17 1 questions 1 consolidated financial statements combine the books of two or more 4307850

17 1 questions 1 consolidated financial statements combine the books of two or more 4307850

 

17.1   Questions

1) Consolidated financial statements combine the books of two or more ________ into one set of financial statements.

A) subsidiaries

B) divisions

C) separate legal entities

D) segments

2) Dividends received from trading securities are reported by the investor as ________.

A) an increase in the investment account

B) a decrease in the investment account

C) dividend revenue on the income statement

D) equity in earnings of the investee on the income statement

3) Dividends received from available-for-sale securities are reported by the investor as ________.

A) an increase in the investment account

B) a decrease in the investment account

C) dividend revenue on the income statement

D) equity in earnings of the investee on the income statement

4) An investor in trading securities has the following information available at December 31, 2012:

Market value of trading securities$10,000

Acquisition cost of trading securities$9,000

How does the investor report the change in market value on the trading securities at December 31, 2012?

A) unrealized loss of $1,000 on income statement

B) unrealized gain of $1,000 on income statement

C) $1,000 is added to other comprehensive income account on the balance sheet

D) $1,000 is subtracted from the other comprehensive income account on the balance sheet

5) An investor in available-for-sale securities has the following information available at December 31, 2012:

Market value of available-for-sale securities$10,000

Acquisition cost of available-for-sale securities$9,000

How does the investor report the change in market value on the available-for-sale securities at December 31, 2012?

A) unrealized loss of $1,000 on income statement

B) unrealized gain of $1,000 on income statement

C) $1,000 is added to accumulated other comprehensive income account on the balance sheet

D) $1,000 is subtracted from the accumulated other comprehensive income account on the balance sheet

6) Changes in the market value of trading securities are reflected in the ________ account.  Changes in the market value of available-for-sale securities are reflected in the ________ account.

A) equity in earnings of investment; retained earnings

B) retained earnings; equity in earnings of investment

C) retained earnings; other comprehensive income or loss

D) other comprehensive income or loss; retained earnings

7) Company B has 40,000 shares of its common stock outstanding.  Company A owns 5,000 shares of Company B's stock.  What method should Company A use to account for its investment in Company B?

A) market-value

B) equity

C) consolidated

D) available-for-sale

8) Company B has 40,000 shares of its common stock outstanding.  Company A owns 15,000 shares of Company B's stock.  What method should Company A use to account for its investment in Company B?

A) market-value

B) equity

C) consolidated

D) available-for-sale

9) Company B has 40,000 shares of its common stock outstanding.  Company A owns 35,000 shares of Company B's stock.  What method should Company A use to account for its investment in Company B?

A) market-value

B) equity

C) consolidated

D) cost

10) Marketable securities that the investor company buys only with the intent to resell them shortly are called ________.

A) available-for-sale securities

B) underpriced securities

C) trading securities

D) options

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