CHAPTER 13: INVESTMENTS AND LONG TERM RECEIVABLES
1. Significant influence of another company generally occurs when the investor owns between 25% and 45%. Due to this
relationship the investor is required to issue consolidated financial statements.
a.
True
b.
False
False
1
Easy
ACCT.WHAL.16.13.1 – LO: 13.1
United States – BUSPROG: Reflective Thinking – BUSPROG: Analytic
United States – OH – Default City – AICPA: FN-Decision Modeling
Bloom’s: Remembering
2. When the investor owns more than 50% of the voting common stock of the investee, the investee is considered to be
under the legal control of the investor.
a.
True
b.
False
True
1
Easy
ACCT.WHAL.16.13.1 – LO: 13.1
United States – BUSPROG: Reflective Thinking – BUSPROG: Analytic
Bloom’s: Remembering
3. In order to classify an investment as held-to–maturity, the company has to have the ability and the intent to hold the
investment until it matures.
a.
True
b.
False
True
1
Easy
ACCT.WHAL.16.13.2 – LO: 13.2
United States – BUSPROG: Reflective Thinking – BUSPROG: Analytic
United States – OH – Default City – AICPA: FN-Decision Modeling
Bloom’s: Remembering
4. For an investment classified as held-to-maturity, any unrealized gains and losses are both reported in the financial
statements and also disclosed in the notes to the financial statements.
a.
True
b.
False
False
1
Easy
ACCT.WHAL.16.13.2 – LO: 13.2
United States – BUSPROG: Reflective Thinking – BUSPROG: Analytic
United States – OH – Default City – AICPA: FN-Decision Modeling
Bloom’s: Remembering
5. When a company purchases investments with the intent to profit on short-term changes in price, the company should
classify these investments as available-for-sale.
a.
True
b.
False
False
1
Easy
ACCT.WHAL.16.13.3 – LO: 13.3
United States – BUSPROG: Reflective Thinking – BUSPROG: Analytic
United States – OH – Default City – AICPA: FN-Decision Modeling
Bloom’s: Remembering
6. The Unrealized Holding Gain/Loss-Trading Securities account is a temporary account that would be closed to Retained
Earnings during the closing process.
a.
True
b.
False
True
1
Easy
ACCT.WHAL.16.13.3 – LO: 13.3
United States – BUSPROG: Reflective Thinking – BUSPROG: Analytic
United States – OH – Default City – AICPA: FN-Decision Modeling
Bloom’s: Remembering
7. Available-for-sale securities are recorded at cost, which equals fair value on the acquisition date.
a.
True
b.
False
True
Easy
United States – BUSPROG: Reflective Thinking – BUSPROG: Analytic
United States – OH – Default City – AICPA: FN-Decision Modeling
8. When an available-for-sale security is sold, any unrealized gains or losses would need to be reclassified from the
Allowance for Change in Fair Value of Investments account in order to avoid double counting any gains or losses
recorded in comprehensive income.
a.
True
b.
False
True
Easy
United States – BUSPROG: Reflective Thinking – BUSPROG: Analytic
United States – OH – Default City – AICPA: FN-Decision Modeling
9. Transferring an investment from the trading category into any other category does not require that any entry be made to
the company’s accounts because any unrealized holding gains or losses on that investment have already been
recognized.
a.
True
b.
False
True
United States – BUSPROG: Reflective Thinking – BUSPROG: Analytic
United States – OH – Default City – AICPA: FN-Decision Modeling
10. The transfer of a security between investment categories is accounted for either at fair value at the time of the transfer
or at cost, depending upon the type of transfer.
True
False
False
1
Easy
ACCT.WHAL.16.13.5 – LO: 13.5
United States – BUSPROG: Reflective Thinking – BUSPROG: Analytic
United States – OH – Default City – AICPA: FN-Decision Modeling
Bloom’s: Remembering
11. An investment of 20% or more in the outstanding common stock of an investee company leads to the presumption of
that the investor has significant influence and requires the investor to use the consolidation method.
