Accounting Chapter 13 & 15 Study Guide

Which of the following is not a strategic purpose of a long-term investment in another company's common stock?

Interest Revenue

The excess of proceeds from selling treasury stock over its costs should be credited to:

PIC from sale of Treasury Stock

The entry to record the issuance of common stock at a price above par would include a credit to:

PIC in Excess of Par- Common Stock

When a corporation purchases its own stock, what account is debited for the cost of the stock?

Treasury Stock

The balance of the valuation allowance for trading investments is reported in the financial statements as:

an addition to or a deduction from the balance of the investments in trading securities in the current asset section of the balance sheet

An investor is assumed to have a degree of control of significant influence over the investee when the investor owns what percentage of the outstanding common stock of the investee?

between 20% and 50%

Which of the following is not a classification for valuing and reporting debt and equity securities?

bond securities

The claims of the ________ must first be satisfied upon liquidation of a corporation.

creditors

Charmayne Corp. owns 40% of the outstanding common stock of Nichols Inc., which reported $300,000 net income and paid dividends of $120,000 during the year. The entry by Charmayne Corp. to record its share of the net income of the investee using the equity method is:

debit Investment in Nichols Inc., $120,000; credit Income of Nichols Inc., $120,000

When an investor owns between 20% and 50% of the outstanding common stock of the investee, the investor should account for its investment in the investee using the:

equity method

An investment in bonds with a book value of $125,700 is sold for $132,000. The gain or loss on the sale of the bond investments is:

gain of $6,300

How are unrealized gains or losses for available-for-sale securities reported on the financial statements?

on the balance sheet as an addition to or a deduction from stockholders' equity

The amount printed on a stock certificate is known as

par value

Debt and equity securities that are purchased and sold to earn short-term profits from changes in their market prices are called:

trading securities

Which of the following is not a characteristic of the corporate form of organization?

unlimited liability of stockholders

Changes in fair value of trading securities are recognized as:

unrealized gains or losses