Question

1. All of the following are examples of money-market investments EXCEPT a) money-market funds. b) term deposits. c) treasury bills. d) shares of a privately held corporation. 2. Under the equity method of accounting for long-term investments in common shares, when a dividend is received from the investee company, a) the Dividend Revenue account is credited. b) the Investment in Associate account is increased. c) the Investment in Associate account is decreased. d) no entry is necessary 3. If a company acquires a 40% common share interest in another company, a) the equity method is usually applicable. b) all influence is classified as controlling c) the cost method is always applicable d) the ability to exert significant influence over the activities of the investee does not exist 4. Short-term debt investments are most likely listed on the balance sheet immediately below a) cash b) inventory c) accounts receivable. d) prepaid expenses 5. Lancaster Landscaping Limited reported the following on its income statement: Profit before income taxes $560,000 Income tax expense 140.000 Profit $420.000 An analysis of the income statement revealed that interest expense was $40,000. Lancaster's interest coverage ratio was a) 15 times b) 14 times c) 10.5 times. d) 11.5 times. 6) Companies generally purchase investments in debt and equity securities a) to generate a return on excess cash until needed. b) to generate investment income. c) to meet strategic goals. d) all of the above

Answer 1

Answer for the questions are :

1. (d)Shares of a privately held corporation.
2. (a)The Dividend Revenue Account is credited.
3. (d)The ability to exert significant influence over the activities of the investee does not exist.
4. (a)Cash.
5. (b)14 Times.
6. (d)All of the above.
7. (a)Only for common shares.
8. (a)Productive capacity analysis.
9. (c)Marketability.
10. (b)Liquidity.
11. (a)Intracompany comparisons.
12. (d)Intracompany analysis.
13. (d)12%.
14. (d)6 Times.
15. (d)Has significant influence over the associate.