Question 1

The Gain on Disposal of Trading Securities is reported in the:

Accepted Answer

A)  other revenues and expenses section of the income statement.
B)  owners' capital section of the income statement.
C)  current assets section of the balance sheet.
D)  fixed assets section of the balance sheet.

Question 2

Long-term investments are also known as marketable securities.

Accepted Answer

A) True 
 B)False

Question 3

If the Fair Value Adjustment account for trading investments has a debit balance:

Accepted Answer

A)  it is subtracted from the Fixed Asset account to determine carrying value.
B)  it is subtracted from the Short-term Investment--Trading account to determine carrying value.
C)  it is added to the Short-term Investment--Trading account to determine carrying value.
D)  it is added to the Fixed Asset account to determine carrying value.

Question 4

U.S. government securities are:

Accepted Answer

A)  real estate investments.
B)  equity securities.
C)  debt securities.
D)  forward contracts.

Question 5

Which of the following is an example of investment income from securities?

Accepted Answer

A)  deferred tax assets
B)  depreciation of long-term assets
C)  sale of fixed assets
D)  interest earned from debt investments

Question 6

A debt security:

Accepted Answer

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.

Question 7

Accruex Corporation has excess cash of $25,000 and invests the same amount in corporate bonds on March 30, 2015. The bonds will mature in two years from the date of purchase. The company plans to use the cash from the bonds for its business expansion after the bonds mature in 2017. Based on the information provided, which of the following will be included in the journal entry on March 30, 2015?

Accepted Answer

A)  a debit to Long-term Investments-Held-to-Maturity for $25,000
B)  a debit to Short-term Investments-US Treasury Notes for $25,000
C)  a debit to Long-term Investments-Available-for-Sale for $25,000
D)  a credit to Long-term Investments-Available-for-Sale for $25,000

Question 8

Which of the following is a condition to record an investment as an available-for-sale security?

Accepted Answer

A)  There should not be any annual cash flows from the investment.
B)  It should have a maturity of less than two years.
C)  It should be a debt security.
D)  The ownership in the voting stock of the investee should be less than 20%.

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

Held-to-maturity investments applies only to debt securities because:

Accepted Answer

A)  these securities earn periodic interest.
B)  equity securities do not mature on a specific date.
C)  these are long-term investments.
D)  equity securities are held for a very short period.

Question 11

All available-for-sale (AFS) investments are reported on the balance sheet at:

Accepted Answer

A)  historical cost.
B)  replacement cost.
C)  current market value.
D)  net realizable value.

Question 12

Green Services invests its excess cash in Creative Technologies and acquires 1,000 shares for $53.25. Green Services owns less than 1% of Creative's voting stock and plans to hold the stock for two years. While preparing the journal entry to record this transaction:

Accepted Answer

A)  Long-term Investments-Available-for-Sale will be debited for $53,250.
B)  Long-term Investments-Held-to-Maturity will be debited for $53,250.
C)  Long-term Investments-Trading Investments will be credited for $53,250.
D)  Long-term Investments-Significant Interest Investments will be debited for $53,250.

Question 13

Debra Technologies invested $50,000 to buy $50,000 face value, 8%, five-year in municipal bonds on January 2, 2010. The bonds will mature on January 2, 2015. The bonds pay interest semiannually on January 2 and July 2 every year till maturity. Based on the information provided, which of the following will be included in the journal entry for the transaction on January 2, 2014?

Accepted Answer

A)  a credit to Interest Revenue for $4,000
B)  a debit to Interest Revenue for $4,000
C)  a credit to Interest Revenue for $2,000
D)  a debit to Interest Revenue for $2,000

Question 14

Short-term investments:

Accepted Answer

A)  include debt and equity securities that the investor expects to hold for more than a year.
B)  are investments in debt securities or equity securities in which the investor holds less than 50% of the voting stock and that the investor plans to sell in the very near future.
C)  are investments in debt and equity securities that are highly liquid and that the investor intends to sell in one year or less.
D)  are investments in debt securities, and the investor intends to hold them until maturity.

Question 15

Marketable securities are also known as:

Accepted Answer

A)  short-term investments.
B)  held-to-maturity investments.
C)  debt investments.
D)  long-term investments.

Question 16

Trading investments are categorized as noncurrent assets.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following securities make an interest payment?

