Question 1

Comprehensive income does not affect net income or retained earnings.

Accepted Answer

A) True 
 B)False

Question 2

Armando Company owns 17,000 of the 70,000 shares of common stock outstanding of Tito Company and exercises a significant influence over its operating and financial policies.The investment should be accounted for by the

Accepted Answer

A)  equity method
B)  market method
C)  cost or market method
D)  cost methodE) C) and D)
F) All of the above

Question 3

The cost method of accounting for stock

Accepted Answer

A)  recognizes dividends as income
B)  is only appropriate as part of a consolidation
C)  requires the investment to be increased by the reported net income of the investee
D)  requires the investment to be decreased by the reported net income of the investeeE) C) and D)
F) A) and D)

Question 4

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 5

Match each of the definitions that follow with the appropriate investment term (a-j) .
-The company investing in another company's stock

Accepted Answer

A)  Debt securities
B)  Equity securities
C)  Investor
D)  Investee
E)  Cost methodF) Trading securitiesG) Available-for-sale securitiesH) Held-to-maturity securitiesI) Equity methodJ) Business combinationK) G) and J)
L) D) and J)

Question 6

Investments in stocks that are expected to be held for the long term are listed in the Stockholders' equity section of the balance sheet.

Accepted Answer

A) True 
 B)False

Question 7

Match each of the definitions that follow with the appropriate investment term (a-j) .
-Preferred and common stocks that represent ownership in a company and do not have a fixed maturity date

Accepted Answer

A)  Debt securities
B)  Equity securities
C)  Investor
D)  Investee
E)  Cost methodF) Trading securitiesG) Available-for-sale securitiesH) Held-to-maturity securitiesI) Equity methodJ) Business combinationK) A) and E)
L) D) and G)

Question 8

Zach Company owns 45% of the voting stock of Tomas Corporation and uses the equity method in recording this investment.Tomas Corporation reported a $20,000 net loss.Zach Company's entry would include a

Accepted Answer

A)  credit to cash for $9,000
B)  debit to the investment account for $9,000
C)  credit to the investment account for $9,000
D)  credit to a loss account for $9,000E) C) and D)
F) A) and B)

Question 9

Ruben Company purchased $100,000 of Evans Company bonds at 100.Ruben later sold the bonds at $104,500 plus $500 in accrued interest.The journal entry to record the sale of the bonds would be

Accepted Answer

A)  debit Cash, $105,000; credit Investments-Evans Company Bonds, $104,500, and Interest Revenue, $500
B)  debit Cash, $105,000; credit Investments-Evans Company Bonds, $100,000, and Gain on Sale of Investments, $5,000
C)  debit Cash, $104,500, and Interest Receivable, $500; credit Investments-Evans Company Bonds, $100,000, Gain on Sale of Investments, $4,500, and Interest Revenue, $500
D)  debit Cash, $105,000; credit Investments-Evans Company Bonds, $100,000, Gain on Sale of Investments, $4,500, and Interest Revenue, $500E) C) and D)
F) B) and C)

Question 10

Comprehensive income must be reported on the income statement.

Accepted Answer

A) True 
 B)False

Question 11

Interest revenue on bonds is reported as

Accepted Answer

A)  an addition to the investment in bonds account
B)  part of comprehensive income but not as part of net income
C)  part of other income
D)  part of operating incomeE) None of the above
F) B) and C)

Question 12

An investor purchased 500 shares of common stock,$25 par,for $21,750.Subsequently,100 shares were sold for $49.50 per share.What is the amount of gain or loss on the sale?

Accepted Answer

A)  $12,750 gain
B)  $600 gain
C)  $600 loss
D)  $9,250 lossE) A) and C)
F) None of the above

Question 13

Accounting for the sale of stock is the same for both the cost and the equity methods of accounting for investments.

Accepted Answer

A) True 
 B)False

Question 14

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 15

Changes in the value of available-for-sale securities are

Accepted Answer

A)  reported as part of stockholders' equity
B)  recognized on the income statement
C)  not recognized
D)  recognized on the income statement and as part of stockholders' equityE) A) and D)
F) A) and C)

Question 16

Any gains or losses on the sale of bonds normally would be reported in the Other income 
(loss)section of the income statement.

