Question: 1) On May 1, Pierce Company purchased $60,000 of Stanton Company's 12% bonds at 100 plus accrued interest of $2,400. On June 30, Pierce received its first semiannual interest. On February 1, Pierce sold $50,000 of the bonds at 103 plus accrued interest.
The journal entry Pierce will record on February 1 will include a
a. credit to Gain on Sale of Investments for $1,500
b. credit to Interest Receivable for $600
c. credit to Cash for $52,500
d. credit to Interest Revenue for $1,500
2) The account Unrealized Gain (Loss) on Available-for-Sale Investments should be included on the
a. balance sheet as an adjustment to stockholders' equity
b. statement of retained earnings
c. balance sheet as an adjustment to the asset account
d. income statement as other revenue (expense)
3) GAAP requires trading and available-for-sale investments to be recorded
a. at their fair value
b. at their historical cost
c. at their net realizable value
d. at their market value
4) Unrealized gains and losses on trading securities are not included in the calculation of income from operations.
True
False