61)
Maroon Company sold supplies in the amount of €15,000 (euros) to a French company when the
exchange rate was $1.15 per euro. At the time of payment, the exchange rate decreased to $1.12.
Maroon must record a loss of $450.
A)
True
B)
False
62)
Long-term investments:
A)
Include only equity securities.
B)
Are expected to be converted into cash within one year.
C)
Must be readily convertible to cash.
D)
Can include funds designated for a special purpose, or investments in land not used in the
company’s operations.
E)
Are current assets.
63)
Short-term investments:
A)
Include funds earmarked for a special purpose such as bond sinking funds.
B)
Include bonds not intended to be converted into cash.
C)
Include stocks not intended to be converted into cash.
D)
Are securities that management intends to convert to cash within the longer of one year or the
current operating cycle, and are readily convertible to cash.
E)
Include sinking funds not intended to be converted into cash.
64)
Long-term investments are reported in the:
A)
Equity section of the balance sheet.
B)
Plant assets section of the balance sheet.
C)
Non-current section of the balance sheet called long-term investments.
D)
Current asset section of the balance sheet.
E)
Intangible asset section of the balance sheet.
65)
Long-term investments include:
A)
Investments in marketable bonds that are intended to be converted into cash in the short-term.
B)
Investments intended to be converted to cash within one year.
C)
Investments in marketable stocks that are intended to be converted into cash in the short-term.
D)
Investments in bonds and stocks that are not readily convertible to cash or not intended to be
converted to cash in the short term.
E)
Only investments readily convertible to cash.
66)
Strickland Corporation has invested in 10% of the outstanding stock of Nez Corporation.
Strickland intends to actively manage this investment for profit. This investment is classified as:
A)
a held-to-maturity security.
B)
a significant influence security.
C)
a trading security.
D)
a controlling influence security.
E)
an available-for-sale security.
67)
All of the following statements regarding equity securities are true except:
A)
Equity securities should be recorded at cost when acquired.
B)
Equity securities are valued at fair value if classified as significant influence securities.
C)
Equity securities are valued at fair value if classified as trading securities.
D)
Equity securities classified as available-for-sale record the dividend revenue when received.
E)
Equity securities are valued at fair value if classified as available-for-sale securities.
68)
All of the following are true about debt securities except:
A)
They can have a cost higher than the maturity value.
B)
They can be short-term investments.
C)
They can be long-term investments.
D)
They can have a cost lower than the maturity value.
E)
They reflect an owner relationship.
69)
At acquisition, debt securities are:
A)
Recorded at cost.
B)
Recorded at the amount of interest that will be received over the life of the security.
C)
Not recorded, because no interest is due yet.
D)
Recorded at cost plus the amount of dividend income to be received.
E)
Recorded at their cost, plus total interest that will be received over the life of the security.
70)
At the end of the accounting period, the owners of debt securities:
A)
Must record a gain or loss on the interest income earned.
B)
Must report the dividend income accrued on the debt securities.
C)
Must record any interest earned on the debt securities during the period.
D)
Must retire the debt.
E)
Must record a gain or loss on the dividend income earned.
71)
A company has an investment in 9% bonds with a par value of $100,000 that pay interest on
October 1 and April 1. The amount of interest accrued on December 31 (the company’s year-end)
would be:
A) $9,000. B) $1,500. C) $2,250. D) $750. E) $4,500.
72)
Roe Corporation owns 2,000 shares of WRJ Corporation stock. WRJ Corporation has 25,000
shares of stock outstanding. WRJ paid $4 per share in cash dividends to its stockholders. The entry
to record the receipt of these dividends is:
A)
Debt Long-Term Investment, $8,000; credit Cash, $8,000.
B)
Debit Unrealized Gain-Equity, $8,000; credit Cash, $8,000.
C)
Debit Cash, $8,000; credit Long-Term Investments, $8,000.
D)
Debit Cash, $8,000; credit Unrealized Gain-Equity, $8,000.
