Question 1

Six months ago,a company purchased an investment in stock for $65,000.This investment is considered available-for-sale.The current market value of the stock is $68,500.The company should record a:
A) Debit to Unrealized Loss-Equity for $3,500.
B) Credit to Unrealized Gain-Equity for $3,500.
C) Debit to Investment Revenue for $3,500.
D) Credit to Market Adjustment - Available-for-Sale for $3,500.
E) Credit to Investment Revenue for $3,500.

Accepted Answer

Current market value $68,500 - cost $65,000 = $3,500

Question 2

A company's return on total assets equals 28%.If total assets and net sales are $4,500,000 and $10,000,000 respectively,how much is net income?
A) $2,800,000
B) $4,060,000
C) $1,260,000
D) $14,500,000
E) $2,030,000

Accepted Answer

$4,500,000 * 0.28 = $1,260,000

Question 3

Acme owns 4,000 shares of XYZ.XYZ has 50,000 total shares of stock outstanding.XYZ paid $0.82 per share in cash dividends to its stockholders.Acme should record a:
A) Debit to Dividends for $41,000.
B) Debit to Dividends for $3,280.
C) Debit to Cash for $3,280.
D) Debit to Long-Term Investments for $3,280.
E) Credit to Long-Term Investments for $3,280.

Accepted Answer

Percent of total stock owned: 4,000 shares/50,000 shares = 8%
4,000 x $0.82 = $3,280

Question 4

Available-for-sale debt securities are:
A) Recorded at cost and remain at cost over the life of the investment.
B) Reported at historical cost, adjusted for the amortized amount of any difference between cost and maturity value.
C) Reported at market value on the balance sheet.
D) Intended to be held to maturity.
E) Always classified with Long-Term Liabilities.

Accepted Answer

Available-for-sale debt securities are reported at fair value on the balance sheet, with unrealized gains or losses reported in other comprehensive income until sold. They are not recorded at cost and they are not intended to be held to maturity. They are also not classified as long-term liabilities. Option B describes held-to-maturity debt securities.

Question 5

A decrease in the fair market value of a security that has not yet been realized through an actual sale of the security is called a(n):
A) Contingent loss
B) Realizable loss
C) Unrealized loss
D) Capitalized loss
E) Market loss

Accepted Answer

An unrealized loss is a decrease in the fair market value of a security that has not yet been realized through an actual sale of the security. The other options are not correct: 
A) A contingent loss is a potential loss that depends on the occurrence of a future event. 
B) A realizable loss is a loss that has been realized through the sale of a security. 
D) A capitalized loss is a loss that is recognized on a company's financial statements as a result of an accounting principle, such as depreciation or amortization. 
E) A market loss is a loss incurred due to changes in the overall market, not necessarily specific to a particular security.

Question 6

Doherty Corporation had net income of $30,000,net sales of $1,000,000,and average total assets of $500,000.Its return on total assets is equal to:
A) 3%
B) 200%
C) 6%
D) 17%
E) 1.5%

Accepted Answer

$30,000/$500,000 = 6%

Question 7

A company had net income of $2,660,000,net sales of $25,000,000,and average total assets of $8,000,000.Its return on total assets is equal to:
A) 3.01%
B) 10.64%
C) 32.00%
D) 33.25%
E) 300.75%

Accepted Answer

Return on total assets = $2,660,000/$8,000,000 = 33.25%

Question 8

Micron owns 3,000 shares of JVT.JVT has 25,000 total shares of stock outstanding.JVT paid $3 per share in cash dividends to its stockholders.Micron should record a:
A) Debit to Dividends for $75,000.
B) Debit to Dividends for $9,000.
C) Debit to Cash for $9,000.
D) Debit to Long-Term Investments for $9,000.
E) Credit to Long-Term Investments for $9,000.

Accepted Answer

Percent of total stock owned: 3,000 shares/25,000 shares = 12%
3,000 x $3 = $9,000 received

Question 9

A company had net income of $43,000,net sales of $380,500,and average total assets of $220,000.Its profit margin and total asset turnover were,respectively:
A) 11.3%; 1.73
B) 11.3%; 19.5
C) 1.7%; 19.5
D) 1.7%; 11.3
E) 19.5%; 11.3

Accepted Answer

Profit margin: $43,000/$380,500 = 11.3%
Asset turnover: $380,500/$220,000 = 1.73

Question 10

A company has net income of $250,000,net sales of $2,000,000,and average total assets of $1,500,000.Its return on total assets is equal to:
A) 12.5%
B) 13.3%
C) 16.7%
D) 75.0%
E) 600.0%

Accepted Answer

Return on total assets = $250,000/$1,500,000 = 16.7%

Question 11

A company had net income of $40,000,net sales of $300,000,and average total assets of $200,000.Its profit margin and total asset turnover were respectively:
A) 13.3%; 0.2
B) 13.3%; 1.5
C) 2.0%; 1.5
D) 1.5%; 0.2
E) 1.5%; 13.3

Accepted Answer

Profit margin: $40,000/$300,000 = 13.3%
Asset turnover: $300,000/$200,000 = 1.5

Question 12

A company had net income of $82,000,net sales of $781,000,and average total assets of $300,000.Its profit margin and total asset turnover were respectively:
A) 10.5%; 0.38
B) 10.5%; 2.6
C) 9.52%; 2.6
D) 27.3%; 1
E) 27.3%; 9.52

Accepted Answer

Profit margin: $82,000/$781,000 = 10.5%
Asset Turnover: $781,000/$300,000 = 2.6

Question 13

Investments in trading securities:
A) Include only equity securities.
B) Are reported as current assets.
C) Include only debt securities.
D) Are reported at their cost, no matter what their market value.
E) Are long-term investments.

Accepted Answer

Investments in trading securities are considered short-term investments and are reported as current assets because they are expected to be sold within a year. They can include both equity and debt securities, and are reported at their fair market value, not their cost.

Question 14

A company's return on total assets equals 30%.If net income and net sales are $900,000 and $8,900,000 respectively,what is the amount of total assets?
A) $2,670,000
B) $270,000
C) $29,666,667
D) $3,000,000
E) $2,940,000

Accepted Answer

$900,000/0.30 = $3,000,000

Question 15

A company had net income of $2,785,000,net sales of $250,000,000,average total assets of $6,000,000,and equity investments of $40,000.Its return on total assets equals:
A) $3,215,000
B) 41.67%
C) 21.54%
D) 69.63%
E) 46.42%

Accepted Answer

Return on total assets = $2,785,000/$6,000,000 = 46.42%

Question 16

Morgan Company purchased 2,000 shares of Asta's common stock for $143,000 as a long-term investment and is considered available-for-sale.The par value of the stock was $1 per share.Morgan paid $375 in commissions on the transaction.The entry to record the transaction would include a:
A) Credit to Common Stock for $2,000.
B) Credit to Common Stock for $143,000.
C) Credit to Common Stock for $143,375.
D) Debit to Long-Term Investments for $143,000.
E) Debit to Long-Term Investments for $143,375.

Accepted Answer

The answer of Morgan Company purchased 2,000 shares of Asta's...

Question 17

Return on total assets measures a company's ability to:
A) Produce net income from net sales.
B) Produce sales from net assets.
C) Produce net income from net assets.
D) Increase its asset base from sales.
E) Increase its asset base from net income.

Accepted Answer

Return on total assets (ROTA) is a profitability ratio that measures a company's ability to generate net income from its total assets. It indicates how efficient a company is in using its assets to generate profits. ROTA is calculated by dividing net income by total assets.

Question 18

A company had investments in long-term available-for-sale securities.At the end of the current year,the company's portfolio had a $162,000 cost and $164,000 market value.
What is the current year's adjustment to market value given the following account balances at the end of the prior year?

A) $$\begin{array} { | c | l | l | } 
\hline \text { Market Adjustment - Available-for-Sale } \ldots \ldots \ldots \ldots \ldots & \text { 2,000 } & \
\hline \text { Ururealized Gain Equity } \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots & & 2,000  \
\hline
\end{array}$$
B) $$\begin{array} { | c | l | l | } 
\hline \text { Market Adjustment - Available-for-Sale } \ldots \ldots \ldots \ldots \ldots & 1,000 & \
\hline \text { Ururealized Gain Equity } \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots & & 1,000 \
\hline
\end{array}$$
C) $$\begin{array} { | l | l | l |} 
\hline \text { Ururealized Gain Equity } \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots  & 1,000 \
\hline\quad \text { Market Adjustment - Available-for-Sale } \ldots \ldots \ldots \ldots \ldots && 1,000  \

\hline
\end{array}$$
D) $$\begin{array} { | l | l | l |} 
\hline \text { Ururealized Gain Equity } \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots  & 2,000 \
\hline\quad \text { Market Adjustment - Available-for-Sale } \ldots \ldots \ldots \ldots \ldots && 2,000  \

\hline
\end{array}$$
E) $$\begin{array} { | l | l | l |} 
\hline \text { Ururealized Gain Equity } \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots  & 3,000 \
\hline\quad \text { Market Adjustment - Available-for-Sale } \ldots \ldots \ldots \ldots \ldots && 3,000  \

\hline
\end{array}$$

Accepted Answer

Prior year balances $3,000 excess of market over cost
Desired current year balances 2,000 excess of market over cost
Amount of decrease 1,000

Question 19

Investments in debt and equity securities that the company actively manages and trades for profit are referred to as short-term investments in:
A) Available-for-sale securities.
B) Held-to-maturity securities.
C) Trading securities.
D) Realizable securities.
E) Liquid securities.

Accepted Answer

Short-term investments that are actively managed and traded for profit are referred to as trading securities.

Question 20

Held-to-maturity securities are:
A) Always classified as long-term liabilities.
B) Part of equity.
C) Debt securities that a company intends and is able to hold to maturity.
D) Equity securities that a company intends and is able to hold to maturity.
E) Equity securities that have a maturity value greater than cost.

Accepted Answer

Held-to-maturity securities refer to debt securities that a company intends and is able to hold to maturity. They are recorded at cost and are reported as long-term assets on the balance sheet. Options A, B, D, and E do not accurately describe held-to-maturity securities.

Quiz 27: Investments and International Operations

Six months ago,a company purchased an investment in stock for $65,000.This investment is considered available-for-sale.The current market value of the stock is $68,500.The company should record a:

A company's return on total assets equals 28%.If total assets and net sales are $4,500,000 and $10,000,000 respectively,how much is net income?

Acme owns 4,000 shares of XYZ.XYZ has 50,000 total shares of stock outstanding.XYZ paid $0.82 per share in cash dividends to its stockholders.Acme should record a:

Available-for-sale debt securities are:

A decrease in the fair market value of a security that has not yet been realized through an actual sale of the security is called a(n) :

Doherty Corporation had net income of $30,000,net sales of $1,000,000,and average total assets of $500,000.Its return on total assets is equal to:

A company had net income of $2,660,000,net sales of $25,000,000,and average total assets of $8,000,000.Its return on total assets is equal to:

Micron owns 3,000 shares of JVT.JVT has 25,000 total shares of stock outstanding.JVT paid $3 per share in cash dividends to its stockholders.Micron should record a:

A company had net income of $43,000,net sales of $380,500,and average total assets of $220,000.Its profit margin and total asset turnover were,respectively:

A company has net income of $250,000,net sales of $2,000,000,and average total assets of $1,500,000.Its return on total assets is equal to:

A company had net income of $40,000,net sales of $300,000,and average total assets of $200,000.Its profit margin and total asset turnover were respectively:

A company had net income of $82,000,net sales of $781,000,and average total assets of $300,000.Its profit margin and total asset turnover were respectively:

Investments in trading securities:

A company's return on total assets equals 30%.If net income and net sales are $900,000 and $8,900,000 respectively,what is the amount of total assets?

A company had net income of $2,785,000,net sales of $250,000,000,average total assets of $6,000,000,and equity investments of $40,000.Its return on total assets equals:

Morgan Company purchased 2,000 shares of Asta's common stock for $143,000 as a long-term investment and is considered available-for-sale.The par value of the stock was $1 per share.Morgan paid $375 in commissions on the transaction.The entry to record the transaction would include a:

Return on total assets measures a company's ability to:

Investments in debt and equity securities that the company actively manages and trades for profit are referred to as short-term investments in:

Held-to-maturity securities are: