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Exam 15: Investments

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Question 21

Multiple Choice

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At the end of the accounting period,the owners of debt securities:

A) Must report the dividend income accrued on the debt securities.
B) Must retire the debt.
C) Must record a gain or loss on the interest income earned.
D) Must record a gain or loss on the dividend income earned.
E) Must record any interest earned on the debt securities during the period.

F) A) and B)
G) A) and C)

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Question 22

Multiple Choice

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Consolidated financial statements:

A) Show the results of operations,cash flows,and the financial position of all entities under a parent's control,including all subsidiaries.
B) Show the results of operations,cash flows,and the financial position of the parent only.
C) Show the results of operations,cash flows,and the financial position of the subsidiary only.
D) Include the investments in the subsidiaries on the balance sheet.
E) Do not include a balance sheet.

F) B) and C)
G) A) and D)

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Question 23

Multiple Choice

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Kendall Corp.purchased at par value $160,000 of Barker Company's 7% bonds that mature in 10 months.The bonds pay interest semiannually on June 1 and December 1.Kendall plans to hold the bonds until they mature.The journal entry to record Kendall's purchase of the bonds is:

Long-term investments include investments in land or other assets not used in a company's operations.

Accounting for long-term investments in equity securities with controlling influence uses the:

Explain how to record the sale of non-influential equity securities.

An investor presumed to have significant influence owns at least 20% but not more than 50% of another company's voting stock.

Investments can be classified as all but which of the following:

When the cost of a short-term held-to-maturity debt security is different from the maturity value,the difference is amortized over the remaining life of the security.

A company purchased $60,000 of 5% bonds on May 1 at par value.The bonds pay interest on March 1 and September 1.The amount of interest accrued on December 31 (the company's year-end) would be:

Long-term investments in available-for-sale securities are reported at fair value on the balance sheet.

A company had a profit margin of 10.5% and total asset turnover of 1.84.Its return on total assets was:

Consolidated financial statements show the financial statements of all entities under the parent's control,including all subsidiaries.

When an investor has insignificant influence over another company's stock,presumably when it owns less than 20%,the stock investment is reported at fair value.

Unrealized Loss−Equity and Unrealized Gain−Equity are permanent equity accounts.

On January 1,Jewel Company buys $200,000 of Marcelo Corp.12%,36-month notes.Interest is paid on the last day of each month.The notes are classified as available-for-sale securities.This is the company's first and only investment in available-for-sale securities.On December 31,the notes have a fair value of $204,000.The journal entry to record the receipt of the monthly interest on January 31 is:

A company has an investment in 9% bonds with a par value of $100,000 that pay interest on October 1 and April 1.The amount of interest accrued on December 31 (the company's year-end) would be:

Landmark Corp.buys $300,000 of Schroeter Company's 8%,5-year bonds payable at par value on September 1.Interest payments are made semiannually.Landmark plans to hold the bonds for the 5-year life.When the bonds mature,the journal entry to record the proceeds will be:

Unrealized gains and losses on stock investments with insignificant influence are reported as a component of stockholders' equity.

________ securities reflect a creditor relationship while ________ securities reflect an owner relationship.