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Exam 13: Investments and Fair Value Accounting

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Question 51

Multiple Choice

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Companies may report comprehensive income on each of the statements below except

A) income statement
B) separate statement of comprehensive income
C) statement of cash flows
D) retained earnings statement

E) A) and B)
F) B) and C)

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Question 52

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Any difference between the fair market values of the securities and their cost is a realized gain or loss.

A) True
B) False

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Question 53

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On May 1,Cedar Inc.purchases $150,000 of 10-year,Knox Corporation 8% bonds dated March 1 at 100 plus accrued interest.What entry would Cedar record when receiving its semiannual interest on March 1?

Any gains or losses on the sale of bonds normally would be reported in the Other Income Loss section of the income statement.

Which of the following items would not affect the investor's income for the period?

When shares of stock held as an investment are sold,the difference between the proceeds and the carrying amount of the investment is recorded as an

Which of the following is not a part of comprehensive income?

When bonds held as long-term investments are purchased at a price other than the face value,the premium or discount should be amortized over the remaining life of the bonds.

The method of accounting for investments in equity securities in which the investor records its share of periodic net income of the investee is the

Temporary investments such as in trading securities are

If one company owns more than 50% of the common stock of another company

Financial statements in which financial data for two or more companies are combined as a single entity are called

Foreign currency translation adjustment is an example of an item that would be included in other comprehensive income.

Held-to-maturity securities are reported on the balance sheet at fair market value.

Financial statements include assets listed at

As with other assets,the cost of a bond investment includes all costs related to the purchase.

The cumulative effects of other comprehensive income items may be reported separately from retained earnings and paid-in capital,on the balance sheet,as accumulated other comprehensive income.

The income statement for Hudson Company reported net income of $345,000 for the year ended December 31 before considering the following: ◉During the year the company purchased trading securities. ◉At year end, the fair value of the investment portfolio was $23,000 less than cost. ◉The balance of Retained Earnings was $823,000 on January 1. ◉Hudson Company paid $43,000 in cash dividends during the year. Calculate the balance of Retained Earnings on December 31.

On April 1,Alliance Company purchased $50,000 of Tetter Company's 12% bonds at 100 plus accrued interest of $2,000.On June 30,Alliance received its first semiannual interest.On February 1,Alliance sold $40,000 of the bonds at 103 plus accrued interest.The journal entry Alliance will record on April 1 for the purchase of the bonds will include a

If the proceeds from the sale of bond investments exceed the carrying amount of the bonds,a gain is realized.