Question 1

Abala Corporation purchased one hundred $1,000 bonds.The corporation intends to hold the bonds until they mature in two years.This investment is characterized as ________ securities.
A)held-to-maturity
B)discretionary
C)trading
D)available-for-sale

Accepted Answer

Held-to-maturity securities are debt securities that the company intends to hold until maturity. In this case, Abala Corporation intends to hold the bonds until they mature in two years, so these are held-to-maturity securities.

Question 2

Comprehensive income includes all changes in equity resulting from ________.
A)contributions by owners
B)dividends
C)net losses
D)purchases of treasury stock

Accepted Answer

Comprehensive income includes all changes in equity resulting from revenues and expenses, gains and losses, but excludes transactions with owners such as contributions and dividends, and transactions related to treasury stock such as purchases and sales. A net loss would result in a decrease in comprehensive income and therefore be included in the calculation.

Question 3

Available-for-sale securities are ________.
A)investments the company may hold or sell
B)investments in debt securities that a company plans to hold until the securities mature
C)investments in debt and equity securities that a company has purchased to make a short-term profit
D)discretionary investments with a specific maturity date

Accepted Answer

Available-for-sale securities are investments that a company can hold or sell depending on the market conditions and the company's financial needs. These securities are not classified as either held-to-maturity or trading securities, making them an intermediate category of investments.

Question 4

Centrex Corporation purchased 500 shares of Pfizer stock.The managers of Centrex Corporation intend to sell the shares as soon as their target price is reached,which will probably be within the next three months.This investment is characterized as ________ securities.
A)available-for-sale
B)held-to-maturity
C)discretionary
D)trading

Accepted Answer

Since the managers intend to sell the shares as soon as their target price is reached, this investment would be classified as "trading" securities according to accounting standards. Trading securities are defined as securities that are bought and held to be resold in the near term, with the intent of generating profits from short-term price fluctuations.

Question 5

Comprehensive income includes ________.
A)revenues,expenses,and extraordinary items
B)unrealized gains and losses from foreign currency transactions
C)unrealized gains and losses on certain types of investments
D)all of these

Accepted Answer

Comprehensive income includes all changes in equity during a period except those resulting from investments by owners and distributions to owners. This encompasses not only revenues, expenses, and extraordinary items (A) but also unrealized gains and losses from foreign currency transactions (B) and certain types of investments (C), making D the correct choice as it includes all these components.

Question 6

Investments in debt and equity securities that a company may either hold or sell are called ________.
A)held-to-maturity securities
B)trading securities
C)available-for-sale securities
D)discretionary investments

Accepted Answer

Available-for-sale securities are debt and equity investments that a company may choose to hold or sell, depending on its financial strategy and market conditions.

Question 7

Comprehensive income equals ________.
A)net income minus preferred dividends
B)net income
C)net income plus other comprehensive income
D)net income plus all non-operating gains and losses

Accepted Answer

Comprehensive income includes net income and other comprehensive income, which consists of unrealized gains and losses on available-for-sale securities, foreign currency translation adjustments, and certain pension adjustments. It does not include preferred dividends or non-operating gains and losses.

Question 8

Abala Corporation purchased $50,000 worth of ABC Company stock.The corporation believes that the stock price will double within a few months and plans to sell the stock as soon as its target price is reached.This investment is characterized as ________ securities.
A)held-to-maturity
B)discretionary
C)trading
D)available-for-sale

Accepted Answer

The investment in ABC Company stock is characterized as trading securities because Abala Corporation intends to sell the stock as soon as its target price is reached. Trading securities are securities that are bought and held primarily for the purpose of selling them in the near term to generate profits on short-term price differences. Held-to-maturity securities are bought by companies with the intention of holding them until they mature. Discretionary securities refer to securities managed by a discretionary investment manager. Available-for-sale securities refer to securities held by a company that may be sold in the future but are not held for the purpose of short-term profit generation.

Question 9

Which of these is part of OTHER comprehensive income?
A)unrealized gains and losses on foreign currency translation
B)gains and losses from selling property,plant and equipment
C)gains and losses from selling treasury stock
D)gains and losses from issuing a stock dividend

Accepted Answer

Unrealized gains and losses on foreign currency translation are part of OTHER comprehensive income, which represents gains or losses that are not recognized in net income but still impact the overall financial position of a company. The other options listed are not part of OTHER comprehensive income, as they are either gains and losses from selling assets or distributing dividends.

Question 10

Items included in other comprehensive income include realized gains and losses from foreign currency translation.

Accepted Answer

Items included in other comprehensive income (OCI) are unrealized gains and losses from certain financial instruments, such as available-for-sale securities, pension liabilities, and cash flow hedges. Realized gains and losses from foreign currency translation are recorded in the income statement.

Question 11

If a company plans to hold debt securities until they mature,they are called ________.
A)held-to-maturity securities
B)trading securities
C)available-for-sale securities
D)conservative investments

Accepted Answer

Debt securities that are intended to be held until they mature are referred to as held-to-maturity securities.

Question 12

Held-to-maturity securities are ________.
A)investments the company may hold or sell
B)investments in debt securities that a company plans to hold until they mature
C)investments in debt and equity securities that a company has purchased to make a short-term profit
D)investments in stocks that a company plans to hold until they mature

Accepted Answer

Held-to-maturity securities are investments in debt securities that a company plans to hold until they mature. The company has the intent and ability to hold these securities until maturity, and therefore they are reported at amortized cost on the balance sheet.

