Acct II Ch 15

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Which of the following is an equity security?

Share of stock

The equity method with consolidation states that the controlling investor is called the parent and the investee is called the:

subsidairy

Which of the following is not a reason that companies make investments?

To reduce risk of bankruptcy

Other comprehensive income includes (realized/unrealized) ______ gains and losses on available-for-sale securities, foreign currency adjustments, and pension adjustments

Unrealized

When making a fair-value adjustment for trading securities, the Unrealized Gain or Loss is a ______ account and the Fair Value Adjustments - Trading is a ________ account

temporary; permanent

True or False: when a trading security is sold and the net proceeds are greater than the cost of the security, no gain or loss is recognized.

False

Grace, Inc. uses the equity method to report a large investment in Jorge, Inc. In this situation, Grace called the _______, and the Jorge is called the subsidiary.

Parent

Ryder Co. holds investments in securities that management intends to convert to cash within three months and that are readily convertible to cash. Ryder should report these securities as _____ on the balance sheet.

short-term assets

Red Co. holds a long-term investment with a significant influence in Ashton, Inc. Red aquired 3,000 shares or 40%, of Ashton for $50,000. During 2010, Ashton had $30,000 of net income and in 2011, Ashton reported $40,000. No dividends were distributed in either year. Red will report book value of this investment on December 31, 2011

$78,000; $50,000 original cost + 40% of 2010 income ($30,000) / 40% of 2011 income ($40,000) = 50000/12000/16000=78000

Beau Co. has net sales in 2009 of $30,000 an din 2010 of $40,000. In 2009, its total assets were $75,000 and in 2010 total assets were $85,000. Total asset turnover for 2010 is:

.50; 40000 / (75000/85000/2)

____ securities are debt and equity securities that the company intends to actively manage and trade for profit. They are always classified as current assets.

Trading

Available-for-sale securities are reported at fair value. Unrealized losses should be reported on the _______ section of the balance sheet

equity

Held-to-maturity securities are debt securities a company intends and is able to hold until ______. They are reported in current assets or long-term assets, depending on their maturity date.

maturity

_______ financial statements show the financial position, results of operations, and cash flows of all entities under the parent's control, including all subsidiaries.

Consolidated

Long Co. holds $60,000 of available-for-sale securities. The securities mature in three months. Long should report these securities as a(n) _______ on the balance sheet

Current asset

Ladder Co. holds $20,000 in long-term debt securities. On December 31, interest earned during the period on the securities equals $500. The adjusting entry to accrue interest will include the following accounts?

Debit Interest Receivable Credit Interest Revenue

Flora Co. holds $76,000 of available-for-sale securities. At the end of the year, Flora determined that the fair value of these securities. At the end of the year, Flora determined that the fair value of these securities is $80,000. The journal entry that Flora will make to reflect this change in value will include the following entries in the amount of $4,000

Debit to Fair-Value Adjustments - Available for Sale Credit to Unrealized Gain - Equity

Harris Co. hods a large portion of stock in Lang, Inc. Lang reported net income of $30,000 during the period. Harris will report its 30% of the earnings with a credit to ______ in the amount of ______

Earnings from Long-Term Investments; $9,000

An equity security is sold for $35,000 cash. he cost of the security was $30,000. The journal entry to record this sale will include which of the following CREDIT entries?

Gain on Sale of Long-Term Investmens - $5,000 Long-Term Investments - AFS - $30,000

_______ securities are debit securities a company intends and is able to hold until maturity. They are reported in current assets or long-term assets, depending on their maturity date.

Held-to-maturity

________ securities are debt securities a company intends and is able to hold until maturity. They are reported in current assets or long-term assets, depending on their maturity date.

Held-to-maturity

Allen Co. holds a long-term investments with significant influence in Rodney Inc. Rodney paid Allen a $5,000 cash dividend. Allen would record the dividend with a debit to Cash and a credit to ______

Long-Term Investment

Vera Co. holds a long-term investment with significant influence in Janey's Inc. Janey's paid Vera a $3,000 cash dividend. Vera would record the dividend with a debit to Cash and a credit to:

Long-Term Investment

Conway Co. purchases 1,000 shares of Ellis Co. common stock at par value for $35,000. Conway intends to sell the securities later than one year from the purchase date. It records the purchase of available-for-sale securities with a debit to _____ and a credit to Cash

Long-Term Investments

Phoenix Co. paid $24,500 plus a $500 brokerage fee to buy a 5%, 2-year bond payable with a $25,000 par value. The bonds pay Interest semiannually. Phoenix intends to hold the bonds until they mature. The entry to reflect this purchase would include a debit to which of the following accounts in what amount?