True
False
False
1
Easy
ACCT.WHAL.16.13.6 – LO: 13.6
United States – BUSPROG: Reflective Thinking – BUSPROG: Analytic
United States – OH – Default City – AICPA: FN-Decision Modeling
Bloom’s: Remembering
12. Under U.S. GAAP investments are classified into three categories based upon management’s intent. IFRS also
divides investments into three classifications, but those classifications are based on the company’s business model for
managing financial assets and the characteristics of the cash flows of the financial asset.
True
False
False
1
ACCT.WHAL.16.13.6 – LO: 13.6
United States – BUSPROG: Reflective Thinking – BUSPROG: Analytic
United States – OH – Default City – AICPA: FN-Decision Modeling
Bloom’s: Remembering
13. For a minority active investment, the investor company should disclose its accounting policies with respect to the
equity method of investments.
True
False
True
1
Easy
ACCT.WHAL.16.13.7 – LO: 13.7
United States – BUSPROG: Reflective Thinking – BUSPROG: Analytic
United States – OH – Default City – AICPA: FN-Decision Modeling
Bloom’s: Remembering
14. For Held-to–Maturity investments in debt securities, the investor company is required to disclose both the aggregate
fair value of the investment and also the change in the net unrealized holding gains or loss to be included in the
income statement.
True
False
False
1
Easy
ACCT.WHAL.16.13.7 – LO: 13.7
United States – BUSPROG: Reflective Thinking – BUSPROG: Analytic
United States – OH – Default City – AICPA: FN-Decision Modeling
Bloom’s: Remembering
15. When a life insurance policy contains a guarantee that the company that purchased the policy is entitled to a return
equal to the amount of the cash surrender value of the policy, a portion of the premium is recorded to a long term
liability account.
a.
True
b.
False
False
1
ACCT.WHAL.16.13.8 – LO: 13.8
United States – BUSPROG: Reflective Thinking – BUSPROG: Analytic
United States – OH – Default City – AICPA: FN-Decision Modeling
Bloom’s: Remembering
16. A note receivable should always be recorded at its present value using the borrower’s incremental interest rate.
True
False
False
1
Easy
ACCT.WHAL.16.13.8 – LO: 13.8
United States – BUSPROG: Reflective Thinking – BUSPROG: Analytic
United States – OH – Default City – AICPA: FN-Decision Modeling
Bloom’s: Remembering
17. In order for a derivative to be considered a hedge, it must be mostly effective in offsetting a substantial amount of risk
exposure associated with changes in fair values or cash flows of the hedged item.
True
False
True
1
Easy
ACCT.WHAL.16.13.9 – LO: 13.9
United States – BUSPROG: Reflective Thinking – BUSPROG: Analytic
United States – OH – Default City – AICPA: FN-Decision Modeling
Bloom’s: Remembering
18. For a cash flow hedge, a company would not recognize in its financial statements any change in the value of the
financial instrument being hedged.
a.
True
b.
False
True
1
Easy
ACCT.WHAL.16.13.9 – LO: 13.9
United States – BUSPROG: Reflective Thinking – BUSPROG: Analytic
United States – OH – Default City – AICPA: FN-Decision Modeling
Bloom’s: Remembering
19. Investment securities are classified based upon management’s intent. This may present difficulties to readers of
financial statements because
a.
management’s judgment of intent and ability may lack comparability.
b.
management’s judgment may lack relevance.
c.
gain trading may result in not producing sufficient gains.
d.
gain trading may result in not producing sufficient reliability.
a
1
Moderate
ACCT.WHAL.16.13.7 – LO: 13.7
United States – BUSPROG: Reflective Thinking – BUSPROG: Analytic
United States – OH – Default City – AICPA: FN-Decision Modeling
20. Investments in debt and equity securities that are held for current resale by banks and brokerage firms are termed
a.
available-for-sale securities.
b.
trading securities.
c.
