Acc 206 Week 8 Quiz – Strayer

ACC 206 Week 8 Quiz – Strayer

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Quiz 6 Chapter 16

INVESTMENTS

CHAPTERSTUDY OBJECTIVES

1. Discuss why corporations invest in debt and stock securities.

2. Explain the accounting for debt investments.

3. Explain the accounting for stock investments.

4. Describe the use of consolidated financial statements.

5. Indicate how debt and stock investments are reported in financial statements.

6. Distinguish between short-term and long-term investments.

TRUE-FALSESTATEMENTS

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. For short-term debt investments, any bond premium or discount is amortized to interest revenue over the remaining term of the bonds.

5. Debt investmentsare 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 Investmentsaccount.

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...