Long-Term Investments for $25,000

Comprehensive income is defined as all changes in equity during the period except those from owners' investments and dividends. It is computed by adding or subtracting which of the following items?

Other comprehensive income Net income

Fierce, Co. holds $50,000 in long-term debt securities. on December 31, interest earned during the period on the securities equals $1,500. The adjusting entry to accrue interest will include a debt to Interest ______ and a credit to Interest ______

Receivable; Revenue

Which of the following is not a factor that helps determine how to account for Investments in securities?

The dollar amount of the investment

Identify the three factors that help determine how to account for investments in securities

The intent to hold short-term or long-term The percent ownership The security type (debt or equity)

Rice Co. holds $50,000 of available-for-sale securities. At the end of the year, Rice determined that the fair value of these securities is only $44,000. The entry that Rice will make to reflect this change in value will include a debit to _____ and a credit to _____ in the amount of $6,000

Unrealized Loss - Equity Fair-Value Adjustment - Available for sale

Other comprehensive income includes which of the following?

Unrealized gains and losses on available-for-sale securities Pension adjustments Foreign currency adjustments

When a long-term investment with significant influence is sold, a gain or loss is computed by taking net proceeds less:

book value

Light, Inc. uses the equity method to account for several long-term investments. Light, Inc. will report these investments using ______ financial statements

consolidated

When the available-for-sale securities are sold, a gain or loss is recognized for the difference between net proceeds and the ____ of the security

cost

When available-for-sale securities are sold, a gain or loss is recognized for the difference between net proceeds and the:

cost of security

When held-to-maturity securities matures, the journal entry to record the maturity will include a (debit/credit) ______ to Long-Term Investments - Held to Maturity

credit

Rex Co. holds a large portion of stock in Jones, Inc. Jones reported net income of $60,000 during the period. Rex will report its 30% of the earnings with a (debit/credit) _____ to Earnings from Long-term Investments in the amount of ______

credit; $18,000

Alan Co. holds trading securities that the company intends to actively manage and trade for profit. These are reported on Alan's balance sheet under (current/trading) _____assets

current

At December 31, Vera Co. owns securities that are due in 3 months. Very has owned the security for three years, and has always planned to hold them until maturity. The securities would be reported as ______ on the balance sheet

current asset

Trading securities are debt and equity securities that the company intends to actively manage and trade for profit. They are always classified as:

current assets

Wyatt Co. plans to purchase 2,500 shares of Outer Wear Co. Wyatt would record this with a (debit/credit) _____ to the Long-Term Investments account

debit

A company sells a trading security costing $1,000 for $800. The journal entry to record this transaction will include a (debit/credit) ____ to Loss on Sale of Short-Term Investment of $_____

debit; 200

Johnson CO. holds non influential investments. Johnson should report these investments on the balance sheet at ______ value

fair

The group of trading securities is reported together as a portfolio at:

fair value

Trading securities, short-term Available-for-sale, and long-term available securities are accounted for using the following method:

fair value

Dean Co. purchased securities that are not readily convertible to cash and are no intended to be converted o cash in the short term. Dean should record these investments as (long/short) _____-term investments on the balance sheet

long

______ investments in securities are defined as those securities that are NOT readily convertible to cash or are not intended to be converted to cash in the short term.

long-term

At December 31, Suri Co. owns securities that are due in 36 months. Suri has owned the securities for 3 years, and has always planned to hold them until maturity. The securities would be reported as ______ on the balance sheet.

long-term assets

Available-for-sale securities are reported at fair value. Unrealized gains should be reported:

on the equity section on the balance sheet

The group of trading securities is reported together as a _______ at fair value (the market value that is not yet confirmed by sales)

portfolio

When a trading security is sold, a gain or loss is recognized based on the net _____ less the cost of security

proceeds

Avery, Inc. uses the equity method to report its 60% investment in Mack Co. In this situation, Avery would be the parent company and Mach would be called the

subsidiary

Income from influential investments is reported in the earnings from long-term investment account. This account is a _______ account, and is reported on the _______.

temporary; income statement


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