held-to-maturity securities.
d.
marketable securities.
b
1
Easy
ACCT.WHAL.16.13.1 – LO: 13.1
United States – BUSPROG: Reflective Thinking – BUSPROG: Analytic
United States – OH – Default City – AICPA: FN-Decision Modeling
Bloom’s: Remembering
21. Investments that are typically held for short periods of time and sold by the company in the expectation of a profit on
the short-term differences in price are classified as
a.
available-for-sale securities.
b.
trading securities.
c.
held-to-maturity securities.
d.
marketable securities.
b
1
Easy
ACCT.WHAL.16.13.1 – LO: 13.1
United States – BUSPROG: Reflective Thinking – BUSPROG: Analytic
United States – OH – Default City – AICPA: FN-Decision Modeling
Bloom’s: Remembering
22. Which of the following categories of investments are reported at their fair values on the balance sheet and have
unrealized holding gains and losses included as a separate component of shareholders’ equity?
a.
held-to-maturity debt securities
b.
marketable securities
c.
available-for-sale securities
d.
trading securities
c
1
Easy
ACCT.WHAL.16.13.1 – LO: 13.1
United States – BUSPROG: Reflective Thinking – BUSPROG: Analytic
United States – OH – Default City – AICPA: FN-Decision Modeling
Bloom’s: Remembering
23. Which of the following securities are reported at their amortized cost on the balance sheet date?
a.
held-to-maturity debt securities
b.
marketable securities
c.
available-for-sale securities
d.
trading securities
a
1
Easy
ACCT.WHAL.16.13.1 – LO: 13.1
United States – BUSPROG: Reflective Thinking – BUSPROG: Analytic
United States – OH – Default City – AICPA: FN-Decision Modeling
Bloom’s: Remembering
24. Investments in debt securities include all of the following except
a.
U.S. treasury securities.
b.
corporate bonds.
c.
preferred stocks that are redeemable at the option of the issuer.
d.
commercial paper.
c
1
Easy
ACCT.WHAL.16.13.1 – LO: 13.1
United States – BUSPROG: Reflective Thinking – BUSPROG: Analytic
United States – OH – Default City – AICPA: FN-Decision Modeling
Bloom’s: Remembering
25. Investments in equity securities include all of the following except
a.
common stocks.
b.
preferred stocks.
c.
convertible debt.
d.
put and call stock options.
c
1
Easy
ACCT.WHAL.16.13.1 – LO: 13.1
United States – BUSPROG: Reflective Thinking – BUSPROG: Analytic
United States – OH – Default City – AICPA: FN-Decision Modeling
Bloom’s: Remembering
26. Which of the following methods of accounting for investments is appropriate when the investor controls the investee?
a.
equity method
b.
consolidation
c.
cost method
d.
lower of cost or market method
b
1
Easy
ACCT.WHAL.16.13.1 – LO: 13.1
United States – BUSPROG: Reflective Thinking – BUSPROG: Analytic
United States – OH – Default City – AICPA: FN-Decision Modeling
Bloom’s: Remembering
27. With consolidation, control generally occurs when the investor owns what percentage of the voting stock of the
investee?
a.
over 50%
b.
between 20% and 50%
c.
less than 20%
d.
over 40%
a
1
Easy
ACCT.WHAL.16.13.1 – LO: 13.1
United States – BUSPROG: Reflective Thinking – BUSPROG: Analytic
United States – OH – Default City – AICPA: FN-Decision Modeling
Bloom’s: Remembering
28. Which of the following methods of accounting for investments is appropriate when the investor has significant
influence over the investee?
a.
equity method
b.
consolidation
c.
cost method
d.
lower of cost or market method
a
1
Moderate
ACCT.WHAL.16.13.1 – LO: 13.1
United States – BUSPROG: Reflective Thinking – BUSPROG: Analytic
United States – OH – Default City – AICPA: FN-Decision Modeling
Bloom’s: Understanding
29. Each of the three categories of investments in debt and equity securities has similar accounting for all of the following
transactions except
a.
