Your Questions About Stocks And Bonds 101

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Charles asks…

Accounting I could use some help please!?

1) Zach company owns 40% of the voting stock of Tomas Corporation and uses the equity method in recording this investment. Tomas Corporation reported $20,000 net loss. Zach’s corporation Entry would include a?
A) Debit to loss of account for $8,000
B)Debit to investment account for $8,000
C)Debit to investment account for $20,000
D)credit to investment account for $8,000

2) The account unrealized Loss on temporary investment in stock should be include in the?
A) Income statement
B)Balance sheet as an addition to temporary investment in stock
C) statement of retained earnings
D) Balance sheet as a deduction in stockholders equity.

3) Which of he following investments below should be accounted for by using the cost method?
A) Long term investment in stock where the investor does have significant influence over the investee
B) Temporary investment in stock
C) Temporary investment in stock and long-term investment in stock where the investor does not have a significant influence over the investee
D) Long-term investment in stock where the investor does not have a significant influence over investee

4) Which of the following is not part of comprehensive income?
A) Unrealized gains or losses
B)Foreign currency items
C) pension liability adjustment
D) restructuring charges

5) Which of the following would be considered an ” Other Comprehensive Income” item?
A)Extraordinary loss related to flood
B) gain on disposal of discontinued operation
C) unrealized loss on available for sale securities
D) Net Income

6) The account investment in bonds is reported
A) At fair market value because that is all that is required
B) At cost as a long term liability along with current portion reported as a current liability
C) At cost as long term asset
D) At cost as a long term less discount on bond investment or plus premium on bonds investment

7) On June 1, $400,000 of bonds were purchased as a long term investment at 101.5 and $500 was paid as the brokerage commission. If the bonds bear interest at 12% which is paid semiannually on January 1st and July 1st. what is the total cost to be debited to the investment account?
A) $406,500
B) $400,000
C) $405,500
D) $ 402,000

8) On June 1, $400,000 of bonds were purchased as long term investment at 97.5 and $500 was paid as the brokerage commission. If the bonds bear interest at 12% which is paid semiannually on January 1 and July 1. what is the total cost to be debited to the investment account?
A) $390,000
B) $390,500
C) $400,500
D) $ 400,000

9) The financial statement resulting from combining parent and subsidiary statement are called consolidated statements?
True or false

10) The Corporation owning all or majority of another corporation is known as the parent company?
True or False

11) The investor carrying an investment by the equity method records cash as dividend receive as an increase in the carrying amount of the investment?
True or false

12) Ordinarily a corporation owning a significant portion of the voting stock of another corporation accounts for the investment using the equity method?
True or False

13) Unrealized gains or losses are reported as other comprehensive income items until the related securities are sold, the the gains and losses become realized and are included in determining net income?
True or false

14) Any difference between the fair market values of the securities and their cost is a realized gain or loss?
True or False

15) Available for sale securities that management expect to sale in the future, but not actively traded for profit?
True or False

16) Although marketable securities may be retained for several years, they continue to be classified as temporary, provided they are readily marketable and can be sold for cash at any time?
True or False

17) The cumulative effect of other comprehensive income items is included in retained earnings, on the balance sheet, as accumulated other comprehensive income?
True or False

18) comprehensive income is all changes in stockholder equity during the period except those resulting from dividend and stockholders investment?
True or False

19) The amortization of discount on bonds purchased as long term investment increases the amount of the investment account?
True Or false

20) As with other assets, the cost of bonds investment include all costs related to the purchase?
True or False

financi4 answers:

Okay, dokay, please post the answers as well.

1D / 2D / 3D / 4D / 5C / 6D / 7B? / 8C / 9 true / 10 true / 11 false / 12 true / 13 true / 14 false / 15 false / 16 true / 17 false / 18 false / 19 false / 20 true

you will post the correct answer, will you?

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