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Multiple choice

1. Accounting for long-term investments in equity securities with controlling influence uses the:
controlling method.
equity method with consolidation.
investor method.
investment method.

2. Long-term investments are reported in the:
current asset section of the balance sheet.
intangible asset section of the balance sheet.
non-current section of the balance sheet called long-term investments.
plant assets section of the balance sheet.

3. At the end of the accounting period, the owners of debt securities:
must report the dividend income accrued on the debt securities.
must retire the debt.
must record a gain or loss on the interest income earned.
must accrue interest earned on the debt securities.

4. Equity securities are:
recorded at cost to acquire them plus accrued interest.
recorded at cost to acquire them plus dividends earned.
recorded at cost to acquire them.
not recorded until dividends are received.

5. Return on total assets measures a company's ability to:

produce net income from net sales.
produce sales from net assets.
produce net income from net assets.
increase its asset base from sales.

6. Long-term investments include:
-investments in bonds and stocks that are not marketable.
-investments in marketable stocks that are intended to be converted into cash in the short-term.
-investments in marketable bonds that are intended to be converted into cash in the short-term.
-only investments readily convertible to cash.

7. Consolidated financial statements:
-show the results of operations, cash flows, and the financial position of all entities under a parent's control.
-show the results of operations, cash flows, and the financial position of the parent only.
-show the results of operations, cash flows, and the financial position of the subsidiary only.
-include the investments account on the balance sheet.

8. A decrease in the fair market value of a security that has not yet been realized through an actual sale of the security is called a(n):
contingent loss.
realizable loss.
unrealized loss.
capitalized loss.

9. Investments in debt and equity securities that the company actively manages and trades for profit are referred to as short-term investments in:
available-for-sale securities.
held-to-maturity securities.
trading securities.
realizable securities.

Solution Preview

1. equity method with consolidation.

2. non-current section of the balance sheet called long-term investments.

3. must accrue interest earned on the debt securities.
Since interest is earned on debt securities, it needs to be accrued if not ...

Solution Summary

The solution explains some multiple choice questions relating to accounting

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