Ch12 - CHAPTER 12 MULTIPLE CHOICE QUESTIONS STUDY GUIDE 33 Corporations invest in other companies for all of the following reasons except to a

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Unformatted text preview: CHAPTER 12 MULTIPLE CHOICE QUESTIONS STUDY GUIDE 33. Corporations invest in other companies for all of the following reasons except to a. house excess cash until needed. b. generate earnings. c. meet strategic goals. d. increase trading of the other companies’ stock. Ans: d, SO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Resource Management, AICPA FN: Reporting, AICPA PC: None, IMA: Business Economics 34. A typical investment to house excess cash until needed is a. stocks of companies in a related industry. b. debt securities. c. low-risk, highly liquid securities. d. stock securities. Ans: c, SO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Resource Management, AICPA FN: Risk Analysis, AICPA PC: None, IMA: Business Economics 35. A company may purchase a non-controlling interest in another firm in a related industry a. to house excess cash until needed. b. to generate earnings. c. for strategic reasons. d. for speculative reasons. Ans: c, SO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Resource Management, AICPA FN: Risk Analysis, AICPA PC: None, IMA: Business Economics 36. Pension funds and mutual funds regularly invest in debt and stock securities to a. generate earnings. b. house excess cash until needed. c. meet strategic goals. d. control the company in which they invest. Ans: a, SO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Resource Management, AICPA FN: Risk Analysis, AICPA PC: None, IMA: Business Economics 37. At the time of acquisition of a debt investment, a. no journal entry is required. b. the cost principle applies. c. the Stock Investments account is debited when bonds are purchased. d. the Investment account is credited for its cost plus brokerage fees. Ans: b, SO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: None, IMA: Business Economics 39. On January 1, 2011, Milton Company purchased at face value, a $1,000, 6% bond that pays interest on January 1 and July 1. Milton Company has a calendar year end. The entry for the receipt of interest on July 1, 2011, is a. Cash........................................................................................ 30 Interest Revenue............................................................ 30 b. Cash........................................................................................ 60 Interest Revenue............................................................ 60 c. Interest Receivable................................................................. 30 Interest Revenue............................................................ 30 d. Interest Receivable................................................................. 60 Interest Revenue............................................................ 60 Ans: a, SO: 2, Bloom: AP, Difficulty: Medium, Min: 2, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA 40.40....
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This note was uploaded on 03/07/2011 for the course ENG 101 taught by Professor Heinlein during the Spring '11 term at Indiana Northwest.

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Ch12 - CHAPTER 12 MULTIPLE CHOICE QUESTIONS STUDY GUIDE 33 Corporations invest in other companies for all of the following reasons except to a

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