Question : 11.Available-for-sale securities: a.are reported the balance sheet at original cost. b.may have : 1253682

 

11.Available-for-sale securities:

a.are reported on the balance sheet at original cost.

b.may have unrealized price increases or decreases, which increase or decrease shareholders’ equity.

c.are reported in the shareholders’ equity section of the balance sheet at fair value.

d.may have unrealized gains or losses on the income statement associated with price increases or decreases.

12.When a company recognizes unrealized losses on trading securities, its earnings per share:

a. decreases.

b. increases.

c. is not affected.

d. may increase or decrease depending on the related market value.

13.Torborg Corp. purchased available-for-sale securities from Hensley Company on December 23 for $3,000. On December 31, the market value of those securities is $3,600. Which one of the following journal entries is appropriate on December 31?

a.

Available-for-Sale Securities

3,600

 

 

Unrealized Gain on Available-for-Sale Securities

 

3,600

 

b.

Available-for-Sale Securities

600

 

 

Unrealized Gain on Available-for-Sale Securities

 

600

 

c.

Available-for-Sale Securities

600

 

 

Unrealized Price Increase on Available-for-Sale Securities

 

600

 

 

 

 

d.

No entry is required.

 

 

14.Trading securities of Sanchez Inc. were purchased by Hayden Company on December 14 for $1,000. On December 31, the market value of those securities is $1,300. Which one of the following adjusting journal entries is appropriate at December 31?

a.

Trading Securities

1,300

 

 

Unrealized Gain on Trading Securities

 

300

 

Cash

 

1,000

 

b.

Trading Securities

300

 

 

Unrealized Gain on Trading Securities

 

300

 

c.

Trading Securities

300

 

 

Securities Revenue

 

300

 

d.

No entry is required.

 

 

15.On November 10, 2011, Clark Inc. purchased shares of Landon Corp. for $100,000 and shares of Norris Incorporated for $50,000. At the end of 2011, the fair market value of the stock of Landon was $80,000 and for Norris Incorporated was $65,000. How should Clark Inc. recognize these changes in market price?

a.As a net unrealized loss of $20,000.

b.As a net unrealized gain of $15,000.

c.As a net unrealized loss of $5,000.

d.No adjustment is required since the total fair value is higher than the total original cost.

16.Which one of the following is true of the equity method?

a.The income recognized by the investor is based on the percentage of stock ownership and the amount of earnings reported by the investee.

b.Market value adjustments are made at yearend.

c.The receipt of dividends increases net income on the investor’s financial statements.

d.The percent of ownership must be greater than 50% to apply this method.

17.The recognition of unrealized gains on available-for-sale investments

a.increases the current ratio.

b.decreases the current ratio.

c.does not affect the current ratio.

d.increases the current ratio if the investment is classified as current, otherwise it has no effect.

18.An investor owns trading equity securities in Noah Company. NoahCompany declared dividends of $300 during July. What entry is required in August when the dividends are received?

a.

Cash

300

 

 

Dividends Receivable

 

300

 

b.

Dividends Receivable

300

 

 

Trading Securities

 

300

 

c.

Dividends Receivable

300

 

 

Dividend Revenue

 

300

 

d.

Cash

300

 

 

Trading Securities

 

300

 

19.Which one of the following journal entries is appropriate for an investor who owns short-term equity securities when dividends of $500 have been declared on those equity securities?

 

a.

Cash

500

 

 

 

Dividends Receivable

 

500

 

b.

Dividends Receivable

500

 

 

 

Trading Securities

 

500

 

c.

Cash

500

 

 

 

Trading Securities

 

500

 

d.

Dividends Receivable

500

 

 

 

Dividend Revenue

 

500

 

20.Which one of the following correctly reflects the effects on the financial statements caused by the increase in the market price of long-term available-for-sale securities?

     Current ratio is unchanged and earnings per share increases.

     Current ratio and earnings per share increase.

c. Current ratio and earnings per share are unchanged.

d. Current ratio is unchanged and earnings per share decreases.