Question :
61. ValleyView Company ValleyView Company acquires common stock of Kansas Enterprises : 1245738
61. ValleyView Company ValleyView Company acquires common stock of Kansas Enterprises for $400,000 on November 1, 2013, and designates this investment as available-for-sale. The fair value of these shares is $435,000 on December 31, 2013. ValleyView sells these shares on August 15, 2014, for $480,000. (Refer to the ValleyView.) The journal entries to record the sale of securities available-for-sale on August 15, 2013. A. Cash……………………………………………..480,000 Unrealized Holding Gain on Securities Available-for-Sale………. 35,000 Marketable Securities……………………………… 435,000 Realized Gain on Sale of Securities Available-for-Sale……………………………….. 80,000B. Marketable Securities……………………..435,000Realized Gain on Sale of Securities available-for-sale………………………….. 80,000 Cash…………………………………………………… 480,000 Unrealized Holding Gain on Securities Available-for-Sale………………….. 35,000 C. Cash……………………………………………. 480,000 Realized Holding Gain on Securities Available-for-Sale…………. 35,000 Marketable Securities……………………………… 435,000 Unrealized Gain on Sale of Securities available-for-sale…………………………………… 80,000D. Marketable Securities……………………. 435,000Unrealized Gain on Sale of Securities available-for-sale………………………….. 80,000 Cash……………………………………………………. 480,000 Realized Holding Gain on Securities Available-for-Sale………………….. 35,000 E. none of the above
62. ValleyView Company ValleyView Company acquires common stock of Kansas Enterprises for $400,000 on November 1, 2013, and designates this investment as available-for-sale. The fair value of these shares is $435,000 on December 31, 2013. ValleyView sells these shares on August 15, 2014, for $480,000. (Refer to ValleyView.) The total income from the purchase and sale of these securities is _____ reported _____ A. $80,000; in the year of sale.B. $80,000; as they occur.C. $35,000; in the year of sale. D. $35,000; as they occur. E. $45,000; in the year of sale
63. Lightner Company decides that an available-for-sale security is impaired as of December 31, 2013 and has an unrealized loss of $5,000. The journal entry to record an impairment loss on securities available-for-sale would be: A. Unrealized Holding Loss on Securities Available-for-Sale…………….5,000 Impairment Loss……………………………………5,000 B. Impairment Loss…………………………….. 5,000 Unrealized Holding Loss on Securities Available-for-Sale……………….. 5,000 C. Realized Holding Loss on Securities Available-for-Sale…………….5,000 Impairment Loss………………………………… 5,000 D. Impairment Loss ……………………………. 5,000 Realized Holding Loss on Securities Available-for-Sale…………………5,000 E. Impairment Loss……………………………. 5,000 Retained Earnings……………………………….. 5,000
64. Which of the following items appears in the balance sheet at amortized acquisition cost? A. debt securities held to maturityB. trading securitiesC. available-for-sale securitiesD. derivativesE. securities available for liquidation
65. According to U.S. GAAP,firms holding debt and equity securities for short-term profit potential A. report the investments on the balance sheet at market value.B. initially record the investments at acquisition cost.C. report unrealized holding gains and losses on the investments in the income statement.D. all of the above. E. none of the above.
66. Which of the following would most likely not be classified as Investment in Securities appearing between the Current Assets and the Property, Plant and Equipment sections of the balance sheet? A. United States Treasury Notes that the firm expects to hold for less than one yearB. investments in securities for the purpose of exerting significant influence over the investee’s dividend payout policyC. investments in securities for the purpose of exerting significant influence over the investee’s day-to-day operationsD. all of the aboveE. none of the above
67. Short-term marketable equity securities were acquired on July 1, Year 1 for $23,000, and classified as available-for-sale. On December 31, Year 1, the securities had a market value of $24,000, determined as follows:
Cost
Fair Market Value
July 1, Year 1
December 31, Year 1
Security AA
$ 9,000
$ 7,000
Security BB
5,000
10,000
Security CC
9,000
7,000
Total
$23,000
$24,000
What adjustment is required to reflect December 31, Year 1 fair value? A. unrealized holding gain on available-for-sale securities of $1,000, reported in other comprehensive incomeB. unrealized holding gain on available-for-sale securities of $1,000, reported in the income statementC. realized holding gain on available-for-sale securities of $1,000, reported in the income statementD. realized holding gain on available-for-sale securities of $1,000, reported in other comprehensive incomeE. realized holding gain on available-for-sale securities of $1,000, reported in retained earnings
68. Manley CompanyInformation concerning Manley Company’s portfolio of debt securities at May 31, Year 6, and May 31, Year 7, is presented below. All of the debt securities were purchased by Manley during June, Year 5. Prior to June, Year 5, Manley had no investments in debt or equity securities.
As of May 31, Year 6
Amortized Cost
Fair Value
Camp Company bonds
$164,526
$168,300
Box Industry bonds
204,964
205,200
Messenger Inc. bonds
305,785
285,200
$675,275
$658,700
As of May 31, Year 7
Amortized Cost
Fair Value
Camp Company bonds
$152,565
$147,600
Box Industry bonds
193,800
204,500
Messenger Inc. bonds
289,130
291,400
$635,495
$643,500
(CMA adapted, Jun 97 #11) Refer to the Manley Company example. Assuming that the above securities are properly classified as available-for-sale securities under U.S. GAAP, the unrealized holding gain or loss as of May 31, Year 7, would be A. recognized as a $8,005 unrealized holding gain on the income statement.B. recognized as other comprehensive income with a year-end credit balance of $8,005 in the Unrealized Holding Gain/Loss account.C. recognized as a $24,580 unrealized holding loss on the income statement.D. recognized as a $24,580 unrealized holding loss in retained earnings.E. recognized as other comprehensive income with a year-end credit balance of $8,005 in retained earnings.
69. (CMA adapted, Jun 97 #12) Refer to the Manley Company example. Assuming that the above securities are properly classified as held-to-maturity securities under U.S. GAAP, the unrealized holding gain or loss as of May 31, Year 7, would A. be recognized as a $8,005 unrealized holding gain on the income statement.B. be recognized as other comprehensive income with a year-end credit balance of $8,005 in the Unrealized Holding Gain/Loss account.C. be recognized as a $24,580 unrealized holding loss on the income statement.D. be recognized as a $24,580 unrealized holding loss in retained earnings.E. not be recognized.
70. According to U.S. GAAP, firms holding debt securities with a positive intent and ability to hold to maturity display such securities in the Investments section of the balance sheet at A. amortized acquisition cost .B. market value.C. maturity value.D. future value of future cash flows.E. present value of future cash flows.
