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| 1.
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For long-term, held-to-maturity securities, a receipt of interest income from the investee (Company X) requires a journal entry which includes: |
| | A) | a debit to Interest Receivable |
| | B) | a credit to Interest Earned |
| | C) | a credit to Investment--Company X |
| | D) | a debit to Investment--Company X |
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| 2.
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For long-term, available-for-sale securities, a receipt of dividends from the investee (Company X) requires a journal entry which includes: |
| | A) | a debit to dividends receivable |
| | B) | a debit to cash |
| | C) | a credit to Investment--Company X |
| | D) | a debit to Investment--Company X |
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| 3.
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The parent company owns 60% of the outstanding shares of the common shares of the Jan-Lin Company which has reported earnings of $50,000. The journal entry for the parent will include: |
| | A) | a debit to Investment in Jan-Lin Common Shares for $50,000 |
| | B) | a debit to Investment in Jan-Lin Common Shares for $30,000 |
| | C) | a credit to Investment in Jan-Lin Common Shares for $30,000 |
| | D) | a credit to Earnings from Invest. in Jan-Lin Com. Shares. for $50,000 |
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| 4.
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Which of the following is INCORRECT? |
| | A) | Class of Investment: Short-term held-to-maturity debt securities
Reporting Method: Cost |
| | B) | Class of Investment: Long-term held-to-maturity debt securities
Reporting Method: Equity |
| | C) | Class of Investment: Equity securities with significant influence
Reporting Method: Equity |
| | D) | Class of Investment: Equity securities with controlling influence
Reporting Method: Equity |
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| 5.
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A multinational company based in the United States sold goods to British Stores when the exchange rate was 1.50. The accountant debited Accounts Receivable--British Stores for $27,000 and credited Sales for the same amount. British Stores paid the receivable when the exchange rate was 1.60. What is the amount of foreign exchange gain or loss? |
| | A) | $16,200 gain |
| | B) | $2,700 loss |
| | C) | $1,800 gain |
| | D) | $1,000 gain |
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| 6.
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A multinational company based in the United States sold goods to Canadian Stores when the exchange rate was 0.80. The accountant debited Accounts Receivable--Canadian Stores for $21,600 and credited Sales for the same amount. Canadian Stores paid the receivable when the exchange rate was 0.75. What as amount of foreign exchange gain or loss? |
| | A) | $1.080 gain |
| | B) | $2,160 loss |
| | C) | $1,080 loss |
| | D) | $1,350 loss |
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| 7.
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Which method should be used in accounting for temporary share investments? |
| | A) | The Cost method |
| | B) | The Cost method (with amortization of premium discount) |
| | C) | The Equity method |
| | D) | The Equity method (using consolidation) |
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| 8.
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Which of the following journal entries is correct for a cash dividend from Company X with a 5% ownership? |
| | A) | debit Cash and credit investment in Company X |
| | B) | debit Cash and credit Dividend Revenue |
| | C) | debit Investment in Company X and credit Cash |
| | D) | debit Dividend Revenue and credit Cash |
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| 9.
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Which of the following journal entries is correct for a cash dividend from Company Y with a 45% ownership? |
| | A) | debit Cash and credit investment in Company Y |
| | B) | debit Cash and credit Dividend Revenue |
| | C) | debit Investment in Company Y and credit Cash |
| | D) | debit Dividend Revenue and credit Cash |
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| 10.
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Which method should be used in accounting for long-term debt investments? |
| | A) | Cost method |
| | B) | Cost method (with amortization of premium discount) |
| | C) | Equity method |
| | D) | Equity method (using consolidation) |
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| 11.
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Which of the following journal entries is correct for recording the loss on temporary investments? |
| | A) | debit allowance to reduce temporary investments to market |
| | B) | debit loss on temporary investment and credit investment common shares |
| | C) | debit investment common share and credit allowance to reduce temporary investments to market |
| | D) | debit loss on temporary investments and credit allowance to reduce temporary investments to market |
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