42 when investing excess cash for short periods of

42. When investing excess cash for short periods of time, corporations invest in
a. stocks of companies in a related industry.
b. debt securities.
c. low-risk, highly liquid securities.
d. stock securities.
Ans: C, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FC: Risk Analysis, AICPA PC: Problem
Solving, IMA: Investment Decisions
H-9
43. In accounting for debt investments, companies make entries for each of the following: 44. Banks and financial institutions often purchase debt securities to
Management, IMA: Investment Decisions
45. Why do corporations generally invest in debt or equity securities?
46. Why do pension and mutual funds invest in debt and equity securities?
a. They have excess cash.
b. They want to generate earnings from investment income.
c. They invest for strategic reasons.
d. They invest for speculative reasons.
Ans: B, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FC: Risk Analysis, AICPA PC: Project
Management, IMA: Investment Decisions
FOR INSTRUCTOR USE ONLY

Test Bank for Financial Accounting: Tools for Business Decision Making, Eighth Edition