Although marketable securities may be retained for several years, they continue

Question

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. (Points : 1) True False Question 2.2. As with other assets, the cost of a bond investment includes all costs related to the purchase. (Points : 1) True False Question 3.3. If the bonds are purchased between interest dates, the purchase price includes accrued interest since the last interest payment. (Points : 1) True False Question 4.4. When a bond is purchased for an investment, the purchase price, minus the brokerage commission, plus any accrued interest is recorded. (Points : 1) True False Question 5.5. The amount of interest paid when buying a bond as an investment should be credited to Interest Revenue. (Points : 1) True False Question 6.6. Most companies invest excess cash in bonds as investments in order to profit long-term from the growth of the investment. (Points : 1) True False Question 7.7. To record a bond investment between interest payment periods, Investment in Bonds would be debited and Cash and Interest Revenue would be credited. (Points : 1) True False Question 8.8. When long-term investments in bonds are sold before their maturity date, the seller deducts any accrued interest since the last interest payment date from the selling price. (Points : 1) True False Question 9.9. If the proceeds from the sale of bond investments exceeds the carrying amount of the bonds, a gain is realized. (Points : 1) True False Question 10.10. Any gains or losses on the sale of bonds normally would be reported in the Other Income (Loss) section of the income statement. (Points : 1) True False Question 11.11. An equity investment in less than 20% of another company’s stock is accounted for using the cost method. (Points : 1) True False Question 12.12. Ordinarily, a corporation owning a significant portion of the voting stock of another corporation accounts for the investment using the equity method. (Points : 1) True False Question 13.13. The investor carrying an investment by the equity method records cash dividends received as an increase in the carrying amount of the investment. (Points : 1) True False Question 14.14. Under the equity method, a stock purchase is recorded at its original cost and is not adjusted to fair market value each accounting period. (Points : 1) True False Question 15.15. The equity method causes the investment account to mirror the proportional changes in book value of the investee. (Points : 1) True False Question 16.16. 16. Accounting for the sale of stock is the same for both the cost and the equity methods of accounting for investments. (Points : 1) True False Question 17.17. The corporation owning all or a majority of the voting stock of another corporation is known as the parent company. (Points : 1) True False Question 18.18. When a corporation owns less than 20% of the stock of another company, dividends received are not treated as income. (Points : 1) True False Question 19.19. The financial statements resulting from combining parent and subsidiary statements are called consolidated statements. (Points : 1) True False Question 20.20. It is not possible for one company to influence the operating policies of another company unless it owns more than 50% interest in that company.

Explanation / Answer

1.1 Answer is True. 2.2 Answer is False. 3.3 Answer is True. 4.4 Answer is True ; investment recorded at cost ; interest and brokerage affect the Profit & Loss Account. 5.5 Answer is True 6.6 Answer is True 7.7 Answer is True 8.8 Answer is True 9.9 Answer is True 10.10 Answer is True 11.11 Answer is True 12.12 Answer is True 13.13 Answer is True 14.14 Answer is False 15.15 Answer is True 16.16 Answer is False 17.17 Answer is True 18.18 Answer is False 19.19 Answer is True 20.20 Answer is True

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