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ACC 557 (Strayer) WK 9 Chapter 12 Quiz

TRUE-FALSE STATEMENTS

1. Corporations purchase investments in debt or stock securities primarily for among 2 factors.

2. A reason some companies purchase investments is bereason they geneprice a significant portion of their earnings from investment earnings.

3. The audit for temporary debt investments and also for permanent debt investments is comparable.

4. When debt investments, are sold, the gain or loss is the difference between the net proceeds from the sale and the fair worth of the bonds.

5. Debt investments are investments in federal government and corporation bonds.

6. In accordance through the cost principle, brokerage fees need to be included to the price of an investment.

7. In accordance through the cost principle, the expense of debt investments contains brokerage fees and accrued interest.

8. In audit for stock investments of less than 20%, the equity technique is supplied.

9. Dividends received on stock investments of less than 20% have to be credited to the Stock Investments account.

10. If an investor owns between 20% and 50% of an investee"s prevalent stock, it is presumed that the investor has actually considerable influence on the investee.

11. The Stock Investments account is debited at acquisition under both the equity method and expense technique of accountancy for investments in widespread stock.


12. Under the equity strategy, the investment in prevalent stock is initially tape-recorded at cost, and the Stock Investments account is changed yearly.

13. Under the equity technique, the receipt of dividends from the investee company outcomes in a boost in the Stock Investments account.

14. Consolidated financial statements are correct when an investor controls an investee by ownership of more than 50% of the investee"s widespread stock.

15. Consolidated financial statements are ready in place of the financial statements for the parent and subsidiary carriers.

16. Consolidated financial statements have to be ready just as soon as a subsidiary agency has a controlling interemainder in the parent company.

17. The valuation of non-trading securities is comparable to the procedures adhered to for trading securities, other than that transforms in fair worth are not recognized in present earnings.

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

19. For non-trading securities, the unrealized gain or loss account is carried forward to future durations.

20. A decrease in the fair value of a trading protection is taped by debiting an unrealized loss account and also crediting the Fair worth Adjustment account.

21. If the fair value of a non-trading defense exceeds its expense, the protection have to be created up to fair worth and also a realized acquire must be well-known.

22. The Fair Value Adjustment account have the right to only have a credit balance or a zero balance.

23. To be classified as a momentary investment, the investment must be readily marketable and intfinished to be converted right into cash within the following year or operating cycle.


24. An investment is easily marketable if it is management"s intent to offer the investment.

25. Stocks traded on the New York Stock Exreadjust are taken into consideration conveniently marketable.

26. When a parent agency acquires a wholly owned subsidiary for an amount in excess of the book worth of the net assets gained, the excess is always allocated to good will.

27. A consolidated earnings statement will reflect only revenue and also expense transactions in between the consolidated entity and parties external the affiliated team.

28. The procedure of excluding intercompany transactions in preparing consolidated statements is referred to as intercompany eliminations.

29. One of the factors a corporation may purchase investments is that it has excess cash.

30. When recording bond interest, Interest Receivable is reported as a irreversible asset in the balance sheet.

31. Under the price technique, the investment is tape-recorded at price and revenue is well-known just when cash dividends are received.

32. Consolidated financial statements current a condensed version of the financial statements so investors will certainly not experience indevelopment overfill.

33. Non-trading securities are securities bought and also held generally for sale in the close to term to generate earnings on short-term price differences.

34. "Intent to convert" does not include an investment provided as a resource that will certainly be supplied whenever before the require for cash arises.

MULTIPLE CHOICE QUESTIONS

35. Corporations invest excess cash for brief durations of time in each of the adhering to except

a. equity securities.

b. very liquid securities.

c. low-hazard securities.

d. government securities.

36. Corporations invest in other suppliers for all of the complying with reasons except to

a. home excess cash until essential.

b. generate income.

c. satisfy strategic purposes.

d. rise trading of the various other companies’ stock.

37. A typical investment to residence excess cash until required is

a. stocks of companies in a connected industry.

b. debt securities.

c. low-risk, extremely liquid securities.

d. stock securities.

38. A company may purchase a nonregulating interemainder in one more firm in a connected industry

a. to residence excess cash until necessary.

b. to geneprice income.

c. for strategic reasons.

d. for speculative reasons.

39. Pension funds and also mutual funds on a regular basis invest in debt and also stock securities mostly to

a. generate revenue.

b. house excess cash till required.

c. accomplish strategic goals.

d. control the agency in which they invest.