E)
Debit Cash, $8,000; credit Dividend Revenue, $8,000.
27
73)
A company purchased $60,000 of 5% bonds on May 1 at par value. The bonds pay interest on
March 1 and September 1. The amount of interest accrued on December 31 (the company’s
year-end) would be:
A) $1,000. B) $2,500. C) $500. D) $1,250. E) $1,500.
74)
A company paid $37,800 plus a broker’s fee of $525 to acquire 8% bonds with a $40,000 maturity
value. The company intends to hold the bonds to maturity. The cash proceeds the company will
receive when the bonds mature equal:
A) $40,000. B) $40,525. C) $43,200. D) $37,800. E) $38,325.
75)
A company paid $37,800 plus a broker’s fee of $525 to acquire 8% bonds with a $40,000 maturity
value as a long-term investment. The company intends to hold the bonds to maturity. The correct
entry to record the purchase of the bond investment is:
A)
Debit Long-Term Investments—HTM $38,325; credit Cash $38,325.
B)
Debit Long-Term Investments—HTM $37,800; credit Cash $37,800.
C)
Debit Long-Term Investments—HTM $37,800; debit Loss on Investment $525; credit Cash
$38,325.
D)
Debit Long-Term Investments—HTM $37,800; debit Investment Expense $525; credit Cash
$38,325.
E)
Debit Cash $40,000; credit Long-Term Investments—HTM $40,000.
76)
Kendall Corp. purchased at par value $75,000 of Shrem Company’s 8% bonds that mature in
three-years. The bonds pay interest semiannually on June 1 and December 1. Kendall plans to hold
the bonds until they mature. When the bonds mature, Kendall should prepare the following journal
entry:
A)
debit Unrealized Gain-Equity, $6,000; credit Cash, $6,000.
B)
debit Cash, $75,000; credit Long-Term Investments—Trading, $75,000.
C)
debit Long-Term Investments—HTM, $75,000; credit Cash, $75,000.
D)
debit Cash, $75,000; credit Long-Term Investments—HTM, $75,000.
E)
debit Cash, $6,000; credit, Unrealized Gain-Equity, $6,000.
77)
Kendall Corp. purchased at par value $160,000 of Barker Company’s 7% bonds that mature in 10
months. The bonds pay interest semiannually on June 1 and December 1. Kendall plans to hold the
bonds until they mature. The journal entry to record Kendall’s purchase of the bonds is:
A)
debit Short-Term Investments—HTM $160,000; credit Cash, $160,000.
B)
debit Long-Term Investments-HTM $160,000; credit Cash $160,000.
C)
debit Cash, $160,000; credit Short-Term Investments—HTM $160,000.
D)
debit Cash, $169,333; credit, Short-Term Investments—HTM $169,333.
E)
debit Cash, $160,000; credit Long-Term Investments-HTM $160,000.
78)
Barnes Company purchased $50,000 of 8% bonds at par. The bonds mature in six years and are a
held-to-maturity security. Which of the following is the correct journal entry to record the receipt
of the semiannual interest payment?
A)
debit Cash, $2,000; credit Interest Revenue, $2,000.
B)
debit Cash, $4,000; credit Long-Term Investments—HTM, $4,000.
C)
debit Unrealized Gain-Equity, $2,000; credit Cash, $2,000.
D)
debit Cash, $4,000; credit Unrealized Gain-Equity, $4,000.
E)
debt Cash, $2,000; credit Long-Term Investments—HTM, $2000.
79)
Accounting for long-term investments in equity securities with controlling influence uses the:
A)
Controlling method.
B)
Consolidated method.
C)
Equity method with consolidation.
D)
Investment method.
E)
Investor method.
80)
The controlling investor is called the:
A)
Senior entity.
B)
Parent.
C)
Owner.
D)
Investee.
E)
Subsidiary.
81)
The investee company in a long term investment with controlling interest is called the:
A)
Subsidiary.
B)
Parent.
C)
Senior entity.
D)
Owner.
E)
Creditor.
