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Chapters 1-4The Accounting Cycle
Chapters 5-8Current Assets
Chapters 9-11Long-Term Assets
Chapters 12-14Liabilities/Equities
Chapters 15-16Using Information
- Chapter 15: Financial Reporting and Concepts
- Chapter 16: Financial Analysis and the Statement of Cash Flows
Chapters 17-20Managerial/Cost
Chapters 21-24Budgeting/Decisions

Chapters 1-4The Accounting Cycle
Chapters 5-8Current Assets
Chapters 9-11Long-Term Assets
Chapters 12-14Liabilities/Equities
Chapters 15-16Using Information
- Chapter 15: Financial Reporting and Concepts
- Chapter 16: Financial Analysis and the Statement of Cash Flows
Chapters 17-20Managerial/Cost
Chapters 21-24Budgeting/Decisions

Chapter 9 – Multiple Choice

By admin / September 29, 2015

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Question 1 of 8

1. Question
Which of the following categories/methods would be used to account for an investment in debt securities, where the intent of the investment was primarily for short-term profits?
- Trading securities
- Available-for-sale securities
- Held to maturity securities
- Equity method
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Question 2 of 8

2. Question
Investments in Bonds that the investor intends to hold to maturity should be disclosed on the balance sheet:
- At their face value minus any unamortized premiums.
- At their face value plus any unamortized premiums.
- At their maturity value.
- At their face value.
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Question 3 of 8

3. Question
When the contract interest rate for a bond exceeds the effective interest rate of the bond, then:
- The price of the bond will be equal to the future cash flow associated with the bond.
- The bond will be issued at a premium.
- The bond will be issued at a discount.
- The face value of the bond will fluctuate over its life.
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Question 4 of 8

4. Question
On June 1, Pennell Corporation purchased $100,000 of 9%, 5-year bonds. The bonds are dated June 1, 20X1. The bonds were issued at 96, and pay interest on December 1 and June 1. The entry to record the investment in bonds is:
- Investment in Bonds 100,000
  
  Cash 100,000
- Investment in Bonds 96,000
  
  Cash 96,000
- Investment in Bonds 104,000
  
  Cash 104,000
- Investment in Bonds            96,000
  
  Interest Income            4,000
  
                                       Cash            100,000
Correct

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Question 5 of 8

5. Question
On April 1, 20X1, Collinge Corporation purchased $100,000 of 7%, 5-year bonds dated April 1, 20X1, at 101. Interest is paid on March 31 and September 30. Assuming use of the straight-line amortization method, the proper amount of income to record on September 30, 20X1 is:
- $7,000
- $3,400
- $3,500
- $3,600
Correct

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Question 6 of 8

6. Question
On January 1, 20X2, Miller Corporation purchased $100,000 of 5%, 10-year bonds dated January 1, 20X2, at 98. Interest is paid on June 30 and December 31 of each year. Assuming use of the straight-line amortization method, the proper amount to report for Investment in Bonds at December 31, 20X3 is:
- $98,000
- $98,400
- $100,000
- $101,600
Correct

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Question 7 of 8

7. Question
Investor Corporation owns 30% of Investee Corporation. Investee had net earnings of $100,000 during the year and paid dividends of $30,000. Investor’s Investment in Investee account contained a $70,000 balance at the beginning of the year. What would be the correct balance of this account at the end of the year?
- $70,000
- $91,000
- $100,000
- $140,000
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Question 8 of 8

8. Question
Mega Corporation owns 100% of Wolf Corporation’s stock. Mega paid $1,000,000 for its investment. At the time of the initial investment, Wolf had total stockholders’ equity of $600,000. All of Wolf’s assets and liabilities were carried at amounts that equaled their fair value, except for a building that was undervalued by $100,000. How much goodwill would you anticipate finding in the consolidated balance sheet?
- $0
- $100,000
- $300,000
- $400,000
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