Question :
21.Trading securities were purchased April 1 for $900. On December : 1241890
21.Trading securities were purchased on April 1 for $900. On December 31, the market value of those securities is $700. Which of the following is part of the adjusting entry necessary on December 31?
a.Debit Unrealized Loss on Trading Securities for $700
b.Debit Realized Loss on Trading Securities for $200
c.Credit Trading Securities for $200
d.Credit Unrealized Loss on Trading Securities for $200
22.Available-for-sale securities were purchased on May 2 for $1,000. On December 31, the market value of those securities is $1,100. Which of the following is part of the adjusting entry necessary on December 31?
a.Debit Unrealized Gain on Available-for-Sale Securities for $1,100
b.Debit Realized Gain on Available-for-Sale Securities for $100
c.Credit Available-for-Sale Securities for $100
d.Credit Unrealized Gain on Available-for-Sale Securities for $100
23.The recognition of unrealized losses on trading securities:
a.decreases the quick and current ratios.
b.increases the quick and current ratios.
c.does not affect the quick ratio, but decreases the current ratio.
d.does not affect the current ratio, but decreases the quick ratio.
24.Which of the following correctly reflects the effects on the financial statements caused by the increase in market price of trading securities?
a.Current ratio and earnings per share decrease.
b.Current ratio and earnings per share increase.
c.Current ratio is unchanged but earnings per share decrease.
d.Current ratio decreases and earnings per share are unchanged.
25.The recognition of realized losses on short-term available-for-sale securities
a.increases the current ratio.
b.decreases working capital.
c.decreases comprehensive income.
d.decreases the debt/equity ratio.
26.Which one of the following is an area of subjectivity which opens the incentive of window dressing to management as it relates to investments?
a.The timing of when an investment is sold.
b.The proclamation of the intention to sell an investment within the next year.
c.The determination of the percentage of stock acquired.
d.Whether management has available cash to acquire investments.
27.The cost method of accounting for long-term equity investments is typically used when:
a.between 20% and 50% of the investee company is owned.
b.over 50% of the investee company is owned.
c.at least 20% of the investee company is owned.
d.None of the above is a consideration in choosing the cost method.
28.Which one of the following correctly reflects the effects on the financial statements caused by dividends declared on trading securities owned by a firm?
a.Current ratio decreases.
b.Earnings per share increases.
c.Current ratio is unchanged.
d.Earnings per share is unchanged.
29.The equity method of accounting for long-term equity investments is typically used when:
a.less than 20% of the investee company is owned.
b.between 20% and 50% of the investee company is owned.
c.over 50% of the investee company is owned.
d.any amount over 20% is acquired.
30.The consolidation procedure of accounting for long-term equity investments is typically used:
a.when less than 20% of the investee company is owned.
b.in situations when over 50% of the investee company is owned.
c.only when 100% of the investee company is owned.
d.when between 20% and 50% of the investee company is owned.
