Question 1

The financial statements resulting from combining parent and subsidiary statements are called consolidated statements.

Accepted Answer

A) True 
 B)False

Question 2

All of the following are factors contributing to the trend for regulators to adopt accounting principles using fair value concepts except

Accepted Answer

A)   a greater percentage of total assets existing as receivables and securities
B)   pressure on regulators to adopt an international set of accounting principles and standards
C)   hybrid measurement methods within GAAP that conflict with each other
D)   the ease of applying market values to assets and liabilitiesE) A) and C)
F) None of the above

Question 3

Financial statements include assets listed at

Accepted Answer

A)   all of these
B)   their fair value
C)   their historical cost
D)   their market valueE) A) and D)
F) None of the above

Question 4

As with other assets, the cost of a bond investment includes all costs related to the purchase.

Accepted Answer

A) True 
 B)False  True

Question 5

The investor carrying an investment by the equity method records cash dividends received as an increase in the carrying amount of the investment.

Accepted Answer

A) True 
 B)False

Question 6

The account Unrealized Gain Loss)  on Trading Investments should be included in the

Accepted Answer

A)   income statement as other revenue expense) 
B)   balance sheet as an adjustment to the asset account
C)   balance sheet as an adjustment to stockholders' equity
D)   statement of retained earningsE) None of the above
F) All of the above

Question 7

The equity method is usually more appropriate for accounting for investments where the purchaser does not have significant influence over the investee.

Accepted Answer

A) True 
 B)False

Question 8

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 9

Financial statements in which financial data for two or more companies are combined as a single entity are called

Accepted Answer

A)   conventional statements
B)   consolidated statements
C)   audited statements
D)   constitutional statementsE) A) and B)
F) C) and D)

Question 10

Which of the following items 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) B) and D)

Question 11

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

Accepted Answer

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

Question 12

The cost and fair value of the trading securities held by Lindy Company as of December 31 are as follows:  a) Complete the table above to find the total cost and fair value for the company's trading securities portfolio.
b) Calculate and record the required December 31 adjustment.
c) Explain how the adjustment from step b) is reported on Lindy's financial statements.

Accepted Answer

c) The unrealized gain will ...

Question 13

Cash is used for all of the following activities except

Accepted Answer

A)   supporting current operating activities
B)   replacing worn-out machinery
C)   expanding current operations
D)   bribing government officialsE) B) and D)
F) C) and D) D

Question 14

Trading securities are

Accepted Answer

A)   reported at fair value on the balance sheet and as unrealized gains or losses on the income statement
B)   not reported on the balance sheet
C)   reported as unrealized gains or losses on the income statement
D)   reported at fair value in the balance sheetE) A) and B)
F) B) and D)

Question 15

The journal entry Pierce will record on June 30 will include a

Accepted Answer

A)   credit to Interest Revenue for $2,400
B)   debit to Cash for $3,600
C)   credit to Cash for $2,400
D)   credit to Interest Receivable for $1,200E) None of the above
F) B) and C)

Question 16

A disadvantage of fair value use is that the comparability between companies may be impacted by different fair value measurements.

Accepted Answer

A) True 
 B)False

Question 17

Match each of the definitions that follow with the appropriate investment term a-j) .
-preferred and common stock 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 C)
L) A) and E)

Question 18

On January 2, Todd Company acquired 40% of the outstanding stock of McGuire Company for $205,000. For the year ending, December 31 McGuire earned income of $48,000 and paid dividends of $14,000.
Prepare the entries for Todd Company for the purchase of the stock, share of McGuire income and dividends received from McGuire.

Accepted Answer

The answer of On January 2, Todd Company acquired 40%...

Question 19

Match each of the definitions that follow with the appropriate investment term a-j) .
-measurement of the rate of return to stockholders based on cash dividends

Accepted Answer

A)  equity method
B)  parent company
C)  subsidiary company
D)  consolidated financial statements
E)  fair valueF) unrealized gain or loss on investments.G) valuation allowance for investmentsH) dividend yieldI) amortized costJ) cost methodK) C) and D)
L) C) and H) H

Question 20

GAAP requires trading and available­for­sale investments to be recorded

Accepted Answer

A)   at their fair value
B)   at their historical cost
C)   at their market value
D)   at their net realizable valueE) All of the above
F) B) and D)

Exam 13: Investments and Fair Value Accounting

The financial statements resulting from combining parent and subsidiary statements are called consolidated statements.

Correct Answer
verified

All of the following are factors contributing to the trend for regulators to adopt accounting principles using fair value concepts except

Correct Answer
verified

Financial statements include assets listed at

Correct Answer
verified

As with other assets, the cost of a bond investment includes all costs related to the purchase.

Correct Answer
verified
True

The investor carrying an investment by the equity method records cash dividends received as an increase in the carrying amount of the investment.

Correct Answer
verified

The account Unrealized Gain Loss) on Trading Investments should be included in the

Correct Answer
verified

The equity method is usually more appropriate for accounting for investments where the purchaser does not have significant influence over the investee.

Correct Answer
verified

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

Correct Answer
verified

Financial statements in which financial data for two or more companies are combined as a single entity are called

Correct Answer
verified

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

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

Correct Answer
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Correct Answer
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c) The unrealized gain will ...
View Answer

Cash is used for all of the following activities except

Correct Answer
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D

Trading securities are

Correct Answer
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The journal entry Pierce will record on June 30 will include a

Correct Answer
verified

A disadvantage of fair value use is that the comparability between companies may be impacted by different fair value measurements.

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
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Match each of the definitions that follow with the appropriate investment term a-j) . -measurement of the rate of return to stockholders based on cash dividends

Correct Answer
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H

GAAP requires trading and availableforsale investments to be recorded

Correct Answer
verified

Exam 13: Investments and Fair Value Accounting

The financial statements resulting from combining parent and subsidiary statements are called consolidated statements.

Correct AnswerverifiedShow Answer

All of the following are factors contributing to the trend for regulators to adopt accounting principles using fair value concepts except

Correct AnswerverifiedShow Answer

Financial statements include assets listed at

Correct AnswerverifiedShow Answer

As with other assets, the cost of a bond investment includes all costs related to the purchase.

Correct AnswerverifiedTrue

The investor carrying an investment by the equity method records cash dividends received as an increase in the carrying amount of the investment.

Correct AnswerverifiedShow Answer

The account Unrealized Gain Loss) on Trading Investments should be included in the

Correct AnswerverifiedShow Answer

The equity method is usually more appropriate for accounting for investments where the purchaser does not have significant influence over the investee.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Financial statements in which financial data for two or more companies are combined as a single entity are called

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct Answerverified c) The unrealized gain will ...View AnswerShow Answer

Cash is used for all of the following activities except

Correct AnswerverifiedD

Trading securities are

Correct AnswerverifiedShow Answer

The journal entry Pierce will record on June 30 will include a

Correct AnswerverifiedShow Answer

A disadvantage of fair value use is that the comparability between companies may be impacted by different fair value measurements.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Match each of the definitions that follow with the appropriate investment term a-j) . -measurement of the rate of return to stockholders based on cash dividends

Correct AnswerverifiedH

GAAP requires trading and available­for­sale investments to be recorded

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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True

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c) The unrealized gain will ...
View Answer

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D

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Correct Answer
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Correct Answer
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H

GAAP requires trading and availableforsale investments to be recorded

Correct Answer
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