20A2 - Accounting Principles 2 - Investments

Which of the following is not a true statement about the accounting for long-term debt investments?

• The investment is initially recorded at cost.

• The cost includes any brokerage fees.

• The accounting for long-term debt investments is similar to the accounting for short-term debt investments.

• The cost includes any accrued interest.

If a short-term debt investment is sold, the Investment account is:

• credited for the book value of the bonds at the sale date.

• credited for the cost of the bonds at the sale date.

• credited for the fair value of the bonds at the sale date.

• debited for the cost of the bonds at the sale date.

If one company owns more than 50% of the common stock of another company,

• the cost method should be used to account for the investment.

• a partnership exists.

• a parent-subsidiary relationship exists.

• the company whose stock is owned must be liquidated.

Consolidated financial statements are prepared when a company owns more than (a)   of the common stock of another company.

If the equity method is being used, the Revenue from Investment in Stock account is credited when (a)   is reported by the investee.