101.Marketable securities are:
A.Listed immediately after Inventory on the balance sheet.
B.Almost as liquid as cash.
C.Originally recorded at cost less any broker’s commission.
D.Sold for a gain when cash received is less than the cost basis.
102.The financial statements of Baxter Corporation include an Unrealized Holding Gain on Investments. This item:
A.Is included in the income statement.
B.Is shown as a reduction in total stockholders’ equity.
C.Indicates that Baxter’s marketable securities have a current market value higher than cost.
D.Indicate that Baxter Corporation sold marketable securities during the period at a gain.
103.The adjustment of available for sale marketable securities to their current market value affects:
A.The balance sheet.
B.The income statement.
C.The cash flow statement.
D.All of the answers are correct.
104.With available for-sale securities, unrealized holding gains and losses are:
A.Not reported until recognized.
B.Reported on the income statement.
C.Reported as an unearned revenue on the balance sheet.
D.Reported in the stockholders’ equity section of the balance sheet.
105.The valuation principle of “fair value accounting” applied to investments classified as available for sale securities:
A.Affects the current period income statement, but not the balance sheet.
B.Enhances usefulness of the balance sheet in evaluating the financial position of a business.
C.Applies to marketable securities and inventories.
D.Requires a corporation to adjust its capital stock account to reflect current market value of its outstanding capital stock.
106.Each of the following transactions would be reflected in both the income statement and the statement of cash flows for the current period, except:
A.The adjustment of marketable securities to their current market value.
B.Receipt of dividends earned on investments.
C.Payment of interest on bonds.
D.Sale of merchandise for cash.
107.Investments in available for sale marketable securities:
A.Only include investments in the capital stock of publicly traded corporations.
B.May be reported in the balance sheet at market values lower than cost, but never at values in excess of original cost.
C.Are adjusted to current market value at the end of each accounting period.
D.Are carried in the accounting records at current market values, and therefore do not generate gains or losses when sold at market values.
108.The purpose of the fair value adjustment for securities classified as “available-for-sale” is:
A.To adjust the valuation of a company’s investment to current market value.
B.To recognize the proper amount of gain or loss on fluctuations in the market value of these securities in the current period income statement.
C.To adjust a corporation’s capital stock account to reflect the current market value of the outstanding capital stock.
D.To compute the amount of taxes payable on unrealized gains and losses.
109.The fair value accounting adjustment:
A.Affects both the balance sheet and the current period income statement.
B.Is not made when the current market value of investments in marketable securities is higher than original cost.
C.May result in either a gain or a loss to be reported in the current period income statement.
D.Represents a departure from the cost principle.
110.An Unrealized Holding Gain (or Loss) on Investments classified as “available-for-sale” securities:
A.Is reported in the asset section of the balance sheet, as an adjustment to the carrying value of the marketable securities.
B.Is reported in the stockholders’ equity section of the balance sheet, as either an increase or decrease in total stockholders’ equity.
C.Appears in the current period income statement, combined with realized gains and losses from sales of securities.
D.Indicates the amount of cash a company would receive if the marketable securities were sold as of the balance sheet date.
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