Question 1

On September 1,Parsons Company purchased $84,000,10 year,7% government bonds at 100 plus accrued interest.The semi-annual interest payment dates are June 30 and December 31.Interest calculations are done by the month.
a- Journalize the entry to record the bond purchase.
b- Journalize the receipt of interest on December 31 of the first year.
c- Journalize the sale of the bonds on February 1 of the second year for $82,000 plus accrued interest.

Accepted Answer

The answer of On September 1,Parsons Company purchased $84,000,10 year,7%...

Question 2

GAAP requires trading and available­for­sale investments to be recorded

Accepted Answer

GAAP requires trading and available-for-sale investments to be recorded at their fair value. This means that the investments are recorded at the price they would fetch if they were sold in the market at the balance sheet date. This method ensures that the financial statements reflect the most current value of the investments, which is important for decision making by investors and other stakeholders.

Question 3

On May 1,Knox Inc.purchases $100,000 of 10-year,6% Madison Corporation bonds dated March 1 at 100 plus accrued interest.What entry would Knox record when purchasing the bonds?

Accepted Answer

The answer of On May 1,Knox Inc.purchases $100,000 of 10-year,6%...

Question 4

Financial statements include assets listed at

Accepted Answer

Financial statements can include assets listed at their fair value, their historical cost, and their market value, depending on the accounting standards being applied (such as GAAP or IFRS) and the specific circumstances of the asset.

Question 5

On May 1,Cedar Inc.purchases $150,000 of 10-year,Knox Corporation 8% bonds dated March 1 at 100 plus accrued interest.What entry would Cedar record when receiving its semiannual interest on March 1?

Accepted Answer

The answer of On May 1,Cedar Inc.purchases $150,000 of 10-year,Knox...

Question 6

All of the following are disadvantages of fair value use except

Accepted Answer

Fair values can impact both the balance sheet and income statement accounts.

Question 7

Journalize the entries to record the following selected bond investment transactions for Southwest Bank: ^aPurchased $400,000 of Daytona Beach 5% bonds at 100 plus accrued interest of $4,500. ^bReceived the first semiannual interest. ^cSold $250,000 of the bonds at 97,plus accrued interest of $1,800.

Accepted Answer

The answer of Journalize the entries to record the following...

Question 8

Define debt securities and equity securities.Include their similarities and differences in your discussion.

Accepted Answer

The answer of Define debt securities and equity securities.Include their...

Question 9

Compare and contrast why companies invest cash in short-term temporary investments vs.long-term investments.

Accepted Answer

The answer of Compare and contrast why companies invest cash...

Question 10

Changes in the value of available­for­sale securities

Accepted Answer

Changes in the value of available-for-sale securities are reported as part of other comprehensive income, which is a component of stockholders' equity, rather than being recognized on the income statement. This allows for the unrealized gains or losses on these securities to be accounted for without affecting net income until they are actually realized.

Question 11

Which of the following would be considered an "other comprehensive income" item?

Accepted Answer

An unrealized loss on available-for-sale securities is considered an "other comprehensive income" item because it is not included in the calculation of net income, but rather reported as a separate component of equity. The other options are either part of net income or extraordinary items, but not considered "other comprehensive income."

Question 12

On July 5,Winter Company had a market price of $58 per share of common stock.For the prior year,Winter Co.had paid an annual dividend of $3.48 per share.What is the dividend yield for Winter Company?

Accepted Answer

The dividend yield is calculated as the annual dividend divided by the market price per share. So, $3.48 / $58 = 0.06, or 6.0%.

Question 13

Which of the following is not a part of comprehensive income?

Accepted Answer

Comprehensive income includes all changes in equity during a period except those resulting from investments by and distributions to owners. Cash flows from stock investments would be included in cash flows from financing activities in the statement of cash flows, but not in comprehensive income. A, C, and D are all parts of comprehensive income.

Question 14

Edison Corporation paid a dividend of $10 per share on its $100 par preferred stock and $4 per share on its $20 par common stock.The market value of the common stock is $80 per share.Edison's dividend yield is

Accepted Answer

The answer of Edison Corporation paid a dividend of $10...

Question 15

Companies may report comprehensive income on each of the statements below except

Accepted Answer

The answer of Companies may report comprehensive income on each...

Question 16

On May 1,Cedar Inc.purchases $100,000 of 10-year,Madison Corporation 6% bonds dated March 1 at 100 plus accrued interest.What entry would Cedar record when receiving its semiannual interest on September 1?

Accepted Answer

The answer of On May 1,Cedar Inc.purchases $100,000 of 10-year,Madison...

