AAHamlen2e TB Ch01 031512
TEST BANK
CHAPTER 1
Intercorporate Investments: An Overview MULTIPLE CHOICE
Use the following information on a company’s investments in equity securities to answer questions 1- 4 below.
The company’s accounting year ends December 31.
Investment
Date of acquisition
Cost
Fair value
12/31/13
Date sold
Selling price
Ajax Company stock
6/20/13
$40,000
$35,000
2/10/14
$32,000
Bril Corporation stock
5/1/13
20,000
N/A
11/15/13 26,000
Coy Company stock
8/2/13
16,000 16,500
1/17/14
23,000
1. Topic: Accounting for trading securities LO 1 If the above investments are categorized as trading securities, what amount is reported for gain or loss on securities, on the 2013 income statement?
a. $1,500 gain
b. $6,000 gain
c. no gain or loss
d. $4,500 loss
ANS: a
2. Topic: Accounting for trading securities LO 1 If the above investments are categorized as trading securities, what amount is reported for gain or loss on securities, on the 2014 income statement?
a. $1,000 loss b. $4,000 loss c. $3,500 gain d. $6,000 loss
ANS: c
3. Topic: Accounting for AFS securities LO 1 If the above investments are categorized as available-for-sale securities, what amount is reported for gain or loss on securities, on the 2013 income statement?
a. $1,500 gain
b. $6,000 gain
c. no gain or loss
d. $4,500 loss
ANS: b
4. Topic: Accounting for AFS securities LO 1 If the above investments are categorized as available-for-sale securities, what amount is reported as gain or loss on securities, on the 2014 income statement?
a. $6,000 loss b. $4,000 loss c. $3,500 gain d. $1,000 loss
ANS: d
Use the following information to answer questions 5-7 below:
A company holds a $100,000 face value corporate bond, bought January 1, 2013, paying 4% annually on December 31, and maturing December 31, 2016. The company paid $93,070 for the bond, to yield 6%. The company categorizes the bond as a held-to-maturity investment, and its accounting year ends December 31.
5.
CHAPTER 1
Intercorporate Investments: An Overview MULTIPLE CHOICE
Use the following information on a company’s investments in equity securities to answer questions 1- 4 below.
The company’s accounting year ends December 31.
Investment
Date of acquisition
Cost
Fair value
12/31/13
Date sold
Selling price
Ajax Company stock
6/20/13
$40,000
$35,000
2/10/14
$32,000
Bril Corporation stock
5/1/13
20,000
N/A
11/15/13 26,000
Coy Company stock
8/2/13
16,000 16,500
1/17/14
23,000
1. Topic: Accounting for trading securities LO 1 If the above investments are categorized as trading securities, what amount is reported for gain or loss on securities, on the 2013 income statement?
a. $1,500 gain
b. $6,000 gain
c. no gain or loss
d. $4,500 loss
ANS: a
2. Topic: Accounting for trading securities LO 1 If the above investments are categorized as trading securities, what amount is reported for gain or loss on securities, on the 2014 income statement?
a. $1,000 loss b. $4,000 loss c. $3,500 gain d. $6,000 loss
ANS: c
3. Topic: Accounting for AFS securities LO 1 If the above investments are categorized as available-for-sale securities, what amount is reported for gain or loss on securities, on the 2013 income statement?
a. $1,500 gain
b. $6,000 gain
c. no gain or loss
d. $4,500 loss
ANS: b
4. Topic: Accounting for AFS securities LO 1 If the above investments are categorized as available-for-sale securities, what amount is reported as gain or loss on securities, on the 2014 income statement?
a. $6,000 loss b. $4,000 loss c. $3,500 gain d. $1,000 loss
ANS: d
Use the following information to answer questions 5-7 below:
A company holds a $100,000 face value corporate bond, bought January 1, 2013, paying 4% annually on December 31, and maturing December 31, 2016. The company paid $93,070 for the bond, to yield 6%. The company categorizes the bond as a held-to-maturity investment, and its accounting year ends December 31.
5.