The equity method of accounting for investments

Assignment Help Financial Accounting

Reference no: EM131202338

1. Temporary investments

A. include cash equivalents

B. do not include equity securities

C. are reported as current assets

D. All of these choices are correct.

2. A company uses cash to pay all of the following except

A. All of these options are uses of cash

B. current expenses

C. dividends to stockholders

D. interest to creditors

3. Temporary investments such as in trading securities are

A. recorded at cost but reported at lower of cost or fair market value

B. recorded at fair market value and reported at fair market value

C. recorded at cost and reported at cost

D. recorded at cost but reported at fair market value

4. Long-term investments are held for all of the listed reasons below except

A. to have influence over another business entity

B. for their long-term gain potential

C. to earn the interest or dividend income

D. to meet current cash needs

5. Interest revenue on bonds is reported

A. as an addition to the Investment in Bonds account

B. as part of other income

C. as part of operating income

D. as part of comprehensive income but not as part of net income

6. Which of the following stock investments should be accounted for using the cost method?

A. investments of less than 20% and investments between 20% and 50%

B. investments of less than 20%

C. investments between 20% and 50%

D. all stock investments should be accounted for using the cost method

7. The equity method of accounting for investments

A. requires the investment be increased by the reported net income of the investee

B. requires the investment to be reported at its original cost

C. requires the investment be increased by the dividends paid by the investee

D. requires a year-end adjustment to revalue the stock to lower of cost or market

Reference no: EM131202338

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