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The factor 1.0609 is taken from the 3% column and 2 periods row in a certain table.From what table is this factor taken?


A) Future value of 1
B) Future value of an annuity of 1
C) Present value of 1
D) Present value of an annuity of 1

E) B) and C)
F) A) and B)

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When the cost method is used to account for a stock investment the carrying value of the investment is affected by


A) the earnings of the investee.
B) the dividend distributions of the investee.
C) the earnings and dividend distributions of the investee.
D) neither the earnings nor the dividends of the investee.

E) A) and D)
F) B) and D)

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On January 1, U.K.Enterprise purchased as an investment a $1,000, 7% bond for $1,000.The bond pays interest on January 1.The bond is sold on July 1 for $1,120 plus accrued interest.Interest has not been accrued since the last interest payment date.What is the entry to record the cash proceeds at the time the bond is sold? On January 1, U.K.Enterprise purchased as an investment a $1,000, 7% bond for $1,000.The bond pays interest on January 1.The bond is sold on July 1 for $1,120 plus accrued interest.Interest has not been accrued since the last interest payment date.What is the entry to record the cash proceeds at the time the bond is sold?

Correct Answer

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At December 31, 2022, Grey beard Inc.has these data on its security investments . At December 31, 2022, Grey beard Inc.has these data on its security investments .

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The cost method of accounting for investments in stock should be employed when the


A) investor owns more than 50% of the investee's stock.
B) investor has significant influence on the investee and the stock held by the investor are marketable equity securities.
C) market value of the shares held is greater than their historical cost.
D) investor's influence on the investee is insignificant.

E) All of the above
F) None of the above

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On January 1, Waverly Company purchased as an investment a $1,000, 7% bond for $1,000.The bond pays interest on January 1.What is the entry to record the interest accrual on December 31? On January 1, Waverly Company purchased as an investment a $1,000, 7% bond for $1,000.The bond pays interest on January 1.What is the entry to record the interest accrual on December 31?

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The Fair Value Adjustment account can only have a credit balance or a zero balance.

A) True
B) False

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At the end of the first year of operations, the total cost of the trading securities portfolio is $245,000.Total fair value is $250,000.The financial statements should show


A) an addition to an asset of $5,000 and a realized gain of $5,000.
B) an addition to an asset of $5,000 and an unrealized gain of $5,000 in the stockholders' equity section.
C) an addition to an asset of $5,000 in the current assets section and an unrealized gain of $5,000 in "Other revenues and gains."
D) an addition to an asset of $5,000 in the current assets section and a realized gain of $5,000 in "Other revenues and gains."

E) None of the above
F) A) and C)

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The future value of a single amount is the value at a future date of a given amount invested now, assuming compound interest.

A) True
B) False

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Trading securities are reported on the balance sheet at


A) fair value.
B) cost.
C) cost, adjusted for the effects of interest.
D) lower of cost or market.

E) A) and B)
F) A) and C)

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The present value of an annuity is the value now of a series of future receipts or payments, discounted assuming compound interest.

A) True
B) False

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When a company holds stock of several different corporations, the group of securities is identified as a(n)


A) affiliated investment.
B) consolidated portfolio.
C) investment portfolio.
D) controlling interest.

E) None of the above
F) B) and C)

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


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

Correct Answer

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All of the following are necessary to compute the future value of a single amount except the


A) interest rate.
B) number of periods.
C) principal.
D) maturity value.

E) A) and D)
F) C) and D)

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Mazzeo Company acquires 80 Dodd's 10%, 5 year, $1,000 bonds on January 1, 2022 for $80,000.If Mazzeo sells all of its Dodd's Bonds for $78,900 what gain or loss is recognized?


A) Loss of $9,100
B) Loss of $1,100
C) Gain of $1,100
D) Gain of $9,100

E) A) and C)
F) B) and D)

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In accordance with the historical cost principle, the cost of debt investments includes brokerage fees and accrued interest.

A) True
B) False

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


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 balance sheet.
D) short-term assets must be readily marketable.

E) C) and D)
F) B) and D)

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Under the equity method, the Stock Investments account is increased when the


A) investee company reports net income.
B) investee company pays a dividend.
C) investee company reports a loss.
D) stock investment is sold at a gain.

E) A) and D)
F) None of the above

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An unrealized gain or loss on trading securities is reported as a separate component of stockholders' equity.

A) True
B) False

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On August 1, Basil Company buys 2,000 shares of Zingo common stock for $61,500 cash.On December 1, the stock investments are sold for $71,000 in cash.Which of the following are the correct journal entries of record for the purchase and sale of the common stock? On August 1, Basil Company buys 2,000 shares of Zingo common stock for $61,500 cash.On December 1, the stock investments are sold for $71,000 in cash.Which of the following are the correct journal entries of record for the purchase and sale of the common stock?

Correct Answer

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