82)
A controlling influence over the investee is based on the investor owning voting stock exceeding:
A) 20%. B) 40%. C) 50%. D) 10%. E) 30%.
83)
Long-term investments cannot include:
A)
Securities with maturity dates within one operating cycle.
B)
Available-for-sale equity securities.
C)
Held-to-maturity debt securities.
D)
Equity securities giving an investor significant influence over an investee.
E)
Available-for-sale debt securities.
84)
Consolidated financial statements:
A)
Show the results of operations, cash flows, and the financial position of all entities under a
parent’s control, including all subsidiaries.
B)
Include the investments in the subsidiaries on the balance sheet.
C)
Show the results of operations, cash flows, and the financial position of the parent only.
D)
Do not include a balance sheet.
E)
Show the results of operations, cash flows, and the financial position of the subsidiary only.
85)
Comprehensive income includes all except:
A)
Gains and losses reported in the income statement.
B)
All changes in equity for a period except those due to investments and distributions to
owners.
C)
Unrealized gains and losses on long-term available-for-sale securities.
D)
Dividends paid to shareholders.
E)
Revenues and expenses reported in the income statement.
86)
Short-term investments in held-to-maturity debt securities are accounted for using the:
A)
Fair value method with fair value adjustment to equity.
B)
Cost method without amortization.
C)
Cost method with amortization.
D)
Equity method.
E)
Fair value method with fair value adjustment to income.
87)
Long-term investments in held–to-maturity debt securities are accounted for using the:
A)
Cost method without amortization.
B)
Fair value method with fair value adjustment to income.
C)
Equity method.
D)
Fair value method with fair value adjustment to equity.
E)
Cost method with amortization.
88)
The price of one currency stated in terms of another currency is called a(n):
A)
Currency rate.
B)
Foreign exchange rate.
C)
International conversion rate.
D)
Currency transaction.
E)
Historical exchange rate.
89)
All of the following statements relating to accounting for international operations are true except:
A)
The balance in the Foreign Exchange Gain (or Loss) account is reported on the income
statement.
B)
Foreign exchange gains or losses can occur when accounting for international purchases
transactions.
C)
Gains and losses from foreign exchange transactions are accumulated in the Foreign
Exchange Gain (or Loss) account.
D)
Gains and losses from foreign exchange transactions are accumulated in the Fair Value
Adjustment Account and are reported on the balance sheet.
E)
Foreign exchange gains or losses can occur when accounting for international sales
transactions.
90)
Foreign exchange rates fluctuate due to changes in all but which of the following?
A)
Expectations of future events.
B)
Supply and demand for currencies.
C)
Political conditions.
D)
Economic conditions.
E)
Whether the companies prepare financial statements under U.S. GAAP or IFRS.
91)
The currency in which a company presents its financial statements is known as the:
A)
Historical cost currency.
B)
Multinational currency.
C)
Specific currency.
D)
Reporting currency.
E)
Price-level-adjusted currency.
92)
If the exchange rate for Canadian and U.S. dollars is 0.82777 to 1, this implies that 3 Canadian
dollars will buy ________ worth of U.S. dollars.
A) $2.48 B) $0.2759 C) $0.82777 D) $1.00 E) $1.82777
93)
Kreighton Manufacturing purchased on credit £50,000 worth of production materials from a British
company when the exchange rate was $1.97 per British pound. At the year-end balance sheet date,
the exchange rate increased to $2.76. If the liability is still unpaid at that time, Kreighton must
record a:
A) gain of $138,000.
B) loss of $138,000.
C)
neither a gain nor loss.
D)
loss of $39,500.
E)
gain of $39,500.
94)
Marshall Company sold supplies in the amount of €25,000 (euros) to a French company when the
exchange rate was $1.21 per euro. At the time of payment, the exchange rate decreased to $0.82.
Marshall must record a:
A)
gain of $20,500.
B)
neither a gain nor loss.
C)
loss of $20,500.
D)
gain of $9,750.
E)
loss of $9,750.