Acc 557 Wk 9 Chapter 12 Quiz - All Possible Questions

ACC 557 WK 9 Chapter 12 Quiz - All Possible Questions

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ACC 557 WK 9 Chapter 12 Quiz - All Possible Questions

TRUE-FALSE STATEMENTS

    1.     Corporations purchase investments in debt or stock securities generally for one of two reasons.

    2.     A reason some companies purchase investments is because they generate a significant portion of their earnings from investment income.

    3.     The accounting for short-term debt investments and for long-term debt investments is similar.

    4.     When debt investments, are sold, the gain or loss is the difference between the net proceeds from the sale and the fair value of the bonds.

    5.     Debt investments are investments in government and corporation bonds.

    6.     In accordance with the cost principle, brokerage fees should be added to the cost of an investment.

    7.     In accordance with the cost principle, the cost of debt investments includes brokerage fees and accrued interest.

    8.     In accounting for stock investments of less than 20%, the equity method is used.

    9.     Dividends received on stock investments of less than 20% should be credited to the Stock Investments account.

  10.     If an investor owns between 20% and 50% of an investee's common stock, it is presumed that the investor has significant influence on the investee.

  11.     The Stock Investments account is debited at acquisition under both the equity method and cost method of accounting for investments in common stock.

  12.     Under the equity method, the investment in common stock is initially recorded at cost, and the Stock Investments account is adjusted annually.

  13.     Under the equity method, the receipt of dividends from the investee company results in an increase in the Stock Investments account.

  14.    ...