Investment- Acc Principle 2

Short-term investments are

• a.   (1) readily marketable and (2) intended to be converted into cash after the current year or operating cycle, whichever is shorter.

• b.   (1) readily marketable and (2) intended to be converted into cash within the current year or operating cycle, whichever is longer.

• c.   (1) readily marketable and (2) intended to be converted into cash after the current year or operating cycle, whichever is longer.

• d.   (1) readily marketable and (2) intended to be converted into cash within the current year or operating cycle, whichever is shorter.

Securities bought and held primarily for sale in the near term to generate income on short-term price differences are

• a.   trading securities.

• b.   available-for-sale securities.

• c.   never-sell securities.

• d.   held-to-maturity securities.

Which of the following would not be classified as a short-term investment?

• a.   Short-term commercial paper

• b.   Idle cash in a bank checking account

• c.   Marketable stock securities

• d.   Marketable debt securities

Short-term investments are securities that are readily marketable and intended to be converted into cash within the next

• a.   year.

• b.         two years

• c.   year or operating cycle, whichever is shorter.

• d.   year or operating cycle, whichever is longer.

Which one of the following would not be classified as a short-term investment?

• a.         Marketable stock securities

• b.   Equity method investments

• c.   Marketable debt securities

• d.   Short-term paper

Available-for-sale securities are classified as

• a.   short-term investments only.

• b.   long-term investments only.

• c.   either short-term or long-term investments.

• d.   current assets only.

At December 31, 2020, DeCore Inc. has these data on its security investments:

 

                        Security                           Cost                        Fair Value 12/31/20

                        Trading                        $ 140,000                           $190,000

                        Available-for-sale          137,000                             122,000

 

            If the available-for-sale securities are held as long-term investments, which of the following will be recorded to adjust the securities to fair value?

• a.         Db)Securities..         35,000

                                  Cr)Unrealized Gain-Income.                                  35,000

• b.         Db)Unrealized Loss-Income      15,000

                          Db)Securities.         35,000

             Cr) Unrealized Gain-Income  50,000

• c.       Db)  Fair Value Adjustment-Trading 50,000

                                  Cr) Unrealized Gain¾Income 50,000

                          Db)Unrealized Gain or Loss-Equity 15,000

                                 Cr) Fair Value Adjustment-Available-for-Sale. 15,000

• d.         Db) Unrealized Gain¾Income 50,000

                                  Cr) Fair Value Adjustment-Trading 50,000

                          Db) Fair Value Adjustment-Available for Sale         15,000

                                  Cr) Unrealized Gain or Loss-Equity 15,000

At December 31, 2020, the trading securities for Sandwich, Inc. are as follows:

 

                        Security           Cost                 Fair Value 12/31/20

                            A                $90,000                       $94,000

                            B                150,000                       141,000

                            C                 32,000                         30,000

 

            Saddle should report the following amount related to the securities in its 2020 income statement:

• a.  $4,000 gain

• b.  $7,000 realized loss.

• c.  $7,000 unrealized loss.

• d.  $11,000 unrealized loss.

Comanic Corp. has common stock of $5,400,000, retained earnings of $2,000,000, unrealized gains on trading securities of $100,000 and unrealized losses on available-for-sale securities of $200,000. What is the total amount of its stockholders’ equity?

• a.   $7,200,000

• b.   $7,400,000

• c.   $7,300,000

• d.   $7,500,000

At the end of the first year of operations, the total cost of the trading securities portfolio is $245,000. Total fair value is $250,000. The financial statements should show an addition to cost of the fair value adjustment and

• a.   a realized gain of $5,000 in the statement of comprehensive income.

• b   an unrealized gain of $5,000 in the stockholders’ equity section of the balance sheet.  

• c.   an unrealized gain of $5,000 in “Other revenues and gains,” on the income statement.

• d.         a realized gain of $5,000 in “Other revenues and gains,” on the income statement.