Accounting for long-term investments

Question

Question 1. Accounting for long-term investments in equity securities with controlling influence uses the:

• controlling method.
• equity method with consolidation.
• investor method.
• investment method.

Question 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.

Question 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.

Question 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.

Question 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.

Question 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.

Question 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.

Question 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.

Question 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.