Question

1. Which of the following is part (U I UIRES) Theory the following is part of the objective of investing in temporary investments A. Receive dividends. B. Earn interest revenue. C. Realize gains from increases in the market price of the securities. D. All of the above. 2. When a company has excess cash that is not needed for current operations, the excess can should be invested in debt securities and/or equity securities. A. True. B. False. 3. An investment in bonds includes the purchase price of the bonds, including any brokerage commissions. A. True. B. False. 4. The equity method of accounting for investments requires A. The investment to be reported at its original cost. B. A year-end adjustment to revalue the stock to lower of cost or market. C. The investment to be increased by the reported net income of the investee. D. The investment to be increased by the dividends paid by the investee. 5. When a corporation owns less than 20% of the stock of another company, dividends received are treated as income. A. True. B. False. 6. Which of the following methods should be used for a stock investment of 60%? A. Cost method. B. Equity method. C. Consolidation method. D. None of the above. 7. GAAP requires trading and available-for-sale investments to be reported at their A. Historical cost. C. Amortized cost, B. Fair value. D. Net realizable value.

Answer 1

1. D ( All of the above)

2. A (True)

3. A (True)

4. C ( The investments to be increased by the net income of the investee)

5. B(False)

6. C ( Consolidated method)

7. B (Fair value).