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TRUE OR FALSE 1. To record the amortization of...




TRUE OR FALSE 1. To record the amortization of a premium on a bond investment, Investment in Bonds would be debited and interest revenue would be credited? 2. Any gains or losses on the sale of long term investments would normally would be reported in the other income or other loss section of the income statement. 3. The fair market value of bond investment should be disclosed, either on the face of the financial statements or in an accompanying note. 4. Comprehensive income in all changes in stockholders' equity during the period except those resulting from dividends and stockholders' investments. 5. Other comprehensive income transactions should be reported net of taxes. 6. Comprehensive income does not affect net income or retained earnings. 7. Although marketable securities may be retained for several years, they continue to be classified as temporary, provided they are readily marketable and cant be sold for cash at any time. 8. Temporary investments are reported in the balance sheet at cost. 9. Unrealized gains and losses are reported as other comprehensive income items until the related securities are sold, the the gains and losses become realized and are included in determining net income. 10. Ordinarily, a corporation owning a significant portion of the voting stock of another corporation accounts for the investment using the equity method. 11. Under the equity method, a stock purchase is recorded at its original cost, but is not subsequently adjusted to fair market value. 12. The equity method causes the investment account to mirror the proportional changes in book value of the investee. 13.It is NOT possible for one company to influence the operating policies of another company unless it owns more than 50% interest in that company. Multiple Choice: 1. Long-term investments are held for all of the listed reasons below EXCEPT A. their income B. long-term potential gain C. Influence over another business entity D. meet current cash needs 2. Temporary investments 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. 3. Blanton Corporation purchased 17% of the outstanding chases of common stock of Worton Corporation as a long term investment. Subsequently, Worton Corporation reported net income and declared and paid cash dividends. What journal entry would Blanton Corporation use to record dividends from Worton Corporation? A. debited Investment in Worton Corporation; credit cash B. debit Cash; credit Dividend Revenue C. debit Investment in Worton Corporation; credit Income of Worton Corporation D. debit Cash; credit Investment in Worton Corporation 4. An investor purchased 500 shares of common stock $ 25 par, for $21,750. Subsequently, 100 shares were sold for $47.50 per share. What is the amount of gain or loss on the sale. A. $4,350 gain B. $400 gain C. $400 loss D. 16,800 loss 5. On May 1, 2010 , Stanton Company purchased $50,000 of Harris Company's 12% bonds at 100 plus accrued interest of $2,000. On June 30, 2010. Stanton received its first semi-annular interest. On February 1, 2011, Stanton sold $40,000 of the bonds at 103 plus accrued interest. The journal entry Stanton will record on June 30, 2010 will include: A. a credit interest revenue for $2,000 B. a debit to cash for $3,000 C. a debit to cash for $2,000 D. a credit to interest receivable for $1,000


Paper#3109 | Written in 18-Jul-2015

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