Question 1

Available-for-sale debt securities are valued on the balance sheet at

Accepted Answer

Available-for-sale debt securities are valued on the balance sheet at fair value, which is the market value of the security at the end of the reporting period. This means that their value is adjusted to reflect current market conditions and may fluctuate over time as market conditions change.

Question 2

Held-to-maturity securities are valued on the balance sheet at

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Question 3

When a company receives a dividend from its investee,what will be the effect on the financial statements of the investing company if it uses the equity method?

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Question 4

A short-term investment in a U.S.Treasury bill costs $24,400 and will mature six months later at $25,000.Management intends to hold the investment until it matures.The entry to record the adjusting entry on December 31,assuming three months have passed is:

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Question 5

Foltz Corporation purchased 3,000 shares of Craver Corporation common stock for $160 per share on January 1,2013,as a long-term investment.Craver reported net income of $140,000 and $180,000 for 2013 and 2014,respectively,and paid dividends of $50,000 and $60,000 during 2013 and 2014,respectively.Craver has a total of 10,000 shares outstanding.Compute the following amounts:
a.Investment income recognized by Foltz Corporation during 2013
b.Balance of Investment in Craver Corporation account at end of 2013
c.Amount of investment income recognized by Foltz Corporation during 2014
d.Balance of Investment in Craver Corporation account at end of 2014

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Question 6

Distinguish between the financial statement presentation of unrealized gains and losses related to trading securities and the financial statement presentation of unrealized gains and losses related to available-for-sale securities.

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Question 7

How is the purchase of long-term investments in bonds accounted for when purchased between interest payment dates?

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Question 8

A short-term investment in a U.S.Treasury bill costs $24,400 and will mature six months later at $25,000.Management intends to hold the investment until it matures.The entry to record the initial investment is:

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Question 9

The following transactions and information pertain to Graczyk Corporation for 2014.Prepare journal entries to record these transactions (omit explanations):

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Question 10

When the accounting period ends before U.S.Treasury bills are scheduled to mature,the investor's adjusting entry would include a

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Question 11

Discuss the financial statement presentation of the account Allowance to Adjust Short-Term Investments to Market,distinguishing between the effect of a debit balance and the effect of a credit balance in the account.

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Question 12

When bonds are intended to be held to maturity,they are accounted for at

Accepted Answer

When bonds are intended to be held to maturity, they are accounted for at cost adjusted for the amortization of their discount or premium. This is because the intention is to hold the bonds until maturity, so the fair value fluctuations are not relevant. The cost of acquiring the bonds and the amortization of the discount or premium are used to determine the bond's carrying value on the balance sheet.

Quiz 28: Accounting for Investments