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Exam 13: Investments and Fair Value Accounting

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Question 71

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Temporary investments such as in trading securities are

A) recorded at cost but reported at fair market value
B) recorded at cost and reported at cost
C) recorded at cost but reported at lower of cost or fair market value
D) recorded at fair market value and reported at fair market value

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

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Question 72

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Discuss the similarities and differences in reporting trading securities,available-for-sale securities and held-to-maturity securities.

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Both trading securities and available-fo...

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Question 73

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Investment in certificates of deposit and other securities that do not change in value are reported in the balance sheet as:

If the proceeds from the sale of bond investments exceeds the carrying amount of the bonds,a gain is realized.

Zach Company owns 45% 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 Company's entry would include a

When long-term investments in bonds are sold before their maturity date,the seller deducts any accrued interest since the last interest payment date from the selling price.

The income statement for Hudson Company reported net income of $345,000 for the year ended December 31,2012 before considering the following: During the year the company purchased trading securities.At year end,the fair value of the investment portfolio was $23,000 less than cost. The balance of retained earnings was $823,000 on December 31,2011.Hudson Company paid $43,000 in cash dividends in 2012.Calculate the balance of retained earnings on December 31,2012.