Question 1 Corporations invest in other companies for all of the following reasons except to Questio

Small Groups and Communities
June 29, 2020
managing diversity 19
June 29, 2020

Question 1 Corporations invest in other companies for all of the following reasons except to Questio

 Question 1
Corporations invest in other companies for all of the
following reasons except to
Question options:

increase trading of the other companies’ stock.

meet strategic goals.

house excess cash until needed.

generate earnings.
Question 2
If a short-term debt investment is sold, the Investment
account is
Question options:

credited for the cost of the bonds at the sale date.

debited for the cost of the bonds at the sale date.

credited for the book value of the bonds at the sale date.

credited for the fair value of the bonds at the sale date.
Question 3
Blaine Company had these transactions pertaining to stock
investments:
• Feb. 1
Purchased 2,000 shares of Horton Company (10%) for $51,000.
• June 1
Received cash dividends of $2 per share on Horton stock.
• Oct. 1
Sold 1,200 shares of Horton stock for $33,000 less brokerage fees of $600.
The entry to record the sale of the stock would include a
Question options:

debit to Cash for $32,400.

credit to Gain on Sale of Stock Investments for $1,800.

credit to Gain on Sale of Stock Investments for $1,200.

debit to Stock Investments for $30,600.
Question 4
Mize Company owns 30% interest in the stock of Lyte
Corporation. During the year, Lyte pays $20,000 in dividends to Mize, and
reports $300,000 in net income. Mize Company’s investment in Lyte will increase
Mize?s net income by
Question options:

$10,000.

$6,000.

$96,000.

$90,000.
Question 5
For accounting purposes, the method used to account for
long-term investments in common stock is determined by
Question options:

the extent of an investor’s influence on the operating and
financial affairs of the investee.

whether the acquisition of the stock by the investor was
friendly or hostile.

the amount paid for the stock by the investor.

whether the stock has paid dividends in past years.
Question 6
If an investor owns less than 20% of the common stock of
another corporation as a long-term investment,
Question options:

no dividends can be expected.

the equity method of accounting for the investment should be
employed.

it is presumed that the investor has significant influence
on the investee.

it is presumed that the investor has relatively little
influence on the investee.
Question 7
When an investor owns between 20% and 50% of the common
stock of a corporation, it is generally presumed that the investor
Question options:

should apply the cost method in accounting for the
investment.

has insignificant influence on the investee and that the
cost method should be used to account for the investment.

will prepare consolidated financial statements.

has significant influence on the investee and that the
equity method should be used to account for the investment.
Question 8
Revenue is recognized when cash dividends are received under
Question options:

the cost method.

the equity method.

both the cost and equity methods.

the controlling interest method.
Question 9
Viejo Inc. earns $450,000 and pays cash dividends of
$150,000 during 2014. Cruz Corporation owns 73,500 of the 210,000 outstanding
shares of Viejo. How much revenue from investment should Viejo report in 2014?
Question options:

$105,000

$52,500

$210,000

$157,500
Question 10
When a company owns more than 50% of the common stock of
another company,
Question options:

controlling financial statements are prepared.

affiliated financial statements are prepared.

consolidated financial statements are prepared.

significant financial statements are prepared.
Question 11
Short-term stock investments should be valued on the balance
sheet at
Question options:

the higher of cost or fair value.

cost.

the lower of cost or fair value.

fair value.
Question 12
If the cost of an available-for-sale security exceeds its
fair value by $40,000, the entry to recognize the loss
Question options:

is not required since the share prices will likely rebound
in the long run.

will show a credit to a contra-asset account that appears in
the stockholders’ equity section of the balance sheet.

will show a debit to an unrealized loss account that is
deducted in the stockholders’ equity section of the balance sheet.

will show a debit to an expense account.
Question 13
At the end of the first year of operations, the total cost
of the trading securities portfolio is $245,000. Total fair value is $250,000. The financial statements should show
Question options:

an addition to an asset of $5,000 and a realized gain of
$5,000.

an addition to an asset of $5,000 and an unrealized gain of
$5,000 in the stockholders’ equity section.

an addition to an asset of $5,000 in the current assets
section and an unrealized gain of $5,000 in “Other revenues and
gains.”

an addition to an asset of $5,000 in the current assets
section and a realized gain of $5,000 in “Other revenues and gains.”
Question 14
Comanic Corp. has common stock of $5,400,000, retained
earnings of $2,000,000, unrealized gains on trading securities of $100,000 and
unrealized losses on available-for-sale securities of $200,000. What is the total amount of its stockholders’
equity?
Question options:

$7,300,000

$7,200,000

$7,400,000

$7,500,000
Question 15
Beak Corporation sells 200 shares of common stock being held
as an investment. The shares were acquired six months ago at a cost of $25 a
share. Beak sold the shares for $40 a share. The entry to record the sale is
Question options:

Stock Investments 8,000
Cash 8,000

Cash 8,000
Stock Investments 3,000

Cash 5,000
Bonds Payable 3,000
Stock Investments 8,000

Cash 8,000
Gain on Sale of Stock Investments 3,000
Stock Investments 5,000

Question 16
A legal document which summarizes the rights and privileges
of bondholders as well as the obligations and commitments of the issuing
company is called
Question options:

a bond debenture.

a bond indenture.

a term bond.

trading on the equity.
Question 17
Stockholders of a company may be reluctant to finance
expansion through issuing more equity because
Question options:

their earnings per share may decrease.

the price of the stock will automatically decrease.

leveraging with debt is always a better idea.

dividends must be paid on a periodic basis.
Question 18
Which of the following is not an advantage of issuing bonds
instead of common stock?
Question options:

Income to common shareholders may increase.

Stockholder control is not affected.

Earnings per share on common stock may be lower.

Tax savings result.
Question 19
A major disadvantage resulting from the use of bonds is that
Question options:

taxes may increase.

bondholders have voting rights.

earnings per share may be lowered.

interest must be paid on a periodic basis.
Question 20
If the market interest rate is greater than the contractual
interest rate, bonds will sell
Question options:

at face value.

at a premium.

only after the stated interest rate is increased.

at a discount.
Question 21
If the market interest rate is 5%, a $10,000, 6%, 10-year
bond, that pays interest semiannually would sell at an amount
Question options:

that cannot be determined.

greater than face value.

less than face value.

equal to face value.
Question 22
Martinez Corporation issues 2,000, 10-year, 8%, $1,000 bonds
dated January 1, 2014, at 98. The journal entry to record the issuance will
show a
Question options:

debit to Cash for $1,960,000.

credit to Bonds Payable for $2,040,000.

debit to Cash of $2,000,000.

credit to Discount on Bonds Payable for $40,000.
Question 23
If bonds are issued at a discount, it means that the
Question options:

bondholder will receive effectively less interest than the
contractual interest rate.

market interest rate is lower than the contractual interest
rate.

financial strength of the issuer is suspect.

market interest rate is higher than the contractual interest
rate.
Question 24
In the balance sheet, the account, Premium on Bonds Payable,
is
Question options:

classified as a revenue account.

added to bonds payable.

deducted from bonds payable.

classified as a stockholders’ equity account.
Question 25
Bond interest paid is
Question options:

the same whether bonds sell at a discount or a premium.

lower when bonds sell at a premium.

higher when bonds sell at a discount.

higher when bonds sell at a discount and lower when bonds
sell at a premium.
Question 26
Bond Corporation issues 5,000, 10-year, 8%, $1,000 bonds
dated January 1, 2014, at 103. The journal entry to record the issuance will
show a
Question options:

credit to Bonds Payable for $5,030,000.

credit to Premium on Bonds Payable for $150,000.

debit to Cash of $5,000,000.

credit to Cash for $5,150,000.
Question 27
Lowe Company has $1,500,000 of bonds outstanding. The
unamortized premium is $19,600. If the company redeemed the bonds at 101, what
would be the gain or loss on the redemption?
Question options:

$15,000 loss

$4,600 gain

$4,600 loss

$15,000 gain
Question 28
Robin Corporation retires its $800,000 face value bonds at
104 on January 1, following the payment of annual interest. The carrying value of the bonds at the
redemption date is $829,960. The entry
to record the redemption will include a
Question options:

debit of $2,040 to Loss on Bond Redemption.

debit of $32,000 to Premium on Bonds Payable.

credit of $2,040 to Loss on Bond Redemption.

credit of $32,040 to Premium on Bonds Payable.
Question 29
If there is a loss on bonds redeemed early, the
Question options:

bonds’ carrying value was less than the redemption price.

bonds’ carrying value was greater than the redemption price.

loss is debited to Interest Expense, as a cost of financing.

loss is debited directly to Retained Earnings.
Question 30
Over the term of the bonds, the balance in the Discount on
Bonds Payable account will
Question options:

increase.

fluctuate up and down if the market is volatile.

decrease.

be unaffected until the bonds mature.
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Question 1 Corporations invest in other companies for all of the following reasons except to Questio was first posted on June 29, 2020 at 3:48 pm.
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