Question 1

A consolidated income statement will reflect only revenue and expense transactions between the consolidated entity and parties outside the affiliated group.

Accepted Answer

A) True 
 B)False

Question 2

What purposes are served by reporting Unrealized Gains (Losses)-Equity in the equity section?

Accepted Answer

Reporting Unrealized Gains (Losses)-Equi...

Question 3

Foley Corporation's trading securities portfolio at the end of the year is as follows:  Foley subsequently sells Share B for ₤12,000. What entry is made to record the sale?

Accepted Answer

The answer of Foley Corporation's trading securities portfolio at the...

Question 4

Which of the following is not a true statement regarding short-term debt investments?

Accepted Answer

A)   The securities usually pay interest.
B)   Investments are frequently government or corporate bonds.
C)   This type of investment must be currently traded in the securities market.
D)   Debt investments are recorded at the price paid less brokerage fees.E) B) and D)
F) C) and D)

Question 5

A reason some companies purchase investments is because they generate a significant portion of their earnings from investment income.

Accepted Answer

A) True 
 B)False

Question 6

Barr Company acquires 50, 10%, 5 year, €1,000 Community bonds on January 1, 2014 for €50,000. The journal entry to record this investment includes a debit to

Accepted Answer

A)   Debt Investments for €55,000.
B)   Debt Investments for €50,000.
C)   Cash for €50,000.
D)   Share Investments for €50,000.E) All of the above
F) C) and D)

Question 7

The fair value adjustment for trading securities

Accepted Answer

A)   is reported as an increase to net income when the fair value of investments is greater than cost.
B)   is reported as other comprehensive income.
C)   is reported as an unrealized gain or loss on the statement of changes in equity.
D)   is only allowed when the fair value of investments is less than cost.E) B) and C)
F) A) and D)

Question 8

If an investor owns between 20% and 50% of an investee's ordinary shares, it is presumed that the investor has significant influence on the investee.

Accepted Answer

A) True 
 B)False

Question 9

Short-term investments are

Accepted Answer

A)   (1)  readily marketable and (2)  intended to be converted into cash after the current year or operating cycle, whichever is shorter.
B)   (1)  readily marketable and (2)  intended to be converted into cash within the current year or operating cycle, whichever is longer.
C)   (1)  readily marketable and (2)  intended to be converted into cash after the current year or operating cycle, whichever is longer.
D)   (1)  readily marketable and (2)  intended to be converted into cash within the current year or operating cycle, whichever is shorter.E) C) and D)
F) A) and B)

Question 10

Short-term investments are securities held by a company that are

Accepted Answer

A)   readily marketable.
B)   intended to be converted into cash within the next year.
C)   readily marketable and intended to be converted into cash within the next year or operating cycle, whichever is longer.
D)   readily marketable and intended to be held until maturity.E) B) and C)
F) B) and D)

Question 11

Greene Corporation sells 200 ordinary shares being held as an investment. The shares were acquired six months ago at a cost of $50 a share. Greene sold the shares for $40 a share. The entry to record the sale is

Accepted Answer

The answer of Greene Corporation sells 200 ordinary shares being...

Question 12

Under the equity method, the Share Investments account is credited when the

Accepted Answer

A)   investee reports net income.
B)   investee reports a net loss.
C)   investment is originally acquired.
D)   investee reports net income and when the investment is originally acquired.E) A) and C)
F) A) and B)

Question 13

Reporting investments at fair value is

Accepted Answer

A)   applicable to share securities only.
B)   applicable to debt securities only.
C)   applicable to both debt and share securities.
D)   a conservative approach because only losses are recognized.E) All of the above
F) A) and D)

Question 14

When an investor owns between 20% and 50% of the ordinary shares of a corporation, it is generally presumed that the investor

Accepted Answer

A)   has insignificant influence on the investee and that the cost method should be used to account for the investment.
B)   should apply the cost method in accounting for the investment.
C)   will prepare consolidated financial statements.
D)   has significant influence on the investee and that the equity method should be used to account for the investment.E) All of the above
F) C) and D)

Question 15

All of the following statements about short-term investments are true except

Accepted Answer

A)   Short-term investments are also called marketable securities
B)   Trading securities are always classified as short-term investments.
C)   Short-term investments are listed below accounts receivable in the current asset section of the statement of financial position.
D)   Short-term assets must be readily marketable.E) All of the above
F) C) and D)

Question 16

The contra-account, Fair Value Adjustment, is also called a(n)

Accepted Answer

A)   offset account.
B)   adjustment account.
C)   valuation account.
D)   opposite account.E) B) and C)
F) A) and B)

Question 17

A year-end analysis of Valencia Inc.'s equity securities portfolio acquired in 2014 shows the following totals at December 31, 2014 for trading and non-trading securities:  What amount of unrealized holding loss should Valencia report in its 2014 income statement?

Accepted Answer

A)   €0.
B)   €50,000.
C)   €150,000.
D)   €200,000.E) None of the above
F) A) and B)

Question 18

The cost of debt investments includes each of the following except

Accepted Answer

A)   brokerage fees.
B)   commissions.
C)   accrued interest.
D)   the price paid.E) B) and C)
F) A) and D)

Question 19

Price Corporation has the following trading securities portfolio of share investments as of December 31, 2014.  On January 22, 2015, Price Corporation sold security C for $30,000.
Instructions
(a) Prepare the adjusting entry for Price Corporation on December 31, 2014, to report the portfolio at fair value.
(b) Indicate the statement of financial position and income statement presentation of the fair value data for Price Corporation at December 31, 2014.
(c) Prepare the journal entry for the 2015 sale.

Accepted Answer

<img  loading="lazy" src="/assets/images/blured-textbook.svg" class="d-inline m-1" alt="blured image" width="139" height="30"> (b) On the statement of financial posit...

Question 20

Which of the following is not a true statement about the accounting for debt investments?

Accepted Answer

A)   At acquisition, investments are recorded at cost.
B)   The cost includes any brokerage fees.
C)   Debt investments include investments in government and corporation bonds.
D)   The cost includes any accrued interest.E) A) and B)
F) A) and C)

Exam 12: Investments

Greene Corporation sells 200 ordinary shares being held as an investment. The shares were acquired six months ago at a cost of $50 a share. Greene sold the shares for $40 a share. The entry to record the sale is

Correct Answer
verified

Which of the following is not a true statement about the accounting for debt investments?

Correct Answer
verified

Barr Company acquires 50, 10%, 5 year, €1,000 Community bonds on January 1, 2014 for €50,000. The journal entry to record this investment includes a debit to

Correct Answer
verified

Short-term investments are securities held by a company that are

Correct Answer
verified

Foley Corporation's trading securities portfolio at the end of the year is as follows: Foley subsequently sells Share B for ₤12,000. What entry is made to record the sale?

Correct Answer
verified

The fair value adjustment for trading securities

Correct Answer
verified

The contra-account, Fair Value Adjustment, is also called a(n)

Correct Answer
verified

Short-term investments are

Correct Answer
verified

A year-end analysis of Valencia Inc.'s equity securities portfolio acquired in 2014 shows the following totals at December 31, 2014 for trading and non-trading securities: What amount of unrealized holding loss should Valencia report in its 2014 income statement?

Correct Answer
verified

Correct Answer
verified
(b) On the statement of financial posit...
View Answer

When an investor owns between 20% and 50% of the ordinary shares of a corporation, it is generally presumed that the investor

Correct Answer
verified

A reason some companies purchase investments is because they generate a significant portion of their earnings from investment income.

Correct Answer
verified

Under the equity method, the Share Investments account is credited when the

Correct Answer
verified

A consolidated income statement will reflect only revenue and expense transactions between the consolidated entity and parties outside the affiliated group.

Correct Answer
verified

All of the following statements about short-term investments are true except

Correct Answer
verified

If an investor owns between 20% and 50% of an investee's ordinary shares, it is presumed that the investor has significant influence on the investee.

Correct Answer
verified

The cost of debt investments includes each of the following except

Correct Answer
verified

Which of the following is not a true statement regarding short-term debt investments?

Correct Answer
verified

What purposes are served by reporting Unrealized Gains (Losses)-Equity in the equity section?

Correct Answer
verified
Reporting Unrealized Gains (Losses)-Equi...
View Answer

Reporting investments at fair value is

Correct Answer
verified

Exam 12: Investments

Greene Corporation sells 200 ordinary shares being held as an investment. The shares were acquired six months ago at a cost of $50 a share. Greene sold the shares for $40 a share. The entry to record the sale is

Correct AnswerverifiedShow Answer

Which of the following is not a true statement about the accounting for debt investments?

Correct AnswerverifiedShow Answer

Barr Company acquires 50, 10%, 5 year, €1,000 Community bonds on January 1, 2014 for €50,000. The journal entry to record this investment includes a debit to

Correct AnswerverifiedShow Answer

Short-term investments are securities held by a company that are

Correct AnswerverifiedShow Answer

Foley Corporation's trading securities portfolio at the end of the year is as follows: Foley subsequently sells Share B for ₤12,000. What entry is made to record the sale?

Correct AnswerverifiedShow Answer

The fair value adjustment for trading securities

Correct AnswerverifiedShow Answer

The contra-account, Fair Value Adjustment, is also called a(n)

Correct AnswerverifiedShow Answer

Short-term investments are

Correct AnswerverifiedShow Answer

A year-end analysis of Valencia Inc.'s equity securities portfolio acquired in 2014 shows the following totals at December 31, 2014 for trading and non-trading securities: What amount of unrealized holding loss should Valencia report in its 2014 income statement?

Correct AnswerverifiedShow Answer

Correct Answerverified (b) On the statement of financial posit...View AnswerShow Answer

When an investor owns between 20% and 50% of the ordinary shares of a corporation, it is generally presumed that the investor

Correct AnswerverifiedShow Answer

A reason some companies purchase investments is because they generate a significant portion of their earnings from investment income.

Correct AnswerverifiedShow Answer

Under the equity method, the Share Investments account is credited when the

Correct AnswerverifiedShow Answer

A consolidated income statement will reflect only revenue and expense transactions between the consolidated entity and parties outside the affiliated group.

Correct AnswerverifiedShow Answer

All of the following statements about short-term investments are true except

Correct AnswerverifiedShow Answer

If an investor owns between 20% and 50% of an investee's ordinary shares, it is presumed that the investor has significant influence on the investee.

Correct AnswerverifiedShow Answer

The cost of debt investments includes each of the following except

Correct AnswerverifiedShow Answer

Which of the following is not a true statement regarding short-term debt investments?

Correct AnswerverifiedShow Answer

What purposes are served by reporting Unrealized Gains (Losses)-Equity in the equity section?

Correct AnswerverifiedReporting Unrealized Gains (Losses)-Equi...View AnswerShow Answer

Reporting investments at fair value is

Correct AnswerverifiedShow Answer

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(b) On the statement of financial posit...
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Reporting Unrealized Gains (Losses)-Equi...
View Answer

Correct Answer
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