40. At the time of acquisition of a debt investment,

a. no journal entry is forced.

b. the price principle applies.

c. the Stock Investments account is debited when bonds are purchased.

d. the Investment account is attributed for its price plus brokerage fees.

41. Which of the complying with is not a true statement about temporary debt investments?

a. The securities typically pay interest.

b. Investments are frequently federal government or corporate bonds.

c. This type of investment have to be currently traded in the securities industry.

d. Debt investments are recorded at the price paid much less brokerage fees.

42. On January 1, 2013, Danner Company purchased at challenge value, a $1,000, 8% bond that pays interest on January 1 and also July 1. Danner Company type of has a calendar year finish.

The entry for the receipt of interemainder on July 1, 2013, is

a. Cash....................................................................................... 40

Interemainder Revenue.......................................................... 40

b. Cash....................................................................................... 80

Interemainder Revenue.......................................................... 80

c. Interest Receivable................................................................ 40

Interemainder Revenue.......................................................... 40

d. Interemainder Receivable................................................................ 80

Interest Revenue.......................................................... 80

43. On January 1, 2013, Danner Company type of purchased at confront value, a $1,000, 10% bond that pays interest on January 1 and July 1. Danner Company has actually a calendar year finish.

The adjusting enattempt on December 31, 2013, is

a. not required.

b. Cash....................................................................................... 50

Interemainder Revenue.......................................................... 50

c. Interemainder Receivable................................................................ 50

Interemainder Revenue.......................................................... 50

d. Interest Receivable................................................................ 50

Debt Investments.......................................................... 50

44. On January 1, 2013, Milton Company type of purchased at confront value, a $1,000, 4% bond that pays interemainder on January 1 and July 1. Milton Company kind of has a calendar year finish.

The enattempt for the receipt of interemainder on January 1, 2014 is

a. Cash....................................................................................... 40

Interemainder Revenue.......................................................... 40

b. Cash....................................................................................... 40

Interemainder Receivable....................................................... 40

c. Cash....................................................................................... 20

Interest Revenue.......................................................... 20

d. Cash....................................................................................... 20

Interemainder Receivable....................................................... 20

45. On January 1, Talent Company kind of purchased as a short-lived investment a $1,000, 8% bond for $1,050. The bond pays interest on January 1 and also July 1. The bond is offered on October 1 for $1,200 plus accrued interest. Interemainder has actually not been accrued since the last interemainder payment day. What is the entry to record the cash proceeds at the moment the bond is sold?

a. Cash....................................................................................... 1,200

Debt Investments ......................................................... 1,200

b. Cash....................................................................................... 1,220

Debt Investments.......................................................... 1,050

Gain onSaleof Debt Investments............................... 150

Interest Revenue.......................................................... 20

c. Cash....................................................................................... 1,220

Debt Investments.......................................................... 1,200

Interemainder Revenue.......................................................... 20

d. Cash....................................................................................... 1,200

Debt Investments.......................................................... 1,050

Gain onSaleof Debt Investments............................... 150

46. Which of the adhering to is not a true statement about the bookkeeping for debt investments?

a. At acquisition, the price principle uses.

b. The price consists of any type of brokerage fees.

c. Debt investments encompass investments in government and also corporation bonds.

d. The price contains any type of accrued interemainder.

47. The expense of debt investments contains each of the following except

a. brokerage fees.

b. comobjectives.

c. accrued interemainder.

d. the price phelp.

48. If a short-term debt investment is marketed, the Investment account is

a. attributed for the face value of the bonds at the sale day.

b. attributed for the cost of the bonds at the sale date.

c. attributed for the fair value of the bonds at the sale day.

d. debited for the expense of the bonds at the sale date.

49. In audit for debt investments, entries are made to recordeach of the complying with other than the

a. acquisition.

b. interemainder revenue.

c. amortization of any discount or premium.

d. sale.

50. Key Company acquires 60, 10%, 5 year, $1,000 Community bonds on January 1, 2013 for $61,250. This contains a brokerage commission of $1,250.

The journal entry to document this investment contains a debit to

a. Debt Investments for $60,000.

b. Debt Investments for $61,250.

c. Cash for $61,250.

d. Stock Investments for $60,000.

See more: What Does Santo Domingo Mean In English, Santo Domingo Definition And Meaning

51. Key Company type of acquires 60, 10%, 5 year, $1,000 Community bonds on January 1, 2013 for $61,250. This consists of a brokerage commission of $1,250.

Assume Community pays interemainder on January 1 and July 1, and also the July 1 entry was made effectively. The journal entry at December 31, 2013 would incorporate a crmodify to