initial recording of cost.
b.
recognition of dividend and interest income.
c.
recognition of realized gains or losses on sales.
d.
recognition of unrealized holding gains and losses.
d
1
Moderate
ACCT.WHAL.16.13.1 – LO: 13.1
United States – BUSPROG: Reflective Thinking – BUSPROG: Analytic
United States – OH – Default City – AICPA: FN-Decision Modeling
Bloom’s: Understanding
30. How is the premium or discount on held-to–maturity bond investments presented on the balance sheet?
a.
as a part of the cost of the investment and amortized over a period not to exceed five years
b.
as a part of the cost of the investment and amortized over the remaining life of the bonds
c.
in a separate account that is reported separately from the bonds and amortized over a period not to exceed five
years
d.
in a separate account that is reported separately from the investment account and not amortized
b
1
Easy
ACCT.WHAL.16.13.2 – LO: 13.2
United States – BUSPROG: Reflective Thinking – BUSPROG: Analytic
United States – OH – Default City – AICPA: FN-Decision Modeling
31. On January 1, 2017, Macie Company purchased Jefferson Company’s 9% bonds with a face amount of $200,000 for
$213,420 to yield 8%. The bonds mature on January 1, 2027, and Macie has both the intent and ability to hold these
bonds to maturity. The bonds pay interest annually on December 31. Assuming Macie uses the effective interest
method of amortizing the bond premium; interest income reported on the income statement for the year ended
December 31, 2017, would be
a.
$16,000.
b.
$17,074.
c.
$18,000.
d.
$18,926.
b
1
Moderate
ACCT.WHAL.16.13.2 – LO: 13.2
United States – BUSPORG: Analytic
United States – OH – Default City – AICPA: FN-Measurement
32. On October 1, 2017, the Sun Company acquired 9% bonds of Jack’s Company with a face value of $400,000 for
$412,000 plus accrued interest. Interest is payable on June 30 and December 31. How would Sun record the initial
bond investment to be held-to-maturity?
a.
Investment in Held-to-Maturity Debt Securities 412,000
Interest Income 9,360
Cash 421,360
b.
Investment in Held-to-Maturity Debt Securities 412,000
Interest Income 9,000
Cash 421,000
c.
Investment in Held-to-Maturity Debt Securities 421,000
Cash 421,000
d.
Investment in Held-to-Maturity Debt Securities 412,000
Cash 412,000
b
1
Moderate
ACCT.WHAL.16.13.2 – LO: 13.2
United States – BUSPROG: Reflective Thinking – BUSPROG: Analytic
United States – OH – Default City – AICPA: FN-Measurement
Bloom’s: Applying
33. On July 1, 2017, Jason Company purchased $60,000 of ten-year 6% bonds of Santo, Inc., for $51,850, to be held-to–
maturity. Interest is payable semiannually on June 30 and December 31. The effective yield on the investment is 8%.
What amount of interest income should Jason record for the six-month period ended December 31, 2017?
a.
$2,063.04
b.
$2,084.96
c.
$2,074.00
d.
$2,400.00
c
1
Moderate
ACCT.WHAL.16.13.2 – LO: 13.2
United States – BUSPORG: Analytic
United States – OH – Default City – AICPA: FN-Measurement
Bloom’s: Analyzing
34. On January 1, 2017, Old World Company purchased $300,000 of ten-year 10% bonds of New Company for $340,260.
Interest is payable annually. The effective yield on the investment is 8%. What is the balance in Old World’s
investment in held-to-maturity debt securities account (rounded to the nearest dollar, if necessary) at December 31,
2018?
a.
$343,039
b.
$360,260
c.
$337,481
d.
