Question 1

Zach Company owns 40% 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 Corporation's entry would include a

Accepted Answer

A)   Credit to cash for $8,000
B)   Debit to the investment account for $8,000
C)   Credit to the investment account for $8,000
D)   Debit to a loss account for $8,000E) B) and C)
F) A) and D)

Question 2

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

Accepted Answer

A)   interest received on a temporary investment in bonds
B)   dividends received on a long-term investment in stock where the investor owns 10% of the investee's stock
C)   dividends received on a long-term investment in stock where the investor owns 30% of the investee's stock
D)   interest received on a long-term investment in bondsE) C) and D)
F) A) and C)

Question 3

Journalize the entries to record the following selected transactions of Oliver Co.:

Accepted Answer

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

Question 4

Define (1) debt securities and (2) equity securities. Include their similarities and differences in your discussion.

Accepted Answer

Debt securities are notes and bonds that...

Question 5

On January 1, 2011, Blanton Company's Valuation Allowance for Trading Investments account has a debit balance of $22,500. On December 31, 2011, the cost of the trading securities portfolio was $80,000. The fair value was $98,000. Which of the following would Blanton report on the income statement for 2011?

Accepted Answer

A)   an Unrealized Loss on Trading Investments of $4,500.
B)   an Unrealized Gain on Trading Investments of $4,500.
C)   an Unrealized Gain on Trading Investments of $18,000.
D)   an Unrealized Loss on Trading Investments of $18,000.E) None of the above
F) A) and D)

Question 6

Long-term investments are held for all of the listed reasons below except

Accepted Answer

A)   the interest or dividend income
B)   long-term gain potential
C)   influence over another business entity
D)   meet current cash needsE) C) and D)
F) A) and B)

Question 7

Unrealized gains and losses on trading securities are not included in the calculation of net income.

Accepted Answer

A) True 
 B)False

Question 8

Under the equity method, the receipt of cash dividends on an investment in common stock of Vallerio Corporation is accounted for as a debit to Cash and a credit to

Accepted Answer

A)   Investment in Vallerio
B)   Retained Earnings
C)   Dividend Revenue
D)   Dividend ReceivablesE) B) and D)
F) A) and D)

Question 9

(1) Discuss factors contributing to the trend to fair value accounting.
(2) What are some of the disadvantages associated with using fair value?

Accepted Answer

Factors contributing to the trend to fai...

Question 10

Generally accepted accounting principles (GAAP) require the use of fair value accounting for all assets and liabilities.

Accepted Answer

A) True 
 B)False

Question 11

The amount of interest paid when buying a bond as an investment should be credited to Interest Revenue.

Accepted Answer

A) True 
 B)False

Question 12

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 securities.E) A) and B)
F) B) and D)

Question 13

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) B) and D)
F) None of the above

Question 14

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

Accepted Answer

A)   a partnership exists.
B)   a parent-subsidiary relationship exists.
C)   the company whose stock is owned must be liquidated
D)   the cost method should be used to account for the investment.E) All of the above
F) B) and C)

Question 15

The account Unrealized Gain (Loss)  on Available-For-Sale Securities should be included in the

Accepted Answer

A)   Income statement as Other Revenue (Expenses) 
B)   Balance sheet as an adjustment to the asset account
C)   Balance sheet as an adjustment to Stockholders' Equity
D)   Statement of Retained EarningsE) A) and D)
F) A) and B)

Question 16

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

Accepted Answer

A)   foreign currency items
B)   restructuring charges
C)   unrealized gains and losses
D)   pension liability adjustmentsE) B) and C)
F) B) and D)

Question 17

The equity method of accounting for investments

Accepted Answer

A)   requires a year-end adjustment to revalue the stock to lower of cost or market
B)   requires the investment to be reported at its original cost
C)   requires the investment be increased by the reported net income of the investee
D)   requires the investment be increased by the dividends paid by the investeeE) A) and B)
F) C) and D)

Question 18

On May 1, 2011, Stanton Company purchased $50,000 of Harris Company's 12% bonds at 100 plus accrued interest of $2,000. On June 30, 2011, Stanton received its first semiannual interest. On February 1, 2012, Stanton sold $40,000 of the bonds at 103 plus accrued interest. The journal entry Stanton will record on June 30, 2011, will include:

Accepted Answer

A)   a credit to Interest Revenue for $2,000.
B)   a debit to Cash for $3,000.
C)   a debit to Cash for $2,000.
D)   a credit to Interest Receivable for $1,000.E) C) and D)
F) All of the above

Question 19

Fair value accounting is used more under Generally Accepted Accounting Principles (GAAP) than it is under International Financial Reporting Standards (IRFS).