Accepted Answer

A)  equity securities
B)  preferred stocks
C)  corporate bonds
D)  significant interest investment

Question 18

At the end of each period, trading securities must be adjusted and reported at fair value.

Accepted Answer

A) True 
 B)False

Question 19

When a loss is recorded on the sale of a significant interest investment:

Accepted Answer

A)  total assets will increase.
B)  equity will increase.
C)  total assets will decrease.
D)  equity will remain unchanged.

Question 20

Greg Financial Services invested $15,000 to acquire 3,750 shares of Mitt Investments on March 15, 2012. This investment represents less than 20% of the investee's voting stock. On May 7, 2016, Greg Financial Services sells 1,750 shares for $12,250. In the balance sheet at May 7, 2016:

Accepted Answer

A)  total assets will remain unchanged.
B)  total assets will decrease.
C)  total liabilities will decrease.
D)  total equity will increase.

Exam 15: Investments

Which of the following securities make an interest payment?

Correct Answer
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All available-for-sale (AFS) investments are reported on the balance sheet at:

Correct Answer
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Long-term investments are also known as marketable securities.

Correct Answer
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Correct Answer
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When a loss is recorded on the sale of a significant interest investment:

Correct Answer
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Held-to-maturity investments applies only to debt securities because:

Correct Answer
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If the Fair Value Adjustment account for trading investments has a debit balance:

Correct Answer
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Greg Financial Services invested $15,000 to acquire 3,750 shares of Mitt Investments on March 15, 2012. This investment represents less than 20% of the investee's voting stock. On May 7, 2016, Greg Financial Services sells 1,750 shares for $12,250. In the balance sheet at May 7, 2016:

Correct Answer
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Which of the following is a condition to record an investment as an available-for-sale security?

Correct Answer
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Which of the following is an example of investment income from securities?

Correct Answer
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Correct Answer
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At the end of each period, trading securities must be adjusted and reported at fair value.

Correct Answer
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Held-to-maturity investments are categorized as long-term assets on the balance sheet, irrespective of the maturity date.

Correct Answer
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The Gain on Disposal of Trading Securities is reported in the:

Correct Answer
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Short-term investments:

Correct Answer
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A debt security:

Correct Answer
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Green Services invests its excess cash in Creative Technologies and acquires 1,000 shares for $53.25. Green Services owns less than 1% of Creative's voting stock and plans to hold the stock for two years. While preparing the journal entry to record this transaction:

Correct Answer
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Marketable securities are also known as:

Correct Answer
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U.S. government securities are:

Correct Answer
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Trading investments are categorized as noncurrent assets.

Correct Answer
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Exam 15: Investments

Which of the following securities make an interest payment?

Correct AnswerverifiedShow Answer

All available-for-sale (AFS) investments are reported on the balance sheet at:

Correct AnswerverifiedShow Answer

Long-term investments are also known as marketable securities.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

When a loss is recorded on the sale of a significant interest investment:

Correct AnswerverifiedShow Answer

Held-to-maturity investments applies only to debt securities because:

Correct AnswerverifiedShow Answer

If the Fair Value Adjustment account for trading investments has a debit balance:

Correct AnswerverifiedShow Answer

Greg Financial Services invested $15,000 to acquire 3,750 shares of Mitt Investments on March 15, 2012. This investment represents less than 20% of the investee's voting stock. On May 7, 2016, Greg Financial Services sells 1,750 shares for $12,250. In the balance sheet at May 7, 2016:

Correct AnswerverifiedShow Answer

Which of the following is a condition to record an investment as an available-for-sale security?

Correct AnswerverifiedShow Answer

Which of the following is an example of investment income from securities?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

At the end of each period, trading securities must be adjusted and reported at fair value.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The Gain on Disposal of Trading Securities is reported in the:

Correct AnswerverifiedShow Answer

Short-term investments:

Correct AnswerverifiedShow Answer

A debt security:

Correct AnswerverifiedShow Answer

Green Services invests its excess cash in Creative Technologies and acquires 1,000 shares for $53.25. Green Services owns less than 1% of Creative's voting stock and plans to hold the stock for two years. While preparing the journal entry to record this transaction:

Correct AnswerverifiedShow Answer

Marketable securities are also known as:

Correct AnswerverifiedShow Answer

U.S. government securities are:

Correct AnswerverifiedShow Answer

Trading investments are categorized as noncurrent assets.

Correct AnswerverifiedShow Answer

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