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.