Select the best answer for each of the following 1 On
Select the best answer for each of the following.
1. On January 1, 2016, Weaver Company purchased as held-to-maturity debt securities $500,000 face value of Park Corporation’s 8% bonds for $456,200. The bonds were purchased to yield 10% interest and pay interest annually. The bonds mature on January 1, 2021. Weaver uses the effective interest method of amortization. What amount should Weaver report on its December 31, 2016, balance sheet as an investment in held to maturity debt securities?
a. $450,580
b. $456,200
c. $461,820
d. $466,200
2. On its December 31, 2015, balance sheet. Fay Company reported investments, classified as trading securities, at a market value of $183,000. There was no change during 2016 in the composition of Fay’s portfolio of marketable equity securities. Pertinent data are as follows:
What amount of loss on these securities should be included in Fay’s income statement for the year ended December 31, 2016?
a. $0
b. $1,500
c. $2,000
d. $3,500
3. During 2016, Anthony Company purchased securities as a long term investment and classified them as available-for-sale. Pertinent data are as follows:
The amount of the holding gain or loss included in Anthony’s yearend balance sheet should be:
a. $0
b. $3,000
c. $9,000
d. $12,000
4. On July 1, 2016, Aldrich Company purchased as an available-for-sale security $200,000 face value, 9% U.S. Treasury' notes for $194,000. The notes mature July 1, 2017, and pay interest semi annually on January’ 1 and July' 1. The notes were sold on December 1, 2016, for $199,000. Aldrich normally uses straight line amortization on all of its notes. In its income statement for the year ended December 31, 2016, what amount should Aldrich report as a gain on the sale of the available- for- sale security?
a. $2,500
b. $3,500
c. $5,000
d. $6,000
5. In 2015, Cromwell Corporation bought 30,000 shares of Fleming Corporation’s listed stock for $300,000 and classified the investment as available-for-sale. In 2016, the market value declined to $200,000. In 2017, the market value of the Fleming stock rose to $230,000, and the stock was sold. How much should Cromwell record as a realized gain or loss in its determination of net income for 2017?
a. $0
b. $30,000 gain
c. $70,000 loss
d. $100,000 loss
6. When the market value of a company's portfolio of available-for-sale securities is lower than its cost, the difference should be:
a. Accounted for as a valuation allowance deducted from the asset to which it relates
b. Accounted for as an addition in the share-holders' equity section of the balance sheet
c. Accounted for as a liability,'
d. Disclosed and described in a note to the financial statements but not accounted for
7. A security in a portfolio of available-for-sale securities is transferred to the trading category'. The security' should be transferred between the corresponding portfolios at:
a. Book value at date of transfer if higher than the lair value at date of transfer
b. Fair value at date of transfer, regardless of its cost
c. Cost, regardless of the fair value at date of transfer
d. Lower of its cost or fair value at date of transfer
8. On January' 2, 2016, Portcla Inc. bought 30% of the outstanding common stock of Bracero Corporation for $258,000 cash. Portcla accounts for this investment by the equity' method. At the date of acquisition of the stock, Bracero’s property, plant, and equipment had a fair value in excess of its book value of $150,000. Braccro’s property', plant, and equipment has a remaining life of 10 years. Bracero's net income for the year ended December 31, 2016, was $180,000. During 2016, Bracero declared and paid cash dividends of $20,000. On December 31, 2016, Portcla should have carried its investment in Bracero in the amount of.
a. $258,000
b. $301,500
c. $306,000
d. $312,000
9. Cash dividends declared out of current earnings were distributed to an investor. How will the investor’s investment account be affected by those dividends under each of the following accounting methods?
10. On January' 1, 2016, Parke Company accepted a $36,000, non interest bearing, 3-year note from a major customer in exchange for used equipment. The equipment had originally cost Parke $200,000 and had a book value of $20,000 on the date of the sale. At the 12% imputed interest rate for this type of loan, the present value of the note is $25,500 at January' 1, 2016. Parke uses the effective interest rate. What is the carrying value of the note receivable on Parke’s December 31, 2016, balance sheet?
a. $28,560
b. $29,000
c. $32,500
d. $36,000
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