$334,480
d
1
Moderate
ACCT.WHAL.16.13.2 – LO: 13.2
United States – BUSPORG: Analytic
United States – OH – Default City – AICPA: FN-Measurement
Bloom’s: Analyzing
35. On July 1, 2017, Rectangle, Inc. purchased Diamond Company’s five-year 12% bonds with a face value of $500,000
for $569,000, which included $25,000 of accrued interest. The bonds, which mature on February 1, 2022, are to be
held-to-maturity and pay interest on February 1 and August 1. Rectangle uses the straight-line method of
amortization. The amount of income that Rectangle would report for the calendar year 2017 as a result of this long-
term investment would be
a.
$20,400.
b.
$25,200.
c.
$30,000.
d.
$34,800.
b
1
ACCT.WHAL.16.13.2 – LO: 13.2
United States – BUSPORG: Analytic
United States – OH – Default City – AICPA: FN-Measurement
Bloom’s: Analyzing
36. On July 1, 2017, James Company purchased Timothy Company’s six-year 9% bonds with a face value of $200,000 for
$196,000, which included $6,000 of accrued interest. The bonds, which mature on March 1, 2023, are to be held-to–
maturity and pay interest semiannually on March 1 and September 1. James uses the straight-line method of
amortization. The amount of income James should report for the calendar year 2017 as a result of this investment
would be
a.
$8,823.52.
b.
$9,882.36.
c.
$9,529.40.
d.
$8,117.64.
b
1
Challenging
ACCT.WHAL.16.13.2 – LO: 13.2
United States – BUSPORG: Analytic
United States – OH – Default City – AICPA: FN-Measurement
Bloom’s: Analyzing
37. The use of the effective interest method to amortize a discount associated with the acquisition of an investment in
bonds results in
a.
the recognition of more interest income over the life of the investment than would result from the use of the
straight-line method.
b.
the recognition of a constant amount of interest income each period.
c.
the recognition of less interest income over the life of the investment than would result from the use of the
straight-line method.
d.
the recognition of a varying amount of interest income each period.
d
1
Challenging
ACCT.WHAL.16.13.2 – LO: 13.2
United States – BUSPROG: Reflective Thinking – BUSPROG: Analytic
United States – OH – Default City – AICPA: FN-Decision Modeling
Bloom’s: Evaluating
38. All of the following statements regarding held-to-maturity debt securities are true except
a.
premiums and discounts must be amortized over the remaining life of the bonds.
b.
the debt securities should be valued at market value.
c.
the realized gain or loss is the difference between their amortized cost and the proceeds from their sale.
d.
interest income may be debited at the time of acquisition.
b
1
Moderate
ACCT.WHAL.16.13.2 – LO: 13.2
United States – BUSPROG: Reflective Thinking – BUSPROG: Analytic
United States – OH – Default City – AICPA: FN-Decision Modeling
Bloom’s: Understanding
39. When bonds are purchased between interest dates, the accrued interest should be
a.
debited to Interest Receivable.
b.
debited to Interest Income.
c.
debited to Investment in Bonds.
d.
either a or b.
d
1
Moderate
ACCT.WHAL.16.13.2 – LO: 13.2
United States – BUSPROG: Reflective Thinking – BUSPROG: Analytic
United States – OH – Default City – AICPA: FN-Decision Modeling
40. The carrying value of held-to-maturity debt securities is the
a.
original purchase amount.
b.
amortized cost.
c.
market value.
d.
lower of amortized cost or market value.
b
1
Easy
ACCT.WHAL.16.13.2 – LO: 13.2
United States – BUSPROG: Reflective Thinking – BUSPROG: Analytic
United States – OH – Default City – AICPA: FN-Decision Modeling
Bloom’s: Remembering
41. When selecting the appropriate accounting for held–to-maturity securities, the company must
a.
never sell the equity instrument before maturity.
b.
never sell the debt instrument before maturity.
c.
have the intent and ability to hold the equity investment to maturity.
d.
have the intent and ability to hold the debt instrument to maturity.
d
1
Easy
ACCT.WHAL.16.13.2 – LO: 13.2
United States – BUSPROG: Reflective Thinking – BUSPROG: Analytic
United States – OH – Default City – AICPA: FN-Decision Modeling
Bloom’s: Remembering
42. The generally accepted accounting principles for trading securities include all of the following except
a.
