ch12

Financial Accounting

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Unformatted text preview: ch12 Student: ___________________________________________________________________________ 1. The extent of influence and control over another company is a critical factor in determining the proper method of accounting for a long-term investment in the common stock of another company. True False 2. Investments in bonds intended to be sold before they reach maturity should be reported under the market value method. True False 3. Management must have the intent and ability to hold a bond investment until maturity if it is to be classified as a held-to-maturity security. True False 4. If a bond is bought at a discount, then interest revenue will be less than the cash payment. True False 5. If a bond is bought at a premium, the amortized book value of the bond investment will decrease as the bond matures. True False 6. Held-to-maturity bond investments have to be reported on the balance sheet at fair value. True False 7. Investments classified other than as held-to-maturity bond investments have to be reported on the balance sheet at fair value. True False 8. A realized gain or loss is reported on the income statement when a fair value adjustment is made. True False 9. An unrealized holding gain is reported on the income statement when the fair value of an available-for-sale security exceeds its cost. True False 10. An unrealized holding gain is reported within other comprehensive income when the fair value of a trading security exceeds its cost. True False 11. An unrealized holding loss is reported on the income statement when the fair value of a trading security is less than its cost. True False 12. A realized gain or loss is reported on the income statement when a trading security is sold. True False 13. A decline in the fair value of the available-for-sale portfolio reduces assets and net income. True False 14. An increase in the fair value of the trading securities portfolio increases both assets and net income. True False 15. The sale of a stock from the available-for-sale portfolio creates a gain or loss on the income statement based on the difference between the stock's original cost and its selling price. True False 16. The only income reported on the income statement for a stock from the available-for-sale portfolio prior to its sale is dividend revenue. True False 17. The equity method is required to be used when an investor has the ability to exert significant influence over the investee. True False 18. Use of the equity method is required for investments between 20 and 50% of a company's common stock regardless of the investor's ability to influence the investee. True False 19. The equity method requires the recognition of investment revenue for dividends received. True False 20. Ocean Corporation owns 30% of Woods Corp. for which they paid $5.5 million and uses the equity method to account for the investment. Woods Corp. paid a $100,000 dividend; the investment in Woods Corp....
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ch12 - ch12 Student 1 The extent of influence and control...

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