Question 17

A company that has 25,000 shares of $5.00 par value common stock issued and outstanding paid a dividend of $0.40 per share.The market value of the stock is $16 per share.The company's dividend yield is

Accepted Answer

Dividend Yield = (Annual Dividend per Share / Market Value per Share) x 100%
Annual Dividend per Share = $0.40
Market Value per Share = $16

Dividend Yield = (0.40 / 16) x 100% = 2.5%

Question 18

On August 1,Year 1,Ant Company sold Bee Company $1,500,000 of 10-year,6% bonds,dated July 1 at 100 plus accrued interest.On March 1,Year 2,Bee sold half of the bonds for $782,500 plus accrued interest.Present entries to record the following transactions:
Bee Company:
a. Purchase of bonds on August 1,Year 1.
b. Receipt of first semiannual interest amount on December 31,Year 1.
c. The sale of the bonds on March 1,Year 2.

Accepted Answer

The answer of On August 1,Year 1,Ant Company sold Bee...

Question 19

All of the following are factors contributing to the trend for regulators to adopt accounting principles using fair value concepts except

Accepted Answer

The answer of All of the following are factors contributing...

Question 20

The dividend yield is measured as

Accepted Answer

The dividend yield is measured as the dividends per share of common stock divided by the market price per share of common stock. This calculation reflects the return that an investor would earn from a stock in the form of dividends.

Quiz 13: Investments and Fair Value Accounting

GAAP requires trading and availableforsale investments to be recorded

On May 1,Knox Inc.purchases $100,000 of 10-year,6% Madison Corporation bonds dated March 1 at 100 plus accrued interest.What entry would Knox record when purchasing the bonds?

Financial statements include assets listed at

On May 1,Cedar Inc.purchases $150,000 of 10-year,Knox Corporation 8% bonds dated March 1 at 100 plus accrued interest.What entry would Cedar record when receiving its semiannual interest on March 1?

All of the following are disadvantages of fair value use except

Define debt securities and equity securities.Include their similarities and differences in your discussion.

Compare and contrast why companies invest cash in short-term temporary investments vs.long-term investments.

Changes in the value of availableforsale securities

Which of the following would be considered an "other comprehensive income" item?

On July 5,Winter Company had a market price of $58 per share of common stock.For the prior year,Winter Co.had paid an annual dividend of $3.48 per share.What is the dividend yield for Winter Company?

Which of the following is not a part of comprehensive income?

Edison Corporation paid a dividend of $10 per share on its $100 par preferred stock and $4 per share on its $20 par common stock.The market value of the common stock is $80 per share.Edison's dividend yield is

Companies may report comprehensive income on each of the statements below except

On May 1,Cedar Inc.purchases $100,000 of 10-year,Madison Corporation 6% bonds dated March 1 at 100 plus accrued interest.What entry would Cedar record when receiving its semiannual interest on September 1?

A company that has 25,000 shares of $5.00 par value common stock issued and outstanding paid a dividend of $0.40 per share.The market value of the stock is $16 per share.The company's dividend yield is

All of the following are factors contributing to the trend for regulators to adopt accounting principles using fair value concepts except

The dividend yield is measured as

Quiz 13: Investments and Fair Value Accounting

GAAP requires trading and available­for­sale investments to be recorded

On May 1,Knox Inc.purchases $100,000 of 10-year,6% Madison Corporation bonds dated March 1 at 100 plus accrued interest.What entry would Knox record when purchasing the bonds?

Financial statements include assets listed at

On May 1,Cedar Inc.purchases $150,000 of 10-year,Knox Corporation 8% bonds dated March 1 at 100 plus accrued interest.What entry would Cedar record when receiving its semiannual interest on March 1?

All of the following are disadvantages of fair value use except

Define debt securities and equity securities.Include their similarities and differences in your discussion.

Compare and contrast why companies invest cash in short-term temporary investments vs.long-term investments.

Changes in the value of available­for­sale securities

Which of the following would be considered an "other comprehensive income" item?

On July 5,Winter Company had a market price of $58 per share of common stock.For the prior year,Winter Co.had paid an annual dividend of $3.48 per share.What is the dividend yield for Winter Company?

Which of the following is not a part of comprehensive income?

Edison Corporation paid a dividend of $10 per share on its $100 par preferred stock and $4 per share on its $20 par common stock.The market value of the common stock is $80 per share.Edison's dividend yield is

Companies may report comprehensive income on each of the statements below except

On May 1,Cedar Inc.purchases $100,000 of 10-year,Madison Corporation 6% bonds dated March 1 at 100 plus accrued interest.What entry would Cedar record when receiving its semiannual interest on September 1?

A company that has 25,000 shares of $5.00 par value common stock issued and outstanding paid a dividend of $0.40 per share.The market value of the stock is $16 per share.The company's dividend yield is

All of the following are factors contributing to the trend for regulators to adopt accounting principles using fair value concepts except

The dividend yield is measured as

GAAP requires trading and availableforsale investments to be recorded

Changes in the value of availableforsale securities