Accepted Answer

A) True 
 B)False

Question 17

Match each of the definitions that follow with the appropriate investment term (a-j) .
-When using this,dividends are treated as a reduction of the investment

Accepted Answer

A)  Debt securities
B)  Equity securities
C)  Investor
D)  Investee
E)  Cost methodF) Trading securitiesG) Available-for-sale securitiesH) Held-to-maturity securitiesI) Equity methodJ) Business combinationK) B) and I)
L) C) and I)

Question 18

Which of the following would be considered an "other comprehensive income" item?

Accepted Answer

A)  net income
B)  extraordinary loss related to flood
C)  gain on disposal of discontinued operations
D)  unrealized loss on available-for-sale securitiesE) None of the above
F) B) and D)

Question 19

Journalize the entries to record the following selected equity investment transactions completed by Flurry Company during the current year.Flurry's purchase represents less than 20% of the total outstanding Braxter Co.stock.​​

Accepted Answer

The answer of Journalize the entries to record the following...

Question 20

On January 1,Butte Company's valuation allowance for trading investments account has a debit balance of $23,200.On December 31,the cost of the trading securities portfolio was $80,000.The fair value was $98,000.Which of the following would Butte report on the income statement for the current year?

Accepted Answer

A)  an unrealized loss on trading investments, $5,200
B)  an unrealized gain on trading investments, $5,200
C)  an unrealized gain on trading investments, $18,000
D)  an unrealized loss on trading investments, $18,000E) A) and B)
F) A) and C)

Exam 15: Investments and Fair Value Accounting

Match each of the definitions that follow with the appropriate investment term (a-j) . -Preferred and common stocks that represent ownership in a company and do not have a fixed maturity date

Correct AnswerverifiedShow Answer

Match each of the definitions that follow with the appropriate investment term (a-j) . -When using this,dividends are treated as a reduction of the investment

Correct AnswerverifiedShow Answer

Zach Company owns 45% of the voting stock of Tomas Corporation and uses the equity method in recording this investment.Tomas Corporation reported a $20,000 net loss.Zach Company's entry would include a

Correct AnswerverifiedShow Answer

Armando Company owns 17,000 of the 70,000 shares of common stock outstanding of Tito Company and exercises a significant influence over its operating and financial policies.The investment should be accounted for by the

Correct AnswerverifiedShow Answer

Comprehensive income must be reported on the income statement.

Correct AnswerverifiedShow Answer

Journalize the entries to record the following selected equity investment transactions completed by Flurry Company during the current year.Flurry's purchase represents less than 20% of the total outstanding Braxter Co.stock.​​

Correct AnswerverifiedShow Answer

Interest revenue on bonds is reported as

Correct AnswerverifiedShow Answer

The cost method of accounting for stock

Correct AnswerverifiedShow Answer

Ruben Company purchased $100,000 of Evans Company bonds at 100.Ruben later sold the bonds at $104,500 plus $500 in accrued interest.The journal entry to record the sale of the bonds would be

Correct AnswerverifiedShow Answer

An investor purchased 500 shares of common stock,$25 par,for $21,750.Subsequently,100 shares were sold for $49.50 per share.What is the amount of gain or loss on the sale?

Correct AnswerverifiedShow Answer

Match each of the definitions that follow with the appropriate investment term (a-j) . -The company investing in another company's stock

Correct AnswerverifiedShow Answer

Investments in stocks that are expected to be held for the long term are listed in the Stockholders' equity section of the balance sheet.

Correct AnswerverifiedShow Answer

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

Comprehensive income does not affect net income or retained earnings.

Correct AnswerverifiedShow Answer

Which of the following would be considered an "other comprehensive income" item?

Correct AnswerverifiedShow Answer

Any gains or losses on the sale of bonds normally would be reported in the Other income (loss)section of the income statement.

Correct AnswerverifiedShow Answer

Changes in the value of available-for-sale securities are

Correct AnswerverifiedShow Answer

Accounting for the sale of stock is the same for both the cost and the equity methods of accounting for investments.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

On January 1,Butte Company's valuation allowance for trading investments account has a debit balance of $23,200.On December 31,the cost of the trading securities portfolio was $80,000.The fair value was $98,000.Which of the following would Butte report on the income statement for the current year?

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Journalize the entries to record the following selected equity investment transactions completed by Flurry Company during the current year.Flurry's purchase represents less than 20% of the total outstanding Braxter Co.stock.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified