Question 1

An investing company that owns more than ________ of another (investee) company's voting stock is presumed to have controlling influence over the investee.

Accepted Answer

The answer of An investing company that owns more than...

Question 2

Bharrat Corporation purchased 40% of Ferris Corporation for $100,000 on January 1. On October 17 of the same year, Ferris Corporation declared total cash dividends of $12,000. At year-end, Ferris Corporation reported net income of $60,000. The balance in the Bharrat Corporation's Long-Term Investment-Ferris account at December 31 should be:

Accepted Answer

A)   $124,000.
B)   $80,800.
C)   $95,200.
D)   $119,200.
E)   $100,000.F) A) and C)
G) B) and C)

Question 3

Available-for-sale securities are actively managed like trading securities because the company intends to trade them for profit in the short term.

Accepted Answer

A) True 
 B)False

Question 4

Marjam Company owns 51,000 shares of MacKenzie Company's 100,000 outstanding shares of common stock. MacKenzie Company pays $25,000 in total cash dividends to its shareholders. Marjam's entry to record this transaction should include a:

Accepted Answer

A)   Credit to Dividend Revenue for $25,000.
B)   Credit to Long-Term investments for $12,750.
C)   Credit to Long-Term Investments for $25,000.
D)   Debit to Dividend Revenue for $12,750.
E)   Debit to Interest Revenue for $12,750.F) B) and E)
G) B) and C)

Question 5

On May 1 of the current year, a company paid $200,000 cash to purchase 6%, 10-year bonds with a par value of $200,000; interest is paid semiannually each May 1 and November 1. The company intends to hold these bonds until they mature. Prepare the journal entry to record the bond purchase.

Accepted Answer

\[\begin{array} { | c | c | c ...

Question 6

All of the following statements regarding equity securities are true except:

Accepted Answer

A)   Equity securities should be recorded at cost when acquired.
B)   Equity securities are valued at fair value if classified as significant influence securities.
C)   Equity securities are valued at fair value if classified as trading securities.
D)   Equity securities classified as available-for-sale record the dividend revenue when received.
E)   Equity securities are valued at fair value if classified as available-for-sale securities.F) All of the above
G) C) and D)

Question 7

On January 3, Kostansas Corporation purchased 5,000 shares of Morton, Inc. for $40 per share plus
$700 in broker commissions. These shares represent a 40% ownership in Morton, Inc. Prepare the journal entry Kostansas Corporation should record when Morton reports net income of $52,000 for the year on December 31.

Accepted Answer

Dec. <img  loading="lazy" src="/assets/images/blured-textbook.svg" class="d-inline m-1" alt="blured image" width="139" height="30"> Long-Term Investments 20...

Question 8

Consolidated financial statements:

Accepted Answer

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

Question 9

All of the following are true for Available-for-sale equity securities except:

Accepted Answer

A)   Are reported at market value on the balance sheet.
B)   Are actively managed like Trading Securities.
C)   May be classified as either short-term or long-term securities.
D)   May earn dividends that are reported in that year's income statement.
E)   Are recorded at cost when acquired.F) C) and E)
G) A) and B)

Question 10

When using the equity method, receipt of cash dividends increases the carrying (book) value of an investment in equity securities.

Accepted Answer

A) True 
 B)False

Question 11

A company reported net income for Year 1 of $98,000 and $106,000 for Year 2. It also reported net sales of $835,000 in Year 1 and $918,000 in Year 2. The company's average total assets in Year 1 were $1,850,000 and $1,720,000 in Year 2. Calculate the company's profit margin, total asset turnover and return on total assets for Year 1 and Year 2. Comment on the results.

Accepted Answer

The company did not increase its profit ...

Question 12

Investments in equity securities where the investor has a controlling influence are accounted for using the ________.

Accepted Answer

equity met...

Question 13

At acquisition, debt securities are:

Accepted Answer

A)   Recorded at cost.
B)   Recorded at the amount of interest that will be received over the life of the security.
C)   Not recorded, because no interest is due yet.
D)   Recorded at cost plus the amount of dividend income to be received.
E)   Recorded at their cost, plus total interest that will be received over the life of the security.F) A) and B)
G) A) and C)

Question 14

A controlling investor is called the parent, and the investee company is called the subsidiary.

Accepted Answer

A) True 
 B)False

Question 15

Explain how to record the sale of trading securities.

Accepted Answer

When trading securities are sold, the di...

Question 16

A company had net income of $45,000, net sales of $390,000, and average total assets of $450,000 for the current year. Calculate the company's profit margin, total asset turnover, and return on total assets.

Accepted Answer

\[\begin{array} { l | l | l }
& & \
\ ...

Question 17

Financial statements that show the financial position, results of operations, and cash flows of all entities under the parent company's control, including all subsidiaries are known as:

Accepted Answer

A)   Consolidated financial statements
B)   Statement of owner's equity
C)   Equity financial statements
D)   Investor financial statements
E)   Combined financial statementsF) C) and D)
G) A) and B)

Question 18

Return on total assets can be separated into the profit margin ratio and total asset turnover.

Accepted Answer

A) True 
 B)False

Question 19

Long-term investments are usually held as an investment of cash for use in current operations.

Accepted Answer

A) True 
 B)False

Question 20

All of the following statements regarding accounting for trading securities under U.S. GAAP are true except:

Accepted Answer

A)   Unrealized gains and losses are recorded in a temporary account that is closed to Income Summary at the end of the period.
B)   The entire portfolio of trading securities is reported at is fair value.
C)   An unrealized gain or loss is recorded with an adjusting entry when the securities are sold.
D)   An unrealized gain or loss from a change in fair value is reported on the income statement.
E)   An unrealized gain or loss is recorded with an adjusting entry at the end of each period.F) C) and D)
G) All of the above

Exam 15: Investments

Financial statements that show the financial position, results of operations, and cash flows of all entities under the parent company's control, including all subsidiaries are known as:

Correct Answer
verified

Long-term investments are usually held as an investment of cash for use in current operations.

Correct Answer
verified

At acquisition, debt securities are:

Correct Answer
verified

On May 1 of the current year, a company paid $200,000 cash to purchase 6%, 10-year bonds with a par value of $200,000; interest is paid semiannually each May 1 and November 1. The company intends to hold these bonds until they mature. Prepare the journal entry to record the bond purchase.

Correct Answer
verified
\[\begin{array} { | c | c | c ...
View Answer

Correct Answer
verified
The company did not increase its profit ...
View Answer

Return on total assets can be separated into the profit margin ratio and total asset turnover.

Correct Answer
verified

Correct Answer
verified

When using the equity method, receipt of cash dividends increases the carrying (book) value of an investment in equity securities.

Correct Answer
verified

Available-for-sale securities are actively managed like trading securities because the company intends to trade them for profit in the short term.

Correct Answer
verified

Explain how to record the sale of trading securities.

Correct Answer
verified
When trading securities are sold, the di...
View Answer

An investing company that owns more than ________ of another (investee) company's voting stock is presumed to have controlling influence over the investee.

Correct Answer
verified

All of the following statements regarding equity securities are true except:

Correct Answer
verified

All of the following statements regarding accounting for trading securities under U.S. GAAP are true except:

Correct Answer
verified

Correct Answer
verified
Dec. Long-Term Investments 20...
View Answer

Marjam Company owns 51,000 shares of MacKenzie Company's 100,000 outstanding shares of common stock. MacKenzie Company pays $25,000 in total cash dividends to its shareholders. Marjam's entry to record this transaction should include a:

Correct Answer
verified

A controlling investor is called the parent, and the investee company is called the subsidiary.

Correct Answer
verified

A company had net income of $45,000, net sales of $390,000, and average total assets of $450,000 for the current year. Calculate the company's profit margin, total asset turnover, and return on total assets.

Correct Answer
verified
\[\begin{array} { l | l | l }
& & \\
\ ...
View Answer

Consolidated financial statements:

Correct Answer
verified

All of the following are true for Available-for-sale equity securities except:

Correct Answer
verified

Investments in equity securities where the investor has a controlling influence are accounted for using the ________.

Correct Answer
verified
equity met...
View Answer

Exam 15: Investments

Financial statements that show the financial position, results of operations, and cash flows of all entities under the parent company's control, including all subsidiaries are known as:

Correct AnswerverifiedShow Answer

Long-term investments are usually held as an investment of cash for use in current operations.

Correct AnswerverifiedShow Answer

At acquisition, debt securities are:

Correct AnswerverifiedShow Answer

On May 1 of the current year, a company paid $200,000 cash to purchase 6%, 10-year bonds with a par value of $200,000; interest is paid semiannually each May 1 and November 1. The company intends to hold these bonds until they mature. Prepare the journal entry to record the bond purchase.

Correct Answerverified\[\begin{array} { | c | c | c ...View AnswerShow Answer

Correct AnswerverifiedThe company did not increase its profit ...View AnswerShow Answer

Return on total assets can be separated into the profit margin ratio and total asset turnover.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

When using the equity method, receipt of cash dividends increases the carrying (book) value of an investment in equity securities.

Correct AnswerverifiedShow Answer

Available-for-sale securities are actively managed like trading securities because the company intends to trade them for profit in the short term.

Correct AnswerverifiedShow Answer

Explain how to record the sale of trading securities.

Correct AnswerverifiedWhen trading securities are sold, the di...View AnswerShow Answer

An investing company that owns more than ________ of another (investee) company's voting stock is presumed to have controlling influence over the investee.

Correct AnswerverifiedShow Answer

All of the following statements regarding equity securities are true except:

Correct AnswerverifiedShow Answer

All of the following statements regarding accounting for trading securities under U.S. GAAP are true except:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedDec. Long-Term Investments 20...View AnswerShow Answer

Marjam Company owns 51,000 shares of MacKenzie Company's 100,000 outstanding shares of common stock. MacKenzie Company pays $25,000 in total cash dividends to its shareholders. Marjam's entry to record this transaction should include a:

Correct AnswerverifiedShow Answer

A controlling investor is called the parent, and the investee company is called the subsidiary.

Correct AnswerverifiedShow Answer

A company had net income of $45,000, net sales of $390,000, and average total assets of $450,000 for the current year. Calculate the company's profit margin, total asset turnover, and return on total assets.

Correct Answerverified \[\begin{array} { l | l | l } & & \\\ ...View AnswerShow Answer

Consolidated financial statements:

Correct AnswerverifiedShow Answer

All of the following are true for Available-for-sale equity securities except:

Correct AnswerverifiedShow Answer

Investments in equity securities where the investor has a controlling influence are accounted for using the ________.

Correct Answerverifiedequity met...View AnswerShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
\[\begin{array} { | c | c | c ...
View Answer

Correct Answer
verified
The company did not increase its profit ...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
When trading securities are sold, the di...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Dec. Long-Term Investments 20...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
\[\begin{array} { l | l | l }
& & \\
\ ...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
equity met...
View Answer