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Exam 15: Investments

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Question 81

True/False

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Creditors invest in a company and hope to receive a return on their investment.

A) True
B) False

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Question 82

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Realized gains or losses occur when a company adjusts an asset to fair value but has not yet disposed of the asset.

A) True
B) False

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Question 83

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At the beginning of the year,Wilson Steel,Inc.purchased 10,000 shares of Barnes Metals,Inc.for $34,000 in exchange for cash and now holds 3.2% of the voting stock of Barnes Metals,Inc.The management of Wilson Steel intends to hold this stock for two years.Assuming no other transaction happened during the year,the ________ in the balance sheet will increase.

Controlling interest equity investments are debt securities in which the investor owns more than 50% of the investee's voting stock.

Provide the following information for controlling interest equity investments: 1.Which accounting method is used? 2.What is the balance sheet effect when using this accounting method? 3.What is the income statement effect when using this accounting method?

A preferred stock is an example of a debt security.

Greene Corporation pays $500,000 to acquire 40% of the voting stock of Universal Technologies,Inc.on May 5,2019.This investment will be classified as a(n) ________.

The fair value of a trading debt security is the price that would be used if the company were to sell the investment on the market.

When a trading debt investment is disposed of,________.

Which of the following securities typically pay interest?

Companies make a year-end adjustment of the trading debt investment to bring the account to historical value.

Securities are ________.

A parent company is a company that ________.

Treasury bills are ________.

Littlefield Industries purchased a bond on September 1 of the current year for $200,000 and classified the investment as trading debt.The market value of the trading debt investment at year-end is $196,000.The adjustment is ________.

Held-to-maturity debt investments are categorized as long-term assets on the balance sheet,regardless of the maturity date.

Available-for-sale debt investments include all trading debt and held-to-maturity debt investments.

Unrealized holding gains or losses on trading debt investments are reported in the ________.

The owner of a bond or stock of a corporation is referred to as the investor.

For each of the following scenarios,state the type of investment: 1.Available-for-sale debt investment 2.No significant influence equity investment 3.Trading debt investment 4.Significant influence equity investment 5.Held-to-maturity debt investment 6.Controlling interest equity investment Indicate your answer by placing the correct number next to the scenario. a.________ Arnold Corp.owns a debt security in Brady Corp.Arnold plans on holding the debt for thirty days. b.________ Maxwell Inc.owns 70% of the voting stock of Russell Corp. c.________ Millie Inc.owns a debt security of Auntie Inc.Millie intends to and has the ability to hold the debt security until maturity.