Intermediate Accounting Study Set 7

Business

Quiz 16 :

Investing Assets

Quiz 16 :

Investing Assets

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Debt securities represent an investment by one company into the common or preferred shares of another company.
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True False
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False

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Both trading debt securities and held-to-maturity debt securities are valued at fair value.
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True False
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False

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All of the following are key questions that must be addressed when accounting for investments in debt and equity securities except ________.
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Multiple Choice
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C

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Bonds are priced such that their yield will be the same as the stated rate of interest.
True False
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Altima Corporation actively manages a portfolio of publicly traded stock funded with excess cash. The purpose of the portfolio is to generate gains on sales and the portfolio is reported at fair value. This method of accounting is consistent with the qualitative characteristic of ________ from the conceptual framework.
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Equity securities are an investment in the common or preferred shares of another company.
True False
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Companies classify debt securities in one of two ways: available-for-sale or held-to-maturity.
True False
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Zenith Corporation reports its investments in debt securities at cost. This method of accounting is consistent with the qualitative characteristic of ________ from the conceptual framework.
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Companies determine the cost of held-to-maturity debt securities as the present value of the future cash flows, discounted at the stated rate of interest.
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What key questions must be addressed when accounting for investments in debt and equity securities?
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How do the qualitative characteristics of relevance and faithful representation relate to the measurement bases used for investments?
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A company reports unrealized gains or losses from trading debt securities in other comprehensive income.
True False
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Companies determine the cost of held-to-maturity debt securities as the present value of the future cash flows, discounted at the market rate of interest.
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A separate fair value adjustment account is typically used to reflect the difference between the fair value and the cost of the investment so as to avoid excessive changes in the investment account itself.
True False
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Bonds are priced in the market so that their ________ is the same as the market rate of interest.
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Investments in securities of other companies are classified as either debt securities or equity securities.
True False
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Available-for-sale debt securities are reported at fair value, with unrealized gains or losses reported in other comprehensive income.
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Changes in the fair value of trading debt securities are reported in other comprehensive income.
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Only debt securities can be classified as held-to-maturity securities.
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Yield is the actual return investors receive on investments in bonds.
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