Question 1

The fair value of an investment is the price that ________.

Accepted Answer

The fair value of an investment is the price that would be received if the company were to sell the investment on the market. It is not necessarily the price that existed at the time of acquisition or always equal to the weighted average cost of the investment. While fair value is relevant for trading investments, it is also important for other types of investments such as available-for-sale or held-to-maturity securities.

Question 2

List and briefly describe the method used to account for investments in equity securities with 50% or more ownership.

Accepted Answer

The answer of List and briefly describe the method used...

Question 3

Which of the following accounting methods is used to account for controlling interest investments?

Accepted Answer

The consolidation method is used to account for controlling interest investments. This method involves combining the financial statements of the parent company and its subsidiaries into one set of consolidated financial statements. The equity method is used for investments where the investor has significant influence but not control, while the acquisition method is used for business combinations where control is obtained. The discounted cash flow method is a valuation method used to estimate the value of an investment based on its future cash flows.

Question 4

Which of the following is true of trading investments?

Accepted Answer

Trading investments are bought and held with the intention of selling them in the short-term to make a profit. Therefore, they must be adjusted and reported at fair value at the end of each accounting period in order to reflect their current market value.

Question 5

When a loss is recorded on the sale of a significant interest investment,________.

Accepted Answer

When a loss is recorded on the sale of a significant interest investment, it means that the selling price was lower than the initial cost. This results in a decrease in the value of the investment and therefore a decrease in total assets since assets are recorded at cost. There will be no impact on equity as only the value of the investment and not the amount of funding was affected.

Question 6

Consolidated statements combine the balance sheets,income statements,and statements of cash flow of the parent company with those of its controlling interest affiliates.

Accepted Answer

Consolidated statements aim to provide a comprehensive view of the financial position and performance of a parent company and its subsidiaries, including controlling interests.

Question 7

At the end of each accounting period,trading securities must be adjusted and reported at fair value.

Accepted Answer

This statement is true. Trading securities must be adjusted and reported at fair value at the end of each accounting period.

Question 8

Complete the following statement:
-
When a company invests in equity securities with 20% to 50% ownership in the investee's _______ stock,the investor can ________ ________ the investee's decisions.These types of investments must be accounted for using the ________ method.

Accepted Answer

The answer of Complete the following statement:
-
When a company invests...

Question 9

Companies make a year-end adjustment of the trading investment to bring the account to historical value.

Accepted Answer

The answer of Companies make a year-end adjustment of the...

Question 10

Realized gains or losses occur when a company adjusts an asset to fair value but has not yet disposed of the asset.

Accepted Answer

Realized gains or losses occur when a company disposes of the asset.

Question 11

Unrealized holding gains or losses on trading investments are reported in the ________.

Accepted Answer

Unrealized holding gains or losses on trading investments are reported in the income statement under other revenues and expenses because they affect net income.

Question 12

A parent company is a company that ________.

Accepted Answer

A parent company owns a controlling interest in another company, meaning it has the power to direct and influence the subsidiary's operations and decisions.

Question 13

Which of the following is true of consolidated statements?

Accepted Answer

The answer of Which of the following is true of...

Question 14

A subsidiary company is a company that ________.

Accepted Answer

A subsidiary company is a separate legal entity that is controlled by another corporation, known as the parent company. The parent company owns the majority of the subsidiary's shares and has the power to appoint the subsidiary's board of directors and make major business decisions.

Question 15

Diamond Investments,Inc.purchased 40% of the common stock of Ivory Corporation on March 1,2016.Ivory Corporation reports a net income of $675,000 for the year 2017.Which of the following is true of the balance sheet on December 31,2017?

Accepted Answer

Since Diamond Investments, Inc. purchased 40% of Ivory Corporation's common stock, it now holds a significant interest in the corporation, which means that it will be able to benefit from Ivory Corporation's net income. Thus, when Ivory Corporation reports a net income of $675,000 for the year 2017, this will increase the equity of Ivory Corporation, and consequently, Diamond Investments, Inc.'s equity will increase as well. Therefore, total equity will increase on the balance sheet as of December 31, 2017.

Question 16

When there is an unrealized loss on trading investments,the ________ will decrease.

Accepted Answer

Unrealized losses on trading investments are recorded as a decrease in the total equity of the company. This is because trading investments are classified as assets, and a decrease in their value directly affects the net worth of the company or its equity.