Question 13

Which of these is part of OTHER comprehensive income?
A)dividends paid to owners
B)revenues minus expenses
C)unrealized gains and losses on certain types of investments
D)net income

Accepted Answer

Other comprehensive income includes unrealized gains and losses on certain types of investments. Dividends paid to owners and revenues minus expenses are not part of other comprehensive income. Net income includes both operating and non-operating items and is reported on the income statement, not as part of other comprehensive income.

Question 14

Investments in debt and equity securities that a company has purchased to make a short-term profit are called ________.
A)held-to-maturity securities
B)trading securities
C)available-for-sale securities
D)speculative investments

Accepted Answer

Trading securities are purchased with the intention of selling them in the short-term to make a profit. Held-to-maturity securities are purchased with the intention of holding them until maturity and earning interest. Available-for-sale securities are purchased without a specific intention to sell or hold until maturity. Speculative investments are high-risk investments made with the intention of making a profit, but with a high chance of losing money.

Question 15

Comprehensive income is the total ________.
A)income earned by a company over an entire fiscal year
B)of all items that affect shareholders' equity except transactions with the owners
C)of all items that affect shareholders' equity
D)income earned by a company including all of its business segments

Accepted Answer

Comprehensive income includes all items that affect shareholders' equity except for transactions with the owners, such as dividends and share issuances. This can include gains or losses on investments, foreign currency translation adjustments, and other items that are not included in net income.

Question 16

Comprehensive income is ________.
A)a footnote to the income statement
B)a line item on the balance sheet
C)a line item on the statement of changes in shareholders' equity
D)never reported on any financial statement

Accepted Answer

Comprehensive income is a component of shareholders' equity that includes all gains and losses that bypass the income statement. Therefore, it is reported on the statement of changes in shareholders' equity.

Question 17

One classification for investments in securities that is allowed by U.S.GAAP is ________.
A)mature
B)immature
C)available-for-sale
D)traded

Accepted Answer

U.S. GAAP allows the classification of investments in securities as held-to-maturity, available-for-sale, or trading. However, only one option from the given choices is available-for-sale. Therefore, the correct answer is option C - available-for-sale.

Question 18

Trading securities are ________.
A)investments the company may hold or sell
B)investments in debt securities that a company plans to hold until the securities mature
C)investments in debt and equity securities that a company has purchased to make a short-term profit
D)discretionary investments with a specific maturity date

Accepted Answer

Trading securities are investments in debt and equity securities that a company has purchased to make a short-term profit. Option A is incorrect because the company may choose to sell the securities instead of holding. Option B is incorrect because it only refers to debt securities and not all types of securities. Option D is incorrect because trading securities do not necessarily have a specific maturity date.

Question 19

Markot Corporation purchased $400,000 of securities and classified them as available-for-sale.The market value of the securities went up to $475,000.Markot Corporation should ________.
A)show these securities on its balance sheet at their market value
B)report a holding gain on its income statement
C)report a holding loss on its income statement
D)report an unrealized gain on its income statement

Accepted Answer

The answer of Markot Corporation purchased $400,000 of securities and...

Question 20

Centrex Corporation purchased 500 shares of Pfizer stock at $50 per share.The managers of Centrex Corporation intend to sell the shares as soon as their target price is reached,which will probably be within the next three months.During the holding period,the market price of the stock went down $5 per share.How should Centrex account for the change in value?
A)A footnote describing the decline in value should be part of the financial statements.
B)An unrealized loss of $2,500 should be shown on the income statement.
C)A realized loss of $2,500 should be shown on the income statement.
D)The decline should not be reported,since stock prices go up and down on a daily basis.

Accepted Answer

The answer of Centrex Corporation purchased 500 shares of Pfizer...

Quiz 10: Using Financial Statement Analysis to Evaluate Firm Performance

Abala Corporation purchased one hundred $1,000 bonds.The corporation intends to hold the bonds until they mature in two years.This investment is characterized as ________ securities.

Comprehensive income includes all changes in equity resulting from ________.

Available-for-sale securities are ________.

Centrex Corporation purchased 500 shares of Pfizer stock.The managers of Centrex Corporation intend to sell the shares as soon as their target price is reached,which will probably be within the next three months.This investment is characterized as ________ securities.

Comprehensive income includes ________.

Investments in debt and equity securities that a company may either hold or sell are called ________.

Comprehensive income equals ________.

Abala Corporation purchased $50,000 worth of ABC Company stock.The corporation believes that the stock price will double within a few months and plans to sell the stock as soon as its target price is reached.This investment is characterized as ________ securities.

Which of these is part of OTHER comprehensive income?

Items included in other comprehensive income include realized gains and losses from foreign currency translation.

If a company plans to hold debt securities until they mature,they are called ________.

Held-to-maturity securities are ________.

Which of these is part of OTHER comprehensive income?

Investments in debt and equity securities that a company has purchased to make a short-term profit are called ________.

Comprehensive income is the total ________.

Comprehensive income is ________.

One classification for investments in securities that is allowed by U.S.GAAP is ________.

Trading securities are ________.

Markot Corporation purchased $400,000 of securities and classified them as available-for-sale.The market value of the securities went up to $475,000.Markot Corporation should ________.