Question : 51. The U.S. government will pay Simpson Company $2,500,000 each six : 1245737

51. The U.S. government will pay Simpson Company $2,500,000 each six months, equal to 2.5% of the $100 million face amount of the treasury bonds (5% annual coupon rate, paid in two installments each year), and will repay the $100 million at the end of five years. At the time Simpson Company purchases the bonds, the market prices these bonds to yield Simpson Company 6% annually (3% each six months). The bonds are classified as held to maturity and Simpson Company would classify this investment as a(n) _____on its _____ because it intends to hold the securities for _____. 
A. current asset; balance sheet; less than one year
B. current asset; income statement; less than one year
C. noncurrent asset; balance sheet; more than one year
D. noncurrent asset; income statement; more than one year
E. current asset; statement of cash flows; less than one year

52. The U.S. government will pay Edie Company $2,500,000 each six months, equal to 2.5% of the $100 million face amount of the treasury bonds (5% annual coupon rate, paid in two installments each year), and will repay the $100 million at the end of five years. At the time Edie Company purchases the bonds, the market prices these bonds to yield Edie Company 6% annually (3% each six months). The bonds are classified as held to maturity and Edie Company would classify this investment as a(n) _____on its _____ because it intends to hold the securities for _____ 
A. current asset; balance sheet; less than one year
B. current asset; income statement; less than one year
C. noncurrent asset; balance sheet; more than one year
D. noncurrent asset; income statement; more than one year
E. current asset; statement of cash flows; less than one year

53. U.S. GAAP and IFRS require firms to account for debt securities held-to-maturity that are deemed to be impaired. The investor recognizes (debits) _____ and reduces (credits) _____.  
A. an impairment loss (included in other comprehensive income); the balance sheet carrying value of the investment
B. the balance sheet carrying value of the investment; an impairment loss (included in other comprehensive income)
C. the balance sheet carrying value of the investment; an impairment loss (included in net income)
D. an impairment loss (included in net income); the balance sheet carrying value of the investment
E. reserve for impairment loss (included in other comprehensive income); the balance sheet reserve for net realizable value of investments

54. Firms include trading securities in _____ in the _____ section of the _____.  
A. held-to-maturity securities; current assets; balance sheet
B. marketable securities; noncurrent assets; statement of cash flows
C. marketable securities; current assets; balance sheet
D. held-to-maturity securities; noncurrent assets; balance sheet
E. held-to-maturity securities; current assets; statement of cash flows

55. Marco Insurance

Marco Insurance acquired shares of Penny Systems’ common stock on December 28, 2013, for $400,000 and classified them as trading securities. The fair value of these securities on December 31, 2013, was $402,000. Marco Insurance sold these shares on January 3, 2014, for $405,000.

(Refer to the Marco Insurance) The journal entries to record acquisition of trading securities on December 28, 2013.  
A. Cash…………………………………………….. 400,000 
   Marketable Securities……………………………….400,000
B. Other Comprehensive Income…………..400,000
   Marketable Securities……………………………….400,000
C. Marketable Securities……………………..400,000
   Other Comprehensive Income………………….. 400,000
D. Marketable Securities……………………..400,000
   Cash……………………………………………………….400,000
E. Marketable Securities……………………..400,000
   Net Income……………………………………………..400,000

56. Marco Insurance

Marco Insurance acquired shares of Penny Systems’ common stock on December 28, 2013, for $400,000 and classified them as trading securities. The fair value of these securities on December 31, 2013, was $402,000. Marco Insurance sold these shares on January 3, 2014, for $405,000.

(Refer to the Marco Insurance)  The journal entries to measure trading securities at fair value and recognize unrealized holding gain in net income on December 31, 2013. 
A. Cash……………………………………………..2,000 
   Marketable Securities………………………………. 2,000
B. Other Comprehensive Income……………..2,000
   Marketable Securities………………………………. 2,000
C. Marketable Securities…………………………2,000
   Other Comprehensive Income…………………… 2,000
D. Marketable Securities…………………………2,000
   Unrealized Holding Gain on
     Trading Securities…………………………………. 2,000
E. Marketable Securities…………………………2,000
   Realized Holding Gain on
    Trading Securities………………………………….. 2,000

57. Marco Insurance

Marco Insurance acquired shares of Penny Systems’ common stock on December 28, 2013, for $400,000 and classified them as trading securities. The fair value of these securities on December 31, 2013, was $402,000. Marco Insurance sold these shares on January 3, 2014, for $405,000.

(Refer to the Marco Insurance)  The journal entries to record the sale of trading securities at a gain on January 3, 2014.  
A. Cash………………………………………………………..405,000 
   Marketable Securities………………………………………….402,000
   Realized Gain on Sale of Trading Securities……………..3,000
B. Marketable Securities………………………………  402,000
Realized Gain on Sale of Trading Securities…… 3,000
   Cash………………………………………………………………..   405,000 
C. Cash……………………………………………………..    405,000 
   Marketable Securities………………………………………… 402,000
   Unrealized Gain on Sale of Trading Securities…………. 3,000
D. Marketable Securities…………………………………402,000
Unrealized Gain on Sale of Trading Securities….3,000
   Cash……………………………………………………………….   405,000
E. Cash……………………………………………………….  405,000 
   Marketable Securities………………………………………….402,000
   Realized Gain on Sale of
     Securities Held to Maturity………………………………….  3,000

58. Marco Insurance

Marco Insurance acquired shares of Penny Systems’ common stock on December 28, 2013, for $400,000 and classified them as trading securities. The fair value of these securities on December 31, 2013, was $402,000. Marco Insurance sold these shares on January 3, 2014, for $405,000.

(Refer to Marco Insurance.) The total income from the purchase and sale of these securities is 
A. $5,000
B. $4,000
C. $3,000
D. $2,000
E. $1,000

59. 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 journal entry to record acquisition of securities available-for-sale on November 1, 2013 is: 
A. Cash . . . . . . . . . . . . . . . . . . . . . .400,000
   Marketable Securities . . . . . . . . . . . . . .400,000
B. Cash . . . . . . . . . . . . . . . . . . . . . .400,000
   Common Stock . . . . . . . . . . . . .  .  .  . . 400,000
C. Common Stock . . . . . . . . . . . . . 400,000
   Cash . . . . . . . . . . . . . . . . . . . . .  . .        400,000
D. Marketable Securities . . . . . . . . 400,000
   Cash . . . . . . . . . . . . . . . . . . . . . . .         400,000
E. Marketable Securities . . . . . . . . 400,000
   Common Stock . . . . . . . . . . . . .  .  .  . . 400,000

60. 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 journal entry to measure securities available-for-sale on December 31, 2013 is:  
A. Unrealized Holding Gain on
  Securities Available-for-Sale…………….35,000
   Marketable Securities……………………………….35,000
B. Unrealized Holding Gain on
  Securities Available-for-Sale…………….35,000
   Common Stock………………………………………..35,000
C. Common Stock………………………………… 35,000
   Unrealized Holding Gain on
     Securities Available-for-Sale…………………..35,000 
D. Marketable Securities………………………. 35,000
   Cash…………………………………………………….. 35,000
E. Marketable Securities………………………  35,000
   Unrealized Holding Gain on
     Securities Available-for-Sale………………….35,000