Question : 31.Walsh Company purchased 1,000 shares of Pierce Company for $20 : 1253684

31.Walsh Company purchased 1,000 shares of Pierce Company for $20 per share and classified the investment as trading securities. At the end of the year, the fair market value of the investment was $23 per share. How should Walsh recognize this change?

a.Debit the investment account by $23,000.

b.Credit the investment account by $3,000.

c.Report an unrealized gain on the income statement.

d.Show an unrealized loss on the balance sheet.

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

a.Current ratio decreases.

b.Earnings per share increases.

c.Current ratio increases.

d.Earnings per share remains unchanged.

33.              The recognition of unrealized gains on marketable securities:

a.depends on the classification of the securities.

b.causes net income to increase regardless of the securities’ classification.

                   causes earnings per share to increase regardless of the securities’ classification.

                  is a primary concern under the equity method.

34.Which one of the following must be met prior to classifying an investment as current?

     It must be an equity security accounted for under the equity method.

     The percentage of ownership must be greater than 50%.

      The investment must be readily marketable.

     Management must intend to hold the investment for an undetermined time period.

35.Trading securities are held primarily for the purpose of:

a.anticipated increases in value over extended time periods.

b.increasing the current ratio.

c.window dressing the balance sheet.

d.generating profits on short-term price increases.

36.Which one of the following correctly reflects the effects on the financial statements of the investor caused by dividends declared on trading securities?

a.Current ratio increases

b.Working capital decreases

c.Revenue and assets decrease

d.Assets increase and shareholders’ equity decreases

37.              Camber Corp. owns 10% of Nova Corp’s outstanding voting stock. Camber should account for its long-term equity investment in Nova Corp. using the:

                  market value method if the stock is not traded on the market.

                  cost method if the stock is traded on the market.

c.cost method if the stock is not traded on the market.

d.equity method if the stock is traded on the market.

38.Which one of the following is evidence of a ready market?

a.The stock was purchased at a negotiated price from an outside party.

b.The security is actively traded on a public stock exchange.

                   A privately held corporation issued the stock.

                  The stock was purchased from an outside investor.

39.An unrealized holding gain or loss that relates to trading securities represents:

a.an undervalued investment.

b.the profit or loss made when the trading securities were sold.

c.the total dividends received from the investee company during the year.

d.the extent to which an investor’s wealth increased or decreased due to holding the investment.

40.All of the following statements are true regarding comprehensive income except:

a.Comprehensive income includes all nonowner-related changes in shareholders’ equity that do not appear on the income statement and are not reflected in the balance of retained earnings.

b.Comprehensive income includes adjustments to shareholders’ equity for holding gains associated with available-for-sale securities.

c.Comprehensive income includes adjustments to shareholders’ equity for holding losses associated with available-for-sale securities..

d.Comprehensive income must be reported in a specific format established by the FASB.