Filters
Question type

Study Flashcards

For trading debt investments, provide the following: • Reporting method used • How unrealized holding gain or loss is reported • Balance sheet effects • Income statement effects  Trading Debt Investments:  Reporting method used  How unrealized holding  gain or loss is reported  Balance sheet effects  Income statement effects \begin{array} { | l | l | } \hline \text { Trading Debt Investments: } &\quad\quad\quad\quad\quad\quad \\\hline \text { Reporting method used } & \\\hline \text { How unrealized holding } & \\\text { gain or loss is reported } & \\\hline \text { Balance sheet effects } & \\\hline \text { Income statement effects } & \\\hline\end{array}

Correct Answer

verifed

verified

Held-to-maturity debt investments are categorized as long-term assets on the balance sheet, regardless of the maturity date.

A) True
B) False

Correct Answer

verifed

verified

Companies invest in trading investments with the intent of ________.


A) increasing the amount of long-term assets
B) gaining the controlling rights of the investee
C) holding the investment until maturity
D) generating a profit on a quick sale

E) C) and D)
F) B) and C)

Correct Answer

verifed

verified

________ investments are categorized as either current assets or long-term assets on the balance sheet, depending on the maturity date.


A) Held-to-maturity debt
B) Serial bond debt
C) Trading debt
D) Available-for-sale debt

E) All of the above
F) A) and D)

Correct Answer

verifed

verified

Dividends received for equity securities in which the investor lacks the ability to participate in the decisions of the investee company are recorded with a debit to the Dividend Revenue account.

A) True
B) False

Correct Answer

verifed

verified

If a held-to-maturity debt security is purchased at a discount, the discount must be amortized when the interest revenue is earned.

A) True
B) False

Correct Answer

verifed

verified

The rate of return on total assets is a ratio that measures a company's success in using its assets to earn income.

A) True
B) False

Correct Answer

verifed

verified

Which of the following is an example of debt securities?


A) preferred stocks
B) real estate
C) common stocks
D) corporate bonds

E) A) and D)
F) All of the above

Correct Answer

verifed

verified

A debt security ________.


A) represents a credit relationship with another company or governmental entity, and typically pays interest for a fixed period
B) represents stock ownership in another company and sometimes pays dividends
C) is a standardized contract between two parties to buy or sell an underlying security at a predetermined price on a specific date
D) is a cash market transaction in which the ownership of the underlying asset is deferred until a specific date

E) None of the above
F) A) and B)

Correct Answer

verifed

verified

Short-term investments are investments in debt and equity securities that the investor intends to hold for longer than one year.

A) True
B) False

Correct Answer

verifed

verified

Depending on the maturity date, held-to-maturity debt investments are categorized as current assets or long-term assets on the balance sheet.

A) True
B) False

Correct Answer

verifed

verified

Regarding accounting entries for debt securities, which of the following is true?


A) The receipt of interest revenue is recorded with a debit to Interest Revenue and a credit to Cash.
B) Investments in debt securities are recorded at cost, including any brokerage fees paid.
C) The receipt of interest revenue is recorded with a debit to Cash and a credit to Held-to-Maturity Debt Investments.
D) Debt securities disposed of at maturity are recorded with a debit to the Short-term or Long-term Investments account and a credit to Cash.

E) A) and C)
F) All of the above

Correct Answer

verifed

verified

A(n) ________ is represented by a certificate and is commonly traded on an exchange.


A) inventory
B) investee
C) interest
D) security

E) B) and C)
F) None of the above

Correct Answer

verifed

verified

Trading debt investments are categorized as current assets.

A) True
B) False

Correct Answer

verifed

verified

Provide definitions for the following types of investments. A) Held-to-maturity debt investment B) Significant influence equity investment C) Trading debt investment

Correct Answer

verifed

verified

a. Held-to-maturity debt investment — A ...

View Answer

Realized gains or losses on available-for-sale debt investments represent the difference between the ________.


A) historical cost and the average market value of the investment
B) fair value and the current market value of the investment
C) cash received at time of disposition and the fair value of the investment
D) cash received at time of disposition and the cost of the investment

E) C) and D)
F) B) and C)

Correct Answer

verifed

verified

Which statement regarding investments in equity securities is incorrect?


A) Significant influence equity investments are always reported as long-term assets on the balance sheet.
B) Significant influence equity investments are consolidated into the investor's financial statements.
C) Investments in equity securities are classified into three specific types based on the investor's level of influence over the investee company.
D) Generally, no significant influence exists if there is an ownership interest of less than 20% of the investee's voting stock.

E) A) and B)
F) All of the above

Correct Answer

verifed

verified

The fair value of a trading debt security is the price that would be used if the company were to sell the investment on the market.

A) True
B) False

Correct Answer

verifed

verified

Purple Corporation pays $536,000 to acquire 40% of the equity securities of Blue, Inc. on May 5, 2019. In the journal entry to record this transaction ________.


A) Equity Investments-Blue Inc. will be credited for $536,000
B) Equity Investments-Blue Inc. will be debited for $536,000
C) Common Stock Holdings-Blue Inc. will be debited for $536,000
D) Revenue from Investments will be credited for $536,000

E) C) and D)
F) A) and D)

Correct Answer

verifed

verified

When a company acquires a long-term bond investment, by paying cash, total assets remain unchanged.

A) True
B) False

Correct Answer

verifed

verified

Showing 41 - 60 of 192

Related Exams

Show Answer