Question 1

The Unrealized Holding Gain/Loss-Trading Securities account is a temporary account that would be closed to
Retained Earnings during the closing process.

Accepted Answer

A) True 
 B)False

Question 2

On April 1, 2017 the Reba Company purchased 10%, $800,000 bonds of the Trading Up Company at par plus accrued interest. These bonds were classified as an investment in trading securities. The bonds pay interest on June 30 and December 31 each year. The entry by Reba on April 1, 2017, would include a

Accepted Answer

A)   debit to Investment in Trading Securities of $820,000.
B)   credit to Cash of $820,000.
C)   credit to Interest Income of $20,000.
D)   debit to Interest Expense of $20,000.E) C) and D)
F) All of the above

Question 3

On January 1, 2017 Chase sold land to Run Company, accepting a 3-year $200,000 non-interest-bearing note due
January 1, 2018. The fair value of the land is $146,238. The land was originally purchased for $136,500 on January 1,
2010. An appropriate rate of interest for a note of this caliber is 11%.
Required:
Prepare all the journal entries in Chase's books for the January 1,2017 through January 1,
2018, in regards to the Run note.

Accepted Answer

The answer of On January 1, 2017 Chase sold land...

Question 4

On October 1, 2017, the Sun Company acquired 9% bonds of Jack's Company with a face value of $400,000 for $412,000 plus accrued interest. Interest is payable on June 30 and December 31. How would Sun record the initial bond investment to be held-to-maturity?

Accepted Answer

The answer of On October 1, 2017, the Sun Company...

Question 5

The transfer of a security between investment categories is accounted for either at fair value at the time of the transfer or at cost, depending upon the type of transfer.

Accepted Answer

A) True 
 B)False

Question 6

A note receivable is considered impaired when

Accepted Answer

A)   the debtor misses an interest or principal payment.
B)   it is probable that the creditor will be unable to collect all amounts due.
C)   the market value of the note is less than its book value.
D)   the market value of interest exceeds the original contract interest rate.E) A) and B)
F) None of the above

Question 7

When an investor currently using the fair value method acquires significant influence over the investee at mid-year, the investor should

Accepted Answer

A)   restate its investment in the investee by debiting the investment account and crediting Retained Earnings for its previous percentage of investee earnings less dividends)  for the period from the original date of acquisition to the date significant influence was obtained.
B)   begin using the equity method from the date of acquiring significant influence and make no retroactive adjustments.
C)   restate its investment in the investee by debiting the investment account and crediting Investment Income for its percentage of investee earnings for the period from the last financial statement until the date significant influence was obtained.
D)   continue to use the fair value method until the end of the accounting period and then switch to the equity method in order to comply with the accounting conventions of consistency and conservatism.E) A) and B)
F) B) and C)

Question 8

On September 1, 2018, WV, Inc., bought $60,000 of MD Printer's 20-year, 6% bonds dated January 1, 2017, for
$56,920 plus accrued interest. The bonds pay interest annually and are classified as held-to-maturity. On September
1, 2028, WV sold one-fourth of these bonds for $15,000 plus accrued interest. No entries relating to the bonds had been made since December 31, 2027. Straight-line amortization was used.
Required:
Record the sale of these bonds.

Accepted Answer

$60,000 − $56,920 = ...

Question 9

Which of the following regarding trading securities is correct?

Accepted Answer

A)   Trading securities are reported at cost on the balance sheet date, and unrealized holding gains and losses are included in income of the current period.
B)   Trading securities are reported at fair value on the balance sheet date, and unrealized holding gains and losses are included in income of the current period.
C)   Trading securities are reported at fair value on the balance sheet date, but unrealized holding gains and losses are not included in income of the current period.
D)   Trading securities are reported at cost on the balance sheet date, but unrealized holding gains and losses are not included in income of the current period.E) B) and C)
F) A) and D)

Question 10

The journal entry to recognize the impairment of a note receivable includes a

Accepted Answer

A)   debit to Bad Debt Expense
B)   credit to Notes Receivable
C)   credit to Interest Expense
D)   debit to Interest IncomeE) B) and C)
F) A) and C)