initially recording the investment at cost.
b.
subsequently valuing the investment at fair value.
c.
including unrealized holding gains and losses as a component of shareholders’ equity.
d.
including interest and dividend revenue as part of income.
c
1
Easy
ACCT.WHAL.16.13.3 – LO: 13.3
United States – BUSPROG: Reflective Thinking – BUSPROG: Analytic
United States – OH – Default City – AICPA: FN-Decision Modeling
Bloom’s: Remembering
43. Unrealized holding gains and losses occur because a company
a.
actively trades securities.
b.
holds securities until maturity.
c.
holds securities through the end of the reporting period.
d.
records a change in fair value of the securities held even if they are not sold.
d
1
Moderate
ACCT.WHAL.16.13.3 – LO: 13.3
United States – BUSPROG: Reflective Thinking – BUSPROG: Analytic
United States – OH – Default City – AICPA: FN-Decision Modeling
Bloom’s: Remembering
44. Which of the following regarding trading securities is correct?
a.
Trading securities are reported at cost on the balance sheet date, and unrealized holding gains and losses are
included in income of the current period.
b.
Trading securities are reported at fair value on the balance sheet date, and unrealized holding gains and losses
are included in income of the current period.
c.
Trading securities are reported at fair value on the balance sheet date, but unrealized holding gains and losses
are not included in income of the current period.
d.
Trading securities are reported at cost on the balance sheet date, but unrealized holding gains and losses are
not included in income of the current period.
b
1
Easy
ACCT.WHAL.16.13.3 – LO: 13.3
United States – BUSPROG: Reflective Thinking – BUSPROG: Analytic
United States – OH – Default City – AICPA: FN-Decision Modeling
Bloom’s: Remembering
45. Unrealized gains and losses on investments in trading securities are reported
a.
as a current asset.
b.
on the income statement.
c.
on the balance sheet as part of shareholders’ equity.
d.
as a contra asset.
b
1
Moderate
ACCT.WHAL.16.13.3 – LO: 13.3
United States – BUSPROG: Reflective Thinking – BUSPROG: Analytic
46. Dividends on investments classified as either trading or available for sale that have been declared as of year-end but
have not yet been received should be recognized in income when
a.
received as cash.
b.
the new year begins.
c.
declared.
d.
accrued.
c
1
Moderate
ACCT.WHAL.16.13.3 – LO: 13.3
United States – OH – Default City – AICPA: FN-Decision Modeling
Bloom’s: Understanding
47. On April 1, 2017 the Reba Company purchased 10%, $800,000 bonds of the Trading Up Company at par plus accrued
interest. These bonds were classified as an investment in trading securities. The bonds pay interest on June 30 and
December 31 each year. The entry by Reba on April 1, 2017, would include a
a.
debit to Investment in Trading Securities of $820,000.
b.
credit to Cash of $820,000.
c.
credit to Interest Income of $20,000.
d.
debit to Interest Expense of $20,000.
b
1
Moderate
ACCT.WHAL.16.13.3 – LO: 13.3
United States – BUSPORG: Analytic
United States – OH – Default City – AICPA: FN-Decision Modeling
Bloom’s: Analyzing
Bloom’s: Understanding
48. In its first year of operations, Roger Company purchased trading securities at a total cost of $53,000. On December 31,
the end of Roger’s fiscal year, the fair market value of those investments totaled $57,000. As a result of these
investments, Roger Company will report
a.
Investment in Trading Securities of $57,000.
b.
Investment in Trading Securities of $53,000.
c.
