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Green Services Inc.invests its excess cash in Creative Technologies Inc.and acquires 1,000 shares for $53.25 per share.Green Services Inc.owns less than 1% of Creative's voting stock and plans to hold the stock for two years.While preparing the journal entry to record this transaction,________.


A) Long-term Investments-Available-for-Sale will be debited for $53,250
B) Long-term Investments-Held-to-Maturity will be debited for $53,250
C) Long-term Investments-Trading Investments will be credited for $53,250
D) Long-term Investments-Significant Interest Investments will be debited for $53,250

Correct Answer

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Glitter Services Inc.pays $1,350,000 to acquire 35% of voting stock of Grey Investments Inc.on March 5,2016.When this transaction is reported in the balance sheet,the ________.


A) total equity will increase
B) total assets will increase
C) total assets will decrease
D) total cash will decrease

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Beige Corporation pays $500,000 to acquire 40% of the equity securities of Olive Technologies Inc.on May 5,2015.Which of the following will be included in the journal entry to record this transaction?


A) Long-term Investments-Trading Investments will be debited by $500,000.
B) Long-term Investments-Olive Technologies Inc.will be debited by $500,000.
C) Long-term Investments-Available-for-Sale will be debited by $500,000.
D) Long-term Investments-Available-for-Sale will be credited by $500,000.

Correct Answer

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Which of the following securities pay a dividend?


A) corporate bonds
B) common stocks
C) debt securities
D) U.S.Government bonds

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Accruex Corporation has excess cash of $25,000 and invests the same amount in corporate bonds on March 30,2015.The bonds will mature in two years from the date of purchase.The company plans to use the cash from the bonds for its business expansion after the bonds mature in 2017.Based on the information provided,which of the following will be included in the journal entry on March 30,2015?


A) a debit to Long-term Investments-Held-to-Maturity for $25,000
B) a debit to Short-term Investments-US Treasury Notes for $25,000
C) a debit to Long-term Investments-Available-for-Sale for $25,000
D) a credit to Long-term Investments-Available-for-Sale for $25,000

Correct Answer

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A company that is controlled by another corporation is called a parent company.

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A security is a ________.


A) regulation dealing with the transactions of investments
B) system aimed at protecting the interests of the market participants
C) share or interest representing financial value
D) process related to the valuation of a financial instrument

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Marketable securities are also known as ________.


A) short-term investments
B) held-to-maturity investments
C) debt investments
D) long-term investments

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Which of the following is true of the accounting entries for debt securities?


A) The receipt of interest revenue is recorded with a debit to Interest Revenue and a credit to Cash.
B) Investments in debt securities are recorded at cost,including any brokerage fees paid.
C) The receipt of interest revenue is recorded with a debit to Cash and a credit to Long-term Securities-Held-to-Maturity.
D) Debt securities disposed of at maturity are recorded with a debit to the Short-term or Long-term Investments account and a credit to Cash.

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Consolidated statements combine the balance sheets,income statements,and cash flow statements of the parent company with those of its controlling interest affiliates.

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Realized gains or losses occur when a company adjusts an investment to fair value but have not yet disposed of the investment.

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An equity security does not represent an ownership interest in a corporation,although it pays dividends.

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When there is an unrealized loss on trading investments,the ________ will decrease.


A) total equity
B) cash
C) total liabilities
D) long term investments

Correct Answer

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Realized gains or losses on available-for-sale investments represent the difference between ________.


A) the historical cost and the average market value of the investment
B) the historical cost and the current market value of the investment
C) the cash received at time of disposal and the fair value of the investment
D) the cash received at time of disposal and the carrying amount of the investment

Correct Answer

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If the Fair Value Adjustment account for trading investments has a debit balance ________.


A) it is subtracted from the Fixed Asset account to determine carrying value.
B) it is subtracted from the Short-term Investment-Trading account to determine carrying value.
C) it is added to the Short-term Investment-Trading account to determine carrying value.
D) it is added to the Fixed Asset account to determine carrying value.

Correct Answer

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The fair value of a trading investment is the price that would be used if the company were to sell the investments on the market.

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Equity securities,in which the investor owns less than 20% ownership in the voting stock of the investee,can be either trading investments or available-for-sale investments.

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The Gain on Disposal of Trading Securities is reported in the ________.


A) other revenues and expenses section of the income statement
B) stockholders' equity section of the income statement
C) current assets section of the balance sheet
D) fixed assets section of the balance sheet

Correct Answer

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Trading investments ________.


A) are debt and equity securities that the investor expects to hold longer than one year or debt or equity securities that are not readily marketable
B) are investments in debt and equity securities that are highly illiquid and that the investor intends to keep till their maturity
C) are investments in debt securities,the investor intends to hold until maturity
D) are investments in debt securities or equity securities in which the investor holds less than 20% of the voting stock and that the investor plans to sell in the very near future

Correct Answer

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Which of the following securities make an interest payment?


A) equity securities
B) preferred stocks
C) corporate bonds
D) significant interest investment

Correct Answer

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