Question 11

Under the equity method, a receipt of cash dividends by the investor would

Accepted Answer

A)   increase total assets and shareholders' equity.
B)   increase total assets and liabilities.
C)   decrease the investment account.
D)   increase the investment account.E) A) and B)
F) All of the above

Question 12

Realized gains and losses on investments in available-for-sale securities are reported

Accepted Answer

A)   as a current asset.
B)   on the income statement.
C)   on the balance sheet as part of shareholders' equity.
D)   as a contra asset.E) A) and B)
F) B) and D)

Question 13

On July 1, 2017, Jason Company purchased $60,000 of ten-year 6% bonds of Santo, Inc., for $51,850, to be held-to- maturity. Interest is payable semiannually on June 30 and December 31. The effective yield on the investment is 8%. What amount of interest income should Jason record for the six-month period ended December 31, 2017?

Accepted Answer

A)   $2,063.04
B)   $2,084.96
C)   $2,074.00
D)   $2,400.00E) B) and C)
F) A) and D)

Question 14

Investments that are typically held for short periods of time and sold by the company in the expectation of a profit on the short-term differences in price are classified as

Accepted Answer

A)   available-for-sale securities.
B)   trading securities.
C)   held-to-maturity securities.
D)   marketable securities.E) None of the above
F) A) and B)

Question 15

On January 1, 2017, Lightner bought 20,000 shares 5% ownership) of Winter Corp. common stock for $360,000. On
May 3, 2017, Winter declared and distributed a 50% stock dividend. On September 1, 2017, Lightner sold 2,000 shares of its investment in Winter stock for $21,400.
Required:
Compute the amount of gain loss) on the sale of this stock.

Accepted Answer

20,000 + 0.5 × 20,000) = 30,00...

Question 16

All of the following statements regarding held-to-maturity debt securities are true except

Accepted Answer

A)   premiums and discounts must be amortized over the remaining life of the bonds.
B)   the debt securities should be valued at market value.
C)   the realized gain or loss is the difference between their amortized cost and the proceeds from their sale.
D)   interest income may be debited at the time of acquisition.E) B) and C)
F) A) and B)

Question 17

A realized gain or loss on the sale of an available-for-sale debt security is determined by comparing

Accepted Answer

A)   the amortized cost of the security with the proceeds from the sale.
B)   the original cost of the security with the proceeds from the sale.
C)   the market value at the latest balance sheet date with the proceeds from the sale.
D)   the original cost with the security's carrying value.E) A) and C)
F) C) and D)

Question 18

Which of the following is not a derivative?

Accepted Answer

A)   equity contract
B)   futures contract
C)   option contract
D)   swap contractE) A) and B)
F) C) and D)

Question 19

Jupiter Bank decides to invest in trading securities in order to take advantage of short term gains. The bank purchased the following securities for the year 2017.
Jan. 15, 2017 Purchased 1,000 shares of Corbin Company common stock for $89 per share
May 23, 2017 Purchased 1500 shares of Petro Company common stock for $75 per share
At the end of 2017 Corbin Company's common stock was trading on the market at $93 per share, and Petro's common stock had a market price of $70 per share.
Required:
1.) Prepare journal entries to record the preceding information.
2.) What is the unrealized holding gain or loss and where is it reported on the 2017 financial statements?

Accepted Answer

The answer of Jupiter Bank decides to invest in trading...

Question 20

Stuart Corp. purchased 100 shares of Dumb Co. stock for $8 per share and 200 shares of Silly Inc. stock for $12 per share. The Dumb Co. stock and the Silly, Inc. stock is classified as trading. As of December 31, the Dumb Co. stock is selling for $9 per share and the Silly Inc. stock is selling for $13 per share. Stuart had net income of $10,000
before reporting the impact of investment transactions.
Required:
a. Record the December 31 adjusting entries for investments.
b. What is Stuart Corp.'s net income after adjusting for investments?
c. What is the appropriate balance sheet presentation for these investments?

Accepted Answer

a. Investment in Trading Securities

30...