Unrealized Holding Gain/Loss-Trading Securities of $4,000 on the income statement as ordinary income.
d.
a credit balance in the contra account to Investment in Trading Securities of $4,000.
a
1
Moderate
ACCT.WHAL.16.13.3 – LO: 13.3
United States – BUSPORG: Analytic
United States – OH – Default City – AICPA: FN-Decision Modeling
Bloom’s: Analyzing
49. Chapin Company purchased investments in 2017 at a cost of $200,000and recorded them as trading securities. Their
market values totaled $250,000 and $230,000 on December 31, 2017, and December 31, 2018, respectively. The entry
required on December 31, 2018, would include a
a.
debit to Unrealized Holding Gain/Loss-Trading Securities of $20,000.
b.
credit to Unrealized Holding Gain/Loss-Trading Securities of $20,000.
c.
credit to Unrealized Holding Gain/Loss-Trading Securities of $30,000.
d.
debit to Unrealized Holding Gain/Loss-Trading Securities of $30,000.
a
1
Moderate
ACCT.WHAL.16.13.3 – LO: 13.3
United States – BUSPORG: Analytic
United States – OH – Default City – AICPA: FN-Decision Modeling
Bloom’s: Analyzing
50. Trading securities were sold on January 3, 2018, for $65,000. Those securities were purchased for $52,000 on
November 21, 2017, and they had a fair value on December 31, 2017, of $57,000. The entry to record the sale would
include a
a.
credit to Unrealized Holding Gain/Loss-Trading Securities of $8,000.
b.
debit to Unrealized Holding Gain/Loss-Trading Securities of $5,000.
c.
debit to Investment in Trading Securities of $5,000.
d.
credit to Gain on Sale of Trading Securities of $8,000.
d
1
Moderate
ACCT.WHAL.16.13.3 – LO: 13.3
United States – BUSPORG: Analytic
United States – OH – Default City – AICPA: FN-Decision Modeling
Bloom’s: Analyzing
51. Which of the following is correct regarding available-for-sale securities?
a.
Available-for-sale securities are reported at cost on the balance sheet date, and unrealized holding gains and
losses are included in income of the current period.
b.
Available-for-sale securities are reported at fair value on the balance sheet date, and unrealized holding gains
and losses are included in income of the current period.
c.
Available-for-sale securities are reported at fair value on the balance sheet date, but unrealized holding gains
and losses are not included in income of the current period.
d.
Available-for-sale securities are reported at cost on the balance sheet date, but unrealized holding gains and
losses are not included in income of the current period.
c
1
Easy
ACCT.WHAL.16.13.4 – LO: 13.4
United States – BUSPROG: Reflective Thinking – BUSPROG: Analytic
United States – OH – Default City – AICPA: FN-Decision Modeling
Bloom’s: Remembering
52. Realized gains and losses on investments available-for-sale are reported
a.
as a current asset.
b.
on the income statement.
c.
on the balance sheet as part of shareholders’ equity.
d.
as a contra asset.
b
1
Easy
ACCT.WHAL.16.13.4 – LO: 13.4
United States – BUSPROG: Reflective Thinking – BUSPROG: Analytic
United States – OH – Default City – AICPA: FN-Decision Modeling
Bloom’s: Remembering
53. A realized gain or loss on the sale of an available-for-sale equity security is determined by comparing
a.
the carrying value of the security with the proceeds from the sale.
b.
the original cost of the security with the proceeds from the sale.
c.
the market value at the latest balance sheet date with the proceeds from the sale.
d.
the original cost with the security’s carrying value.
b
1
Easy
ACCT.WHAL.16.13.4 – LO: 13.4
United States – BUSPROG: Reflective Thinking – BUSPROG: Analytic
United States – OH – Default City – AICPA: FN-Decision Modeling
Bloom’s: Remembering
54. The carrying value of available-for-sale debt and equity securities is
a.
historical cost.
b.
the current fair value.
c.
the lower of cost or current market value.
d.
the higher of cost or current market value.
b
1
Easy
ACCT.WHAL.16.13.4 – LO: 13.4
United States – BUSPROG: Reflective Thinking – BUSPROG: Analytic
United States – OH – Default City – AICPA: FN-Decision Modeling