Question 1

The financial statements resulting from combining parent and subsidiary statements are called consolidated statements.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following stock investments should be accounted for using the cost method?

Accepted Answer

A)   investments of less than 20%
B)   investments between 20 % and 50%
C)   investments of less than 20% and investments between 20% and 50%
D)   all stock investments should be accounted for using the cost methodE) None of the above
F) C) and D)

Question 3

Ruben Company purchased $100,000 of Evans Company bonds at 100 plus $1,500 in accrued interest. The bond interest rate is 8% and interest is paid semi-annually. The journal entry to record the purchase would be:

Accepted Answer

A)   Debit: Investment in Bonds $101,500; Credit: Cash $101,500
B)   Debit: Investment in Bonds $100,000; Credit: Interest Revenue $1,500 and Cash $98,500
C)   Debit: Investment in Bonds $100,000 and Interest Receivable $1,500; Credit: Cash $101,500
D)   Investment in Bonds $100,000; Credit: Cash $100,000E) A) and D)
F) A) and C)

Question 4

Albright Company purchased as a long-term investment $500,000 of Benton Corporation 10-year, 9% bonds. Present entries to record the following selected transactions:

Accepted Answer

The answer of Albright Company purchased as a long-term investment...

Question 5

Following is data for the available-for-sale securities held by AdBrand Company as of December 31, 2012.
  Required:

(1) Complete the table above to find the total cost and fair value for the company's available-for-sale securities portfolio.
(2) Calculate and record the required December 31, 2012 adjustment.
(3) Explain how the adjustment from step (2) is reported on AdBrand's 2012 financial statements.

Accepted Answer

(3) The unrealized loss will be shown...

Question 6

Purchased $400,000 of ABC Co. 5% bonds at 100 plus accrued interest of $4,500. Sold $250,000 of bonds at 97. The journal entry for the purchase would include:

Accepted Answer

A)   a credit to Interest Receivable for $4,500
B)   a credit to Interest Revenue for $4,500
C)   a debit to Interest Receivable for $4,500
D)   a debit to Interest Revenue for $4,500E) B) and C)
F) All of the above

Question 7

Foreign currency translation adjustment is an example of an item that would be included in Other Comprehensive Income.

Accepted Answer

A) True 
 B)False

Question 8

The journal entry Stanton will record on February 1, 2015, will include:

Accepted Answer

A)   a credit to Interest Revenue for $1,500.
B)   a credit to Gain on Sale of Investments for $1,500.
C)   a credit to Cash for $52,500.
D)   a credit to Interest Receivable for $600.E) B) and C)
F) A) and C)

Question 9

The investor carrying an investment by the equity method records cash dividends received as an increase in the carrying amount of the investment.

Accepted Answer

A) True 
 B)False

Question 10

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.

Accepted Answer

A) True 
 B)False

Question 11

Compare and contrast why companies invest cash in short-term temporary investments vs. long-term investments.

Accepted Answer

When companies temporarily have excess c...

Question 12

Which of the following is not a reason to invest excess cash in temporary investments?

Accepted Answer

A)   earn interest revenue
B)   influence the operations of another company
C)   receive dividends
D)   realize gains from the increase in market value of the securitiesE) C) and D)
F) None of the above

Question 13

Although marketable securities may be retained for several years, they continue to be classified as temporary, provided they are readily marketable and can be sold for cash at any time.

Accepted Answer

A) True 
 B)False

Exam 13: Investments and Fair Value Accounting

Albright Company purchased as a long-term investment $500,000 of Benton Corporation 10-year, 9% bonds. Present entries to record the following selected transactions:

Correct Answer
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Correct Answer
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(3) The unrealized loss will be shown...
View Answer

Ruben Company purchased $100,000 of Evans Company bonds at 100 plus $1,500 in accrued interest. The bond interest rate is 8% and interest is paid semi-annually. The journal entry to record the purchase would be:

Correct Answer
verified

Although marketable securities may be retained for several years, they continue to be classified as temporary, provided they are readily marketable and can be sold for cash at any time.

Correct Answer
verified

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.

Correct Answer
verified

The journal entry Stanton will record on February 1, 2015, will include:

Correct Answer
verified

Which of the following is not a reason to invest excess cash in temporary investments?

Correct Answer
verified

Compare and contrast why companies invest cash in short-term temporary investments vs. long-term investments.

Correct Answer
verified
When companies temporarily have excess c...
View Answer

The investor carrying an investment by the equity method records cash dividends received as an increase in the carrying amount of the investment.

Correct Answer
verified

Which of the following stock investments should be accounted for using the cost method?

Correct Answer
verified

Foreign currency translation adjustment is an example of an item that would be included in Other Comprehensive Income.

Correct Answer
verified

Purchased $400,000 of ABC Co. 5% bonds at 100 plus accrued interest of $4,500. Sold $250,000 of bonds at 97. The journal entry for the purchase would include:

Correct Answer
verified

The financial statements resulting from combining parent and subsidiary statements are called consolidated statements.

Correct Answer
verified

Exam 13: Investments and Fair Value Accounting

Albright Company purchased as a long-term investment $500,000 of Benton Corporation 10-year, 9% bonds. Present entries to record the following selected transactions:

Correct AnswerverifiedShow Answer

Correct Answerverified (3) The unrealized loss will be shown...View AnswerShow Answer

Ruben Company purchased $100,000 of Evans Company bonds at 100 plus $1,500 in accrued interest. The bond interest rate is 8% and interest is paid semi-annually. The journal entry to record the purchase would be:

Correct AnswerverifiedShow Answer

Although marketable securities may be retained for several years, they continue to be classified as temporary, provided they are readily marketable and can be sold for cash at any time.

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

The journal entry Stanton will record on February 1, 2015, will include:

Correct AnswerverifiedShow Answer

Which of the following is not a reason to invest excess cash in temporary investments?

Correct AnswerverifiedShow Answer

Compare and contrast why companies invest cash in short-term temporary investments vs. long-term investments.

Correct AnswerverifiedWhen companies temporarily have excess c...View AnswerShow Answer

The investor carrying an investment by the equity method records cash dividends received as an increase in the carrying amount of the investment.

Correct AnswerverifiedShow Answer

Which of the following stock investments should be accounted for using the cost method?

Correct AnswerverifiedShow Answer

Foreign currency translation adjustment is an example of an item that would be included in Other Comprehensive Income.

Correct AnswerverifiedShow Answer

Purchased $400,000 of ABC Co. 5% bonds at 100 plus accrued interest of $4,500. Sold $250,000 of bonds at 97. The journal entry for the purchase would include:

Correct AnswerverifiedShow Answer

The financial statements resulting from combining parent and subsidiary statements are called consolidated statements.

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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(3) The unrealized loss will be shown...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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When companies temporarily have excess c...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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