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Exam 14: Understanding Investments in Debt and Equity Securities

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Question 111

Multiple Choice

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Which of the following is not a true statement about the accounting for long-term debt investments?

A) The investment is initially recorded at cost.
B) The cost includes any brokerage fees.
C) Debt investments include investment in government and corporation bonds.
D) The cost includes any accrued interest.

E) A) and B)
F) A) and C)

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Question 112

Multiple Choice

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Hardin Park Company had these transactions pertaining to stock investments Feb.1 Purchased 5,000 shares of Raley Company (10%) for $89,000 cash. June 1 Received cash dividends of $1 per share on Raley stock. Oct) 1 Sold 2,000 shares of Raley stock for $39,000. Dec) 1 Received cash dividends of $2 per share on Raley stock. The entry to record the receipt of the dividends June 1 would include a

A) debit to Stock Investments of $5,000.
B) credit to Dividend Revenue of $5,000.
C) debit to Dividend Revenue of $5,000.
D) credit to the Stock Investments of $5,000.

E) All of the above
F) B) and C)

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Question 113

Multiple Choice

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On January 1, 2022, Valentine Corporation purchased 25% of the common stock outstanding of Betz Corporation for $200,000.During 2022, Betz Corporation reported net income of $80,000 and paid cash dividends of $48,000.The balance of the Stock Investments-Betz account on the books of Valentine Corporation at December 31, 2022, is

Trading securities are valued on the balance sheet at market value.

Present value is based on

Hardin Park Company had these transactions pertaining to stock investments Feb.1 Purchased 5,000 shares of Raley Company (10%) for $89,000 cash. June 1 Received cash dividends of $1 per share on Raley stock. Oct) 1 Sold 2,000 shares of Raley stock for $39,000. Dec) 1 Received cash dividends of $2 per share on Raley stock. The entry to record the sale of the stock would include a

Pension funds and mutual funds are corporations that regularly invest for strategic reasons.

Some companies attempt to generate investement income through speculative investements.

Which of the following accounting problems does not involve a present value calculation?