Exam 13: Investments and Long-Term Receivables

Correct Answer
verified
a. Investment in Trading Securities 30...
View Answer

Correct Answer
verified

The transfer of a security between investment categories is accounted for either at fair value at the time of the transfer or at cost, depending upon the type of transfer.

Correct Answer
verified

The Unrealized Holding Gain/Loss-Trading Securities account is a temporary account that would be closed to Retained Earnings during the closing process.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
20,000 + 0.5 × 20,000) = 30,00...
View Answer

A realized gain or loss on the sale of an available-for-sale debt security is determined by comparing

Correct Answer
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Which of the following regarding trading securities is correct?

Correct Answer
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All of the following statements regarding held-to-maturity debt securities are true except

Correct Answer
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Which of the following is not a derivative?

Correct Answer
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On October 1, 2017, the Sun Company acquired 9% bonds of Jack's Company with a face value of $400,000 for $412,000 plus accrued interest. Interest is payable on June 30 and December 31. How would Sun record the initial bond investment to be held-to-maturity?

Correct Answer
verified

Investments that are typically held for short periods of time and sold by the company in the expectation of a profit on the short-term differences in price are classified as

Correct Answer
verified

Under the equity method, a receipt of cash dividends by the investor would

Correct Answer
verified

Correct Answer
verified
$60,000 − $56,920 = ...
View Answer

On April 1, 2017 the Reba Company purchased 10%, $800,000 bonds of the Trading Up Company at par plus accrued interest. These bonds were classified as an investment in trading securities. The bonds pay interest on June 30 and December 31 each year. The entry by Reba on April 1, 2017, would include a

Correct Answer
verified

Realized gains and losses on investments in available-for-sale securities are reported

Correct Answer
verified

A note receivable is considered impaired when

Correct Answer
verified

Correct Answer
verified

The journal entry to recognize the impairment of a note receivable includes a

Correct Answer
verified

When an investor currently using the fair value method acquires significant influence over the investee at mid-year, the investor should

Correct Answer
verified

Exam 13: Investments and Long-Term Receivables

Correct Answerverifieda. Investment in Trading Securities 30...View AnswerShow Answer

Correct AnswerverifiedShow Answer

The transfer of a security between investment categories is accounted for either at fair value at the time of the transfer or at cost, depending upon the type of transfer.

Correct AnswerverifiedShow Answer

The Unrealized Holding Gain/Loss-Trading Securities account is a temporary account that would be closed to Retained Earnings during the closing process.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct Answerverified20,000 + 0.5 × 20,000) = 30,00...View AnswerShow Answer

A realized gain or loss on the sale of an available-for-sale debt security is determined by comparing

Correct AnswerverifiedShow Answer

Which of the following regarding trading securities is correct?

Correct AnswerverifiedShow Answer

All of the following statements regarding held-to-maturity debt securities are true except

Correct AnswerverifiedShow Answer

Which of the following is not a derivative?

Correct AnswerverifiedShow Answer

On October 1, 2017, the Sun Company acquired 9% bonds of Jack's Company with a face value of $400,000 for $412,000 plus accrued interest. Interest is payable on June 30 and December 31. How would Sun record the initial bond investment to be held-to-maturity?

Correct AnswerverifiedShow Answer

Investments that are typically held for short periods of time and sold by the company in the expectation of a profit on the short-term differences in price are classified as

Correct AnswerverifiedShow Answer

Under the equity method, a receipt of cash dividends by the investor would

Correct AnswerverifiedShow Answer

Correct Answerverified$60,000 − $56,920 = ...View AnswerShow Answer

Correct AnswerverifiedShow Answer

Realized gains and losses on investments in available-for-sale securities are reported

Correct AnswerverifiedShow Answer

A note receivable is considered impaired when

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The journal entry to recognize the impairment of a note receivable includes a

Correct AnswerverifiedShow Answer

When an investor currently using the fair value method acquires significant influence over the investee at mid-year, the investor should

Correct AnswerverifiedShow Answer

Correct Answer
verified
a. Investment in Trading Securities 30...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
20,000 + 0.5 × 20,000) = 30,00...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
$60,000 − $56,920 = ...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified