Question 1

All of the following are true of fair value accounting except

Accepted Answer

A)   GAAP requires trading and available-for-sale investments to be recorded at fair value
B)   fair value measurements have become more reliable
C)   the differences between original cost and fair value are reported in valuation allowance accounts
D)   fair values only affect balance sheet accountsE) A) and D)
F) B) and C)

Question 2

The account Unrealized Gain (Loss)  on Trading Investments should be included on 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 3

Ruben Company purchased $100,000 of Evans Company bonds at 100. Ruben later sold the bonds at $104,500 plus $500 in accrued interest. The journal entry to record the sale of the bonds would be

Accepted Answer

A)   debit Cash, $105,000; credit Investments-Evans Company Bonds, $104,500, and Interest Revenue, $500
B)   debit Cash, $105,000; credit Investments-Evans Company Bonds, $100,000, and Gain on Sale of Investments, $5,000
C)   debit Cash, $104,500, and Interest Receivable, $500; credit Investments-Evans Company Bonds, $100,000, Gain on Sale of Investments, $4,500, and Interest Revenue, $500
D)   debit Cash, $105,000; credit Investments-Evans Company Bonds, $100,000, Gain on Sale of Investments, $4,500, and Interest Revenue, $500E) None of the above
F) C) and D)

Question 4

On January 1, the valuation allowance for available-for-sale investments account had a zero balance. On December 31, the cost of the available-for-sale securities was $48,700, and the fair value was $39,200. Prepare the adjusting entry to record the unrealized gain or loss for available-for-sale investments on December 31.

Accepted Answer

The answer of On January 1, the valuation allowance for...

Question 5

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

Accepted Answer

A)   foreign currency items
B)   cash flows from stock investments
C)   unrealized gains and losses on available-for-sale securities
D)   pension liability adjustmentsE) A) and B)
F) A) and C)

Question 6

Trading securities are reported on the balance sheet at cost.

Accepted Answer

A) True 
 B)False

Question 7

When shares of stock held as an investment are sold, the difference between the proceeds and the carrying amount of the investment is recorded as a (n)

Accepted Answer

A)   prior period adjustment
B)   operating income and loss
C)   paid-in capital addition
D)   gain or lossE) All of the above
F) B) and C)

Question 8

Match each of the definitions that follow with the appropriate investment term (a-j) .
-The method of accounting for investments of 20% to 50% in another company's stock

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) B) and I)
L) A) and F)

Question 9

If the bonds are purchased between interest dates, the purchase price includes accrued interest since the last interest payment.

Accepted Answer

A) True 
 B)False

Question 10

Investments that do not normally change in value are disclosed on the balance sheet as cash and cash equivalents.

Accepted Answer

A) True 
 B)False

Question 11

Ordinarily, a corporation owning a significant portion of the voting stock of another corporation accounts for the investment using the equity method.

Accepted Answer

A) True 
 B)False

Exam 15: Investments and Fair Value Accounting

Correct Answer
verified

When shares of stock held as an investment are sold, the difference between the proceeds and the carrying amount of the investment is recorded as a (n)

Correct Answer
verified

Trading securities are reported on the balance sheet at cost.

Correct Answer
verified

Match each of the definitions that follow with the appropriate investment term (a-j) . -The method of accounting for investments of 20% to 50% in another company's stock

Correct Answer
verified

All of the following are true of fair value accounting except

Correct Answer
verified

Ruben Company purchased $100,000 of Evans Company bonds at 100. Ruben later sold the bonds at $104,500 plus $500 in accrued interest. The journal entry to record the sale of the bonds would be

Correct Answer
verified

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

Correct Answer
verified

Ordinarily, a corporation owning a significant portion of the voting stock of another corporation accounts for the investment using the equity method.

Correct Answer
verified

Investments that do not normally change in value are disclosed on the balance sheet as cash and cash equivalents.

Correct Answer
verified

If the bonds are purchased between interest dates, the purchase price includes accrued interest since the last interest payment.

Correct Answer
verified

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

Correct Answer
verified

Exam 15: Investments and Fair Value Accounting

Correct AnswerverifiedShow Answer

When shares of stock held as an investment are sold, the difference between the proceeds and the carrying amount of the investment is recorded as a (n)

Correct AnswerverifiedShow Answer

Trading securities are reported on the balance sheet at cost.

Correct AnswerverifiedShow Answer

Match each of the definitions that follow with the appropriate investment term (a-j) . -The method of accounting for investments of 20% to 50% in another company's stock

Correct AnswerverifiedShow Answer

All of the following are true of fair value accounting except

Correct AnswerverifiedShow Answer

Ruben Company purchased $100,000 of Evans Company bonds at 100. Ruben later sold the bonds at $104,500 plus $500 in accrued interest. The journal entry to record the sale of the bonds would be

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Ordinarily, a corporation owning a significant portion of the voting stock of another corporation accounts for the investment using the equity method.

Correct AnswerverifiedShow Answer

Investments that do not normally change in value are disclosed on the balance sheet as cash and cash equivalents.

Correct AnswerverifiedShow Answer

If the bonds are purchased between interest dates, the purchase price includes accrued interest since the last interest payment.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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