Goals Achievement: Chapter Nine
The specific accounting treatment for a long-term investment depends on the type of security purchased, not the intent of the investment.
true Incorrect or falseCorrect
In evaluating the correct accounting choice (e.g., held-to--maturity, etc.) for a particular investment, which of the following is most apt to be regarded as the "default" choice?
trading securities Incorrect or available for sale securitiesCorrect
The biggest difference between accounting for trading securities and available for sale securities has to do with:
the asset measurement Incorrect or how changes in value are recognizedCorrect
Changes in market value of available-for-sale securities will directly impact:
stockholders' equity Correct or net incomeIncorrect
The most popular approach to reporting adjustments to "other comprehensive income" is through the:
stockholders' equity Correct or direct adjustment of the income statementIncorrect
Presently, the accounting profession purports to use which conceptual approach to measuring income:
current operating Incorrect or all inclusiveCorrect
When accounting for available-for-sale securities, the amount of investee earnings has no direct effect on the investor's Investment account.
true Correct or falseIncorrect
Dividends received on available-for-sale security investments are reported as income.
true Correct or falseIncorrect
Bond investments are initially entered into the accounts at cost; that is, the purchase price plus brokerage fees and other related acquisition costs.
true Correct or falseIncorrect
A premium on an investment in bonds would likely result when the contract rate is "what" in relation to the going market rate?
above Correct or belowIncorrect
The amortization of a premium on a bond investment causes interest income to be:
reduced Correct or increasedIncorrect
The amortization of a discount on a bond investment causes interest income to be:
reduced Incorrect or Correct increased
The excess of the cash received on a bond investment over the initial investment cost is recognized as:
return of investment Incorrect or incomeCorrect
The amortization method that results in a level amount of interest income each period was illustrated in this chapter. An alternative amortization method will be illustrated in subsequent chapters. The method shown is this chapter was the:
straight-line method Correct or effective-interest methodIncorrect
The equity method involves journal entries at the time the investee's earnings are announced, as well as when:
dividends are paid Correct or market value declinesIncorrect
The equity method of accounting for an investment occurs when the investor has the ability to exercise significant influence over the investee, which is presumed to be the case when the investment level reaches:
Under the equity method, the investor's investment account goes up and down with the investees:
equity Correct or cashIncorrect
Consolidated financial statements are normally required when the investor's ownership level exceeds the:
20% level Incorrect or 50% levelCorrect
When consolidating, which of the following accounts would be eliminated from the consolidated presentation:
Goodwill Incorrect or Investment in SubsidiaryCorrect
Goodwill is the excess of the investment cost over "book value" or over "fair value" of the subsidiaries identifiable assets?
Book Value Incorrect or Fair ValueCorrect