Question 17

Maize Corporation pays $532,000 for 100,000 shares to acquire 45% common stock of Teal Investments,Inc.on January 5,2017.Maize Corporation sells 20,000 shares for $40,000 on January 6,2017.Which of the following is the correct journal entry for the transaction on January 6,2017? (Round any intermediate calculations to two decimal places,and your final answer to the nearest dollar. )

Accepted Answer

The cost per share is $532,000 / 100,000 = $5.32. Selling 20,000 shares at $5.32 per share gives a cost of $106,400. The sale price is $40,000, resulting in a loss of $66,400 ($106,400 - $40,000).

Question 18

Consolidation accounting is the way to combine the financial statements of two or more companies that have the same owners.

Accepted Answer

Consolidation accounting is the process of combining the financial statements of two or more companies that are under the same ownership or control to present a single set of financial statements for the entire group. This is done to provide a more accurate picture of the financial performance and position of the group as a whole.

Question 19

The fair value of a trading security is the price that would be used if the company were to sell the investment on the market.

Accepted Answer

The fair value of a trading security is indeed the price that would be used if the company were to sell the investment on the market.

Question 20

A company that is controlled by another corporation is called a parent company.

Accepted Answer

The answer of A company that is controlled by another...

Quiz 10: Investments

The fair value of an investment is the price that ________.

List and briefly describe the method used to account for investments in equity securities with 50% or more ownership.

Which of the following accounting methods is used to account for controlling interest investments?

Which of the following is true of trading investments?

When a loss is recorded on the sale of a significant interest investment,________.

Consolidated statements combine the balance sheets,income statements,and statements of cash flow of the parent company with those of its controlling interest affiliates.

At the end of each accounting period,trading securities must be adjusted and reported at fair value.

Complete the following statement: - When a company invests in equity securities with 20% to 50% ownership in the investee's _ stock,the investor can the investee's decisions.These types of investments must be accounted for using the __ method.

Companies make a year-end adjustment of the trading investment to bring the account to historical value.

Realized gains or losses occur when a company adjusts an asset to fair value but has not yet disposed of the asset.

Unrealized holding gains or losses on trading investments are reported in the ________.

A parent company is a company that ________.

Which of the following is true of consolidated statements?

A subsidiary company is a company that ________.

Diamond Investments,Inc.purchased 40% of the common stock of Ivory Corporation on March 1,2016.Ivory Corporation reports a net income of $675,000 for the year 2017.Which of the following is true of the balance sheet on December 31,2017?

When there is an unrealized loss on trading investments,the ________ will decrease.

Consolidation accounting is the way to combine the financial statements of two or more companies that have the same owners.

The fair value of a trading security is the price that would be used if the company were to sell the investment on the market.

A company that is controlled by another corporation is called a parent company.

Quiz 10: Investments

The fair value of an investment is the price that ________.

List and briefly describe the method used to account for investments in equity securities with 50% or more ownership.

Which of the following accounting methods is used to account for controlling interest investments?

Which of the following is true of trading investments?

When a loss is recorded on the sale of a significant interest investment,________.

Consolidated statements combine the balance sheets,income statements,and statements of cash flow of the parent company with those of its controlling interest affiliates.

At the end of each accounting period,trading securities must be adjusted and reported at fair value.

Complete the following statement: - When a company invests in equity securities with 20% to 50% ownership in the investee's _______ stock,the investor can ________ ________ the investee's decisions.These types of investments must be accounted for using the ________ method.

Companies make a year-end adjustment of the trading investment to bring the account to historical value.

Realized gains or losses occur when a company adjusts an asset to fair value but has not yet disposed of the asset.

Unrealized holding gains or losses on trading investments are reported in the ________.

A parent company is a company that ________.

Which of the following is true of consolidated statements?

A subsidiary company is a company that ________.

Diamond Investments,Inc.purchased 40% of the common stock of Ivory Corporation on March 1,2016.Ivory Corporation reports a net income of $675,000 for the year 2017.Which of the following is true of the balance sheet on December 31,2017?

When there is an unrealized loss on trading investments,the ________ will decrease.

Consolidation accounting is the way to combine the financial statements of two or more companies that have the same owners.

The fair value of a trading security is the price that would be used if the company were to sell the investment on the market.

A company that is controlled by another corporation is called a parent company.

Complete the following statement: - When a company invests in equity securities with 20% to 50% ownership in the investee's _ stock,the investor can the investee's decisions.These types of investments must be accounted for using the __ method.