Accepted Answer

A) True 
 B)False

Question 20

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

Accepted Answer

A) True 
 B)False

Exam 13: Investments and Fair Value Accounting

Correct Answer
verified

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

Correct Answer
verified

(1) Discuss factors contributing to the trend to fair value accounting. (2) What are some of the disadvantages associated with using fair value?

Correct Answer
verified
Factors contributing to the trend to fai...
View Answer

Fair value accounting is used more under Generally Accepted Accounting Principles (GAAP) than it is under International Financial Reporting Standards (IRFS).

Correct Answer
verified

Long-term investments are held for all of the listed reasons below except

Correct Answer
verified

Correct Answer
verified

Unrealized gains and losses on trading securities are not included in the calculation of net income.

Correct Answer
verified

The account Unrealized Gain (Loss) on Available-For-Sale Securities should be included in the

Correct Answer
verified

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

Correct Answer
verified

The equity method of accounting for investments

Correct Answer
verified

Journalize the entries to record the following selected transactions of Oliver Co.:

Correct Answer
verified

Generally accepted accounting principles (GAAP) require the use of fair value accounting for all assets and liabilities.

Correct Answer
verified

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

Correct Answer
verified

Which of the following would be considered an "Other Comprehensive Income" item?

Correct Answer
verified

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

Correct Answer
verified

Define (1) debt securities and (2) equity securities. Include their similarities and differences in your discussion.

Correct Answer
verified
Debt securities are notes and bonds that...
View Answer

Under the equity method, the receipt of cash dividends on an investment in common stock of Vallerio Corporation is accounted for as a debit to Cash and a credit to

Correct Answer
verified

Zach Company owns 40% 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 Corporation's entry would include a

Correct Answer
verified

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 Answer
verified

The amount of interest paid when buying a bond as an investment should be credited to Interest Revenue.

Correct Answer
verified

Exam 13: Investments and Fair Value Accounting

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

(1) Discuss factors contributing to the trend to fair value accounting. (2) What are some of the disadvantages associated with using fair value?

Correct AnswerverifiedFactors contributing to the trend to fai...View AnswerShow Answer

Fair value accounting is used more under Generally Accepted Accounting Principles (GAAP) than it is under International Financial Reporting Standards (IRFS).

Correct AnswerverifiedShow Answer

Long-term investments are held for all of the listed reasons below except

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Unrealized gains and losses on trading securities are not included in the calculation of net income.

Correct AnswerverifiedShow Answer

The account Unrealized Gain (Loss) on Available-For-Sale Securities should be included in the

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The equity method of accounting for investments

Correct AnswerverifiedShow Answer

Journalize the entries to record the following selected transactions of Oliver Co.:

Correct AnswerverifiedShow Answer

Generally accepted accounting principles (GAAP) require the use of fair value accounting for all assets and liabilities.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following would be considered an "Other Comprehensive Income" item?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Define (1) debt securities and (2) equity securities. Include their similarities and differences in your discussion.

Correct AnswerverifiedDebt securities are notes and bonds that...View AnswerShow Answer

Under the equity method, the receipt of cash dividends on an investment in common stock of Vallerio Corporation is accounted for as a debit to Cash and a credit to

Correct AnswerverifiedShow Answer

Zach Company owns 40% 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 Corporation's entry would include a

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

The amount of interest paid when buying a bond as an investment should be credited to Interest Revenue.

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Factors contributing to the trend to fai...
View Answer

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
Debt securities are notes and bonds that...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified