ACCOUNTING

QUESTION 1

1. A typical investment to house excess cash until needed is

A. stocks of companies in a related industry.
B. stock securities.
C. debt securities.
D. low-risk, highly liquid securities.

6 points   

QUESTION 2

1. If an investor owns less than 20% of the common stock of another corporation as a long-term investment,

A. the equity method of accounting for the investment should be employed.
B. it is presumed that the investor has significant influence on the investee.
C. no dividends can be expected.
D. it is presumed that the investor has relatively little influence on the investee.

6 points   

QUESTION 3

1. Which of the following would not be considered a motive for making a stock investment in another corporation?

A. Appreciation in the market value of the stock investment
B. An increase in the amount of interest revenue from the stock investment
C. Use of the investment to diversify its own operations
D. Use of the investment for expanding its own operations

6 points   

QUESTION 4

1. Locke Co. purchased 50, 6% Johnston Company bonds for $50,000 cash plus brokerage fees of $500. Interest is payable semiannually on July 1 and January 1. The entry to record the July 1 semiannual interest payment would include a

A. debit to Interest Receivable for $1,500.
B. credit to Interest Revenue for $1,500.
C. credit to Debt Investments for $1,515.
D. credit to Interest Revenue for $1,515.

6 points   

QUESTION 5

1. Temper Co. purchased 60, 6% Irick Company bonds for $60,000. Interest is payable semiannually on July 1 and January 1. If 30 of the securities are sold on July 1 for $32,000, the entry would include a credit to Gain on Sale of Debt Investments for

A. $2,300.
B. $1,400.
C. $1,700.
D. $2,000.

6 points   

QUESTION 6

1. Laramie industries owns 45% of McCook Company. For the current year, McCook reports net income of $250,000 and declares and pays a $60,000 cash dividend. Which of the following correctly presents the journal entries to record Laramie’s equity in McCook’s net income and the receipt of dividends from McCook?

A.
Dec. 31 Revenue from Stock Investments 112,500  
    Stock Investments     112,500
Dec. 31 Stock Investments 27,000  
    Cash     27,000

 

B.
Dec. 31 Stock Investments 85,500  
    Revenue from Stock Investments     85,500

 

C.
Dec. 31 Stock Investments 112,500  
    Revenue from Stock Investments     112,500
Dec. 31 Cash 60,000  
    Stock Investments     60,000

 

D.
Dec. 31 Stock Investments 112,500  
    Revenue from Stock Investments     112,500
Dec. 31 Cash 27,000  
    Stock Investments     27,000

 

6 points   

QUESTION 7

1. Jenner Company had the following transactions pertaining to its short-term stock investments.

Jan. 1   Purchased 600 shares of Pork Company stock for $8,400.

 

June 1   Received cash dividends of $0.60 per share on the Pork Company stock.

 

Sept. 15   Sold 300 shares of the Pork Company stock for $3,600.
       
Dec     1   Received cash dividend of $0.75 per share on the Pork Company Stock

Instructions Journalize the transactions (5 points each).

20 points   

QUESTION 8

1. The statement of cash flows reports each of the following except

A. the net change in cash.
B. cash receipts from operating activities.
C. cash payments from investing activities.
D. cash sales.

6 points   

QUESTION 9

1. Investing activities include

A. repaying money previously borrowed.
B. obtaining capital from owners.
C. collecting cash on loans made.
D. obtaining cash from creditors.

6 points   

QUESTION 10

1. Which one of the following affects cash during a period?

A. Declaration of a cash dividend
B. Payment of an accounts payable
C. Write-off of an uncollectible account receivable
D. Recording depreciation expense

6 points   

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