bills are considered equity securities.

Trading securities are valued on the balance sheet at

Distinguish between the financial statement presentation of unrealized gains and losses related to trading securities and the financial statement presentation of unrealized gains and losses related to available-for-sale securities.

Singletary Corporation owns a 40 percent interest in the stock of Fleming Corporation.During 2014,Fleming pays $50,000 in dividends to Singletary and reports $214,000 in net income.Singletary Corporation's investment in Fleming will increase Singletary's income before income taxes by

When a company holds U.S.Treasury bills,it debits Interest Income and credits Short-Term Investments at the end of the accounting period (assuming it is prior to the T-bills' maturity).

When bonds are purchased between interest dates,the buyer must pay (in addition to the bonds' cost)the amount of interest that has accrued since the last interest payment date.