Problem 1. Accounting for long-term investments in equity securities with controlling influence uses the:
- controlling method.
- equity method with consolidation.
- investor method.
- investment method.
Problem 2. Long-term investments are reported in the:
- current asset section of the balance sheet.
- intangible asset section of the balance sheet.
- non-current section of the balance sheet called long-term investments.
- plant assets section of the balance sheet.
Problem 3: At the end of the accounting period, the owners of debt securities:
- must report the dividend income accrued on the debt securities.
- must retire the debt.
- must record a gain or loss on the interest income earned.
- must accrue interest earned on the debt securities.
Problem 4. Equity securities are:
- recorded at cost to acquire them plus accrued interest.
- recorded at cost to acquire them plus dividends earned.
- recorded at cost to acquire them.
- not recorded until dividends are received.
Problem 5. Return on total assets measures a company's ability to:
- produce net income from net sales.
- produce sales from net assets.
- produce net income from net assets.
- increase its asset base from sales.
Problem 6. Long-term investments include:
- investments in bonds and stocks that are not marketable.
- investments in marketable stocks that are intended to be converted into cash in the short-term.
- investments in marketable bonds that are intended to be converted into cash in the short-term.
- only investments readily convertible to cash.
Problem 7. Consolidated financial statements:
- show the results of operations, cash flows, and the financial position of all entities under a parent's control.
- show the results of operations, cash flows, and the financial position of the parent only.
- show the results of operations, cash flows, and the financial position of the subsidiary only.
- include the investments account on the balance sheet.
Problem 8. A decrease in the fair market value of a security that has not yet been realized through an actual sale of the security is called a(n):
- contingent loss.
- realizable loss.
- unrealized loss.
- capitalized loss.
9. Investments in debt and equity securities that the company actively manages and trades for profit are referred to as short-term investments in:
- available-for-sale securities.
- held-to-maturity securities.
- trading securities.
- realizable securities.