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Long-term investments in held-to-maturity debt securities are accounted for using the ___________________________.

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cost metho...

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A company purchased $60,000 of 5% bonds on May 1.The bonds pay interest on February 1 and August 1.The amount of interest accrued on December 31 (the company's year-end) would be:


A) $250
B) $500
C) $1,250
D) $2,500
E) $3,000

F) A) and E)
G) D) and E)

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Six months ago,a company purchased an investment in stock for $65,000.This investment is considered available-for-sale.The current market value of the stock is $68,500.The company should record a:


A) Debit to Unrealized Loss-Equity for $3,500.
B) Credit to Unrealized Gain-Equity for $3,500.
C) Debit to Investment Revenue for $3,500.
D) Credit to Market Adjustment - Available-for-Sale for $3,500.
E) Credit to Investment Revenue for $3,500.

F) B) and E)
G) B) and C)

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Return on total assets measures a company's ability to:


A) Produce net income from net sales.
B) Produce sales from net assets.
C) Produce net income from net assets.
D) Increase its asset base from sales.
E) Increase its asset base from net income.

F) A) and D)
G) B) and E)

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Micron owns 35% of Martok.Martok pays a total of $47,000 in cash dividends for the period.Micron's entry to record the dividend transaction would include a:


A) Credit to Long-Term Investments for $16,450.
B) Debit to Long-Term Investments for $16,450.
C) Debit to Cash for $47,000.
D) Credit to Cash for $16,450.
E) Credit to Investment Revenue for $47,000.

F) A) and C)
G) A) and B)

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________________________ refers to all changes in equity for a period except for those due to investments and distributions to owners.

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Identify the three types of classifications for noninfluential investments in securities.

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Noninfluential investments in ...

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Any cash dividends received from equity securities are recorded as Dividend Expense.

A) True
B) False

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A company had investments in long-term available-for-sale securities.At the end of the current year,the company's portfolio had a $731,000 cost and $730,000 market value. What is the current year's adjustment to market value given the following account balances at the end of the prior year? A company had investments in long-term available-for-sale securities.At the end of the current year,the company's portfolio had a $731,000 cost and $730,000 market value. What is the current year's adjustment to market value given the following account balances at the end of the prior year? A) \begin{array} { | c | l | l | } \hline \text { Market Adjustment - Available-for-Sale } \ldots \ldots \ldots \ldots \ldots & 1,000 & \\ \hline \text { Ururealized Gain Equity } \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots & & 1,000 \\ \hline \end{array} B) \begin{array} { | c | l | l | } \hline \text { Market Adjustment - Available-for-Sale } \ldots \ldots \ldots \ldots \ldots &6 , 0 0 0 & \\ \hline \text { Ururealized Gain Equity } \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots & & 6 , 000 \\ \hline \end{array} C) \begin{array} { | l | l | l |} \hline \text { Ururealized Gain Equity } \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots & 1,000 \\ \hline\quad \text { Market Adjustment - Available-for-Sale } \ldots \ldots \ldots \ldots \ldots && 1,000 \\ \hline \end{array} D) \begin{array} { | l | l | l |} \hline \text {Ururealized Gain (Loss) }\\ \text{Equity } \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots & 6,000 \\ \hline\quad \text { Market Adjustment - Available-for-Sale } \ldots \ldots \ldots \ldots \ldots && 6,000 \\ \hline \end{array} E) \begin{array} { | c | l | l | } \hline \text { Uryealized Gain (Loss) Equity } \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots & 4,000 & \\ \hline \text { Market Adjustment - Available-for-Sale } \ldots \ldots \ldots \ldots & & 4,000 \\ \hline \end{array}


A)  Market Adjustment - Available-for-Sale ……………1,000 Ururealized Gain Equity ………………………1,000\begin{array} { | c | l | l | } \hline \text { Market Adjustment - Available-for-Sale } \ldots \ldots \ldots \ldots \ldots & 1,000 & \\\hline \text { Ururealized Gain Equity } \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots & & 1,000 \\\hline\end{array}
B)  Market Adjustment - Available-for-Sale ……………6,000 Ururealized Gain Equity ………………………6,000\begin{array} { | c | l | l | } \hline \text { Market Adjustment - Available-for-Sale } \ldots \ldots \ldots \ldots \ldots &6 , 0 0 0 & \\\hline \text { Ururealized Gain Equity } \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots & & 6 , 000 \\\hline\end{array}
C)  Ururealized Gain Equity ………………………1,000 Market Adjustment - Available-for-Sale ……………1,000\begin{array} { | l | l | l |} \hline \text { Ururealized Gain Equity } \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots & 1,000 \\\hline\quad \text { Market Adjustment - Available-for-Sale } \ldots \ldots \ldots \ldots \ldots && 1,000 \\\hline\end{array}
D) Ururealized Gain (Loss) Equity ………………………6,000 Market Adjustment - Available-for-Sale ……………6,000\begin{array} { | l | l | l |} \hline \text {Ururealized Gain (Loss) }\\\text{Equity } \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots & 6,000 \\\hline\quad \text { Market Adjustment - Available-for-Sale } \ldots \ldots \ldots \ldots \ldots && 6,000 \\\hline\end{array}
E)  Uryealized Gain (Loss)  Equity ………………………4,000 Market Adjustment - Available-for-Sale …………4,000\begin{array} { | c | l | l | } \hline \text { Uryealized Gain (Loss) Equity } \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots & 4,000 & \\\hline \text { Market Adjustment - Available-for-Sale } \ldots \ldots \ldots \ldots & & 4,000 \\\hline\end{array}

F) B) and E)
G) A) and B)

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Short-term investments:


A) Are securities that management intends to convert to cash within one year or an operating cycle, whichever is longer.
B) Include funds earmarked for a special purpose such as bond sinking funds.
C) Include stocks not intended to be converted into cash.
D) Include bonds not intended to be converted into cash.
E) Include sinking funds not intended to be converted into cash.

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

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Sanuk purchased on credit £20,000 worth of parts from a British company when the exchange rate was $1.66 per British pound.At the year-end balance sheet date,the exchange rate increased to $1.69.Sanuk must record a gain of $600.

A) True
B) False

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An investor purchased $50,000 of bonds that were held to maturity.The investor's journal entry at maturity of the bonds should include a debit to Cash for $50,000 and a credit to Long-Term Investments for $50,000.

A) True
B) False

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A controlling investor is referred to as the parent and the investee company is referred to as the subsidiary.

A) True
B) False

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An investing company that owns more than ________ of another (investee)company's voting stock is presumed to have controlling influence over the investee.

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Profit margin is calculated by sales divided by net income.

A) True
B) False

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Explain how to record the sale of trading securities.

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When trading securities are sold,the dif...

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A company owns $400,000 of 7% bonds that pay interest on October 1 and April 1.The amount of interest accrued on December 31 (the company's year-end) would be:


A) $4,667
B) $7,000
C) $28,000
D) $14,000
E) $9,333

F) B) and E)
G) A) and E)

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Available-for-sale debt securities are:


A) Recorded at cost and remain at cost over the life of the investment.
B) Reported at historical cost, adjusted for the amortized amount of any difference between cost and maturity value.
C) Reported at market value on the balance sheet.
D) Intended to be held to maturity.
E) Always classified with Long-Term Liabilities.

F) A) and E)
G) D) and E)

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All companies desire a low return on total assets.

A) True
B) False

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Equity securities reflect a creditor relationship such as investments in notes,bonds,and certificates of deposit.

A) True
B) False

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