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ACC 305 Week 2 Quiz 01 Chapter 17

Multiple Choice Question 36


Jordan Company purchased ten-year, 10% bonds that pay interest semiannually. The
bonds are sold to yield 8%. One step in calculating the issue price of the bonds is to
multiply the principal by the table value for
o
o
o
o

20 periods and 5% from the present value of 1 table.


20 periods and 4% from the present value of 1 table.
10 periods and 8% from the present value of 1 table.
10 periods and 10% from the present value of 1 table.

Multiple Choice Question 99


The summarized balance sheets of Goebel Company and Dobbs Company as of December
31, 2014 are as follows:
Goebel Company
Balance Sheet
December 31, 2014
Assets
$1,200,000
Liabilities
$150,000
Capital stock
600,000
Retained earnings
450,000
Assets
$1,200,000
Dobbs Company
Balance Sheet
December 31, 2014
Assets
Liabilities
Capital Stock
Retained Earnings
Assets

$900,000
$225,000
555,000
120,000
$900,000

If Goebel Company acquired a 20% interest in Dobbs Company on December 31, 2014 for
$175,000 and the fair value method of accounting for the investment were used, the amount
of the debit to Equity Investments (Dobbs) would have been
o $175,000
o $115,000
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ACC 305 Week 2 Quiz 01 Chapter 17


o $180,000
o $139,000

Multiple Choice Question 58


Gains trading or cherry picking involves
o Moving securities whose value has deceased since acquisition from available-for-sale to
held-to-maturity in order to avoid reporting losses
o All of the above ae considered methods of gains trading or cherry picking.
o Reporting investment securities are fair value but liabilities at amortized cost.
o Selling securities whose value has increased since acquisition while holding those value
has decreased since acquisition

Multiple Choice Question 29


Equity securities acquired by a corporation which are accounted for by recognizing
unrealized holding gains or losses as other comprehensive income and as a separate
component of stockholders' equity are
o
o
o
o

Available-for-sale securities where a company has holdings of less than 20%


Trading securities where a company has holdings of less than 20%
Securities where a company has holdings of between 20% and 50%
Securities where a company has holdings of more than 50%

Multiple Choice Question 98


Harrison Company owns 20,000 of the 50,000 outstanding shares of Taylor, Inc. common
stock. During 2015, Taylor earns $1,000,000 and pays cash dividends of $800,000.
Harrison should report investment revenue for 2015 of
o
o
o
o

$320,000
$0
$80,000
$400,000

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ACC 305 Week 2 Quiz 01 Chapter 17


Multiple Choice Question 80
On October 1, 2014, Menke Company purchased to hold to maturity, 400, $1,000, 9%
bonds for $416,000. An additional $12,000 was paid for accrued interest. Interest is paid
semiannually on December 1 and June 1 and the bonds mature on December 1, 2018.
Menke uses straight-line amortization. Ignoring income taxes, the amount reported in
Menke's 2014 income statement from this investment should be
o
o
o
o

$9,000
$9,960
$10,920
$8,040

Multiple Choice Question 91


On its December 31, 2014, balance sheet, Trump Company reported its investment in
available-for-sale securities, which had cost $600,000, at fair value of $550,000. At
December 31, 2015, the fair value of the securities was $585,000. What should Trump
report on its 2015 income statement as a result of the increase in fair value of the
investments in 2015?
o
o
o
o

Unrealized gain of $35,000


$0
Unrealized loss of $15,000
Realized gain of $35,000

Multiple Choice Question 78


On November 1, 2014, Howell Company purchased 800 of the $1,000 face value, 9% bonds
of Ramsey, Incorporated, for $842,000, which includes accrued interest of $12,000. The
bonds, which mature on January 1, 2019, pay interest semiannually on March 1 and
September 1. Assuming that Howell uses the straight-line method of amortization and that
the bonds are appropriately classified as available-for-sale, the net carrying value of the
bonds should be shown on Howell's December 31, 2014, balance sheet at
o
o
o
o

$828,800
$830,000
$842,000
$800,000

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ACC 305 Week 2 Quiz 01 Chapter 17


Multiple Choice Question 22
A correct valuation is
o
o
o
o

Held-to-maturity at fair value


None of these answers are correct
Available-for-sale at amortized cost
Held-to-maturity at amortized cost

Multiple Choice Question 92


During 2014, Woods Company purchased 60,000 shares of Holmes Corporation common
stock for $945,000 as an available-for-sale investment. The fair value of these shares was
$900,000 at December 31, 2014. Woods sold all of the Holmes stock for $17 per share on
December 3, 2015, incurring $42,000 in brokerage commissions. Woods Company should
report a realized gain on the sale of stock in 2015 of
o
o
o
o

$75,000
$33,000
$78,000
$120,000

Multiple Choice Question 34


In accounting for investments in debt securities that are classified as trading securities,
o
o
o
o

A discount is reported separately


A premium is reported separately
None of these answers are correct
Unrealized holding gain or loss is reported on income statement

Multiple Choice Question 112


Valet Corporation began operations in 2015. An analysis of Valets equity securities
portfolio acquired in 2015 shows the following totals at December 31, 2015 for trading and
available-for-sale securities:
Trading

Available-forPage 4 of 6

ACC 305 Week 2 Quiz 01 Chapter 17


Sale

Aggregate cost
Aggregate fair
value

Securitie
s
$90,000

Securities
$110,000

80,000

95,000

What amount should Valet report in its 2015 income statement for unrealized holding loss?
o
o
o
o

$5,000
$15,000
$10,000
$25,000

Multiple Choice Question 28


Use of the effective-interest method in amortizing bond premiums and discounts results in
o A varying amount being recorded as interest income from period to period
o A smaller amount of interest income over the life of the bond issue than would result
from use of the straight-line method
o A variable rate of return on the book value of the investment
o A greater amount of interest income over the life of the bond issue than would result from
use of the straight-line method

Multiple Choice Question 110


The following information relates to Windom Company for 2015:
Realized gain on sale of available-for-sale securities

$30,000

Unrealized holding gains arising during the period on


available-for-sale securities

60,000

Reclassification adjustment for gains included in net income

20,000

Windoms 2015 other comprehensive income is


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ACC 305 Week 2 Quiz 01 Chapter 17


o
o
o
o

$110,000
$90,000
$50,000
$70,000

Multiple Choice Question 32


Watt Company purchased $300,000 of bonds for $315,000. If Watt intends to hold the
securities to maturity, the entry to record the investment includes
o None of these answers are correct
o A debit to Held-to-Maturity Securities at $300,000
o A credit to Premium on Investments of $15,000
o A debit to Held-to-Maturity Securities at $315,000

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