1. An objective in purchasing temporary investments is to
a. earn interest revenue.
b. receive dividends.
c. realize gains from increases in the market price of the securities.
d. All of these choices are correct.
2. Changes in valuation for trading securities are reported as
a. unrealized gains or losses on the income statement under Other Income (Loss).
b. accumulated unrealized gain or loss in the stockholders' equity section of the balance sheet.
c. an amortized cost of the investment on the balance sheet.
d. None of these choices are correct.
3. Changes in valuation for available-for-sale securities are reported as
a. unrealized gains or losses on the income statement under Other Income (Loss).
b. accumulated unrealized gain or loss in the stockholders' equity section of the balance sheet.
c. an amortized cost of the investment on the balance sheet.
d. None of these choices are correct.
4. Generally accepted accounting principles require trading and available-for-sale investments to be reported at their
a. cost.
b. fair value.
c. amortized cost.
d. None of these choices are correct.
5. When an asset is reported at its fair value, any difference between the asset's original cost or prior period's fair value must be reported in a
a. receivable or payable account.
b. revenue or expense account.
c. valuation allowance account.
d. None of these choices are correct.
6. On April 11 of the current year, Zack Corporation had a market price of $48 per share of common stock. Its par value was $10 per share. For the previous year, Zack paid an annual dividend of $3.90 per share. Zack's gross revenues and net income was $5,000,000 and $2,500,000, respectively. The dividend yield for Zack Corporation would be
a. 8%.
b. 0.8%.
c. 39%.
d. None of these choices are correct.
7. The journal entry required to record the purchase of $20,000 of U.S. Treasury bonds at their face amount on May 17 plus accrued interest for 45 days would include a
a. debit to Interest Receivable.
b. debit to Cash.
c. credit to Investments.
d. None of these choices are correct.
8. Jacob Company's accounting period ends on December 31. The amount of an adjusting entry to accrue interest for $20,000, 4%, US Treasury bills, purchased on October 1 would be
a. $133.33.
b. $200.00.
c. $2,000.00.
d. None of these choices are correct.
9. The company investing in another company's stock is called a(n)
a. broker.
b. investor.
c. investee.
d. stockee.
10. If the investor owns less than 20% of the outstanding stock of the investee, the accounting method utilized will be
a. the equity method.
b. the cost method.
c. consolidation.
d. None of these choices are correct.
11. If an investor owns between 20% and 50% of the outstanding stock of the investee, the accounting method utilized will be
a. the equity method.
b. the cost method.
c. consolidation.
d. None of these choices are correct.
12. If the investor owns more than 50% of the outstanding stock of the investee, the accounting method utilized will be
a. the equity method.
b. the cost method.
c. consolidation.
d. None of these choices are correct.