Quiz_7 Key - ACC 5110 Name Part I Choose the best answer QUIZ 7 KEY Winter 2010 1 Which of the following is correct about the effective-interest

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ACC 5110 Winter 2010 QUIZ 7 Name : KEY Part I. Choose the best answer. 1. Which of the following is correct about the effective-interest method of amortization? a. The effective interest method applied to investments in debt securities is different from that applied to bonds payable. b. Amortization of a discount decreases from period to period. c. Amortization of a premium decreases from period to period. d. The effective-interest method produces a constant rate of return on the book value of the investment from period to period. - Rate of return = Interest revenue / Carrying value of investment assets - Under the effective-interest method, amount of amortization is increasing for both discount- and premium-issuance. 2. Which of the following is not correct in regard to trading securities? a. They are held with the intention of selling them in a short period of time. b. Unrealized holding gains and losses are reported as part of net income. c. Any discount or premium is not amortized. d. All of these are correct. -All categories of debt-related investment assets are subject to amortization of discount or premium. 3. Dane, Inc., owns 35% of Marin Corporation. During the calendar year 2007, Marin had net earnings of $300,000 and paid dividends of $30,000. Dane mistakenly recorded these transactions using the fair value method rather than the equity method of accounting. What
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This note was uploaded on 01/18/2011 for the course ACC 5110 taught by Professor Lee during the Winter '10 term at Wayne State University.

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Quiz_7 Key - ACC 5110 Name Part I Choose the best answer QUIZ 7 KEY Winter 2010 1 Which of the following is correct about the effective-interest

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