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| 1.
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Short term investments are current assets and must meet two requirements: (1) they are expected to be converted into cash within one year or the current accounting cycle of the business and (2) they are readily convertible to cash. |
| | A) | True |
| | B) | False |
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| 2.
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Investments in shares and bonds that are not marketable or, if marketable, are not intended to be converted into cash in the short-term are called long-term investments. |
| | A) | True |
| | B) | False |
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| 3.
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An important requirement for a security to be classified as a long-term investment in available-for-sale securities is that it must enable the investor to have significant influence over the investee. |
| | A) | True |
| | B) | False |
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| 4.
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Dividends paid to the investor of long-term investments in available-for-sale securities are recorded as interest revenue. |
| | A) | True |
| | B) | False |
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| 5.
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When a company recognizes dividends from an investment in another company's shares as dividend revenue, the company is using the cost method of accounting for that share investment. |
| | A) | True |
| | B) | False |
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| 6.
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The difference between the increased fair market value of available-for-sale securities and their book value is reported on the balance sheet, not on the income statement as a gain. |
| | A) | True |
| | B) | False |
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| 7.
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Any realized gain/loss on trading securities is reported on the balance sheet. |
| | A) | True |
| | B) | False |
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| 8.
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When an investor has significant influence or controlling influence over the investee, the equity method of accounting for the investment is used. |
| | A) | True |
| | B) | False |
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| 9.
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When the Investment in the Elmwood Company account of the investor is increased at the time the Elmwood Company informs the investor of its income, the investor is using the equity method of accounting for stock investments. |
| | A) | True |
| | B) | False |
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| 10.
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If ABC Corporation owns a controlling interest (more than 50% of the voting shares) in XYZ Corporation, ABC Corporation is a parent company to the XYZ Corporation. |
| | A) | True |
| | B) | False |
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| 11.
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If Leland Corporation is controlled by the Janet Corporation because the Janet Corporation owns more than 50% of the voting shares of the Leland Corporation, the Leland Corporation is a subsidiary of the Janet Corporation. |
| | A) | True |
| | B) | False |
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| 12.
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Financial statements that show the results of all operations under the parent's control, including those of any subsidiaries, are called consolidated financial statements. |
| | A) | True |
| | B) | False |
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| 13.
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A company that operates in a large number of different countries is referred to as an international business. |
| | A) | True |
| | B) | False |
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| 14.
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The price of one currency stated in terms of another currency is called the foreign exchange rate. |
| | A) | True |
| | B) | False |
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| 15.
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When collecting an account receivable from a foreign entity, if the exchange rate decreased since the time of the sale, there is a reportable foreign exchange gain. |
| | A) | True |
| | B) | False |
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| 16.
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When a short-term investment’s market value has declined, there is no adjustment to be made. |
| | A) | True |
| | B) | False |
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| 17.
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The increase in market value of a temporary investment is not recorded until the investment is sold. |
| | A) | True |
| | B) | False |
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| 18.
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The premium paid for a long-term debt investment should be amortized against the investment account over the life of the investment using the effective interest method. |
| | A) | True |
| | B) | False |
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| 19.
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The dividend received from share investment with significant influence should use the cost method by debiting cash and crediting dividend revenue. |
| | A) | True |
| | B) | False |
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