Multiple Choice Questions
1. A company may retire bonds by:
A) Exercising a call option.
B) The holders converting them to stock.
C) Purchasing the bonds on the open market.
D) Paying them off at maturity.
E) All of the above.
2. Long-term investments:
A) Are current assets.
B) Include funds earmarked for a special purpose such as bond sinking funds.
C) Must be readily convertible to cash.
D) Are expected to be converted into cash within one year.
E) Include only equity securities.
3. Long-term investments include:
A) Investments in bonds and stocks that are not marketable.
B) Investments in marketable stocks that are intended to be converted into cash in the short-term.
C) Investments in marketable bonds that are intended to be converted into cash in the short-term.
D) Only investments readily convertible to cash.
E) Investments intended to be converted to cash within one year.
4. Equity securities are:
A) Recorded at cost to acquire them plus accrued interest.
B) Recorded at cost to acquire them plus dividends earned.
C) Recorded at cost to acquire them.
D) Not recorded until dividends are received.
E) Not recorded until interest is received.
5. The controlling investor is called the:
A) Owner.
B) Subsidiary.
C) Parent.
D) Investee.
E) Senior entity.
6. A controlling influence over the investee is based on the investor owning voting stock exceeding:
A) 10%.
B) 20%.
C) 30%.
D) 40%.
E) 50%.
7. Comprehensive income includes
A) Revenues and expenses reported in the income statement.
B) Gains and losses reported in the income statement.
C) Unrealized gains and losses on long-term available-for-sale securities.
D) All changes in equity for a period except those due to investments and distributions to owners.
E) All of the above.
8. Foreign exchange rates fluctuate due to changes in :
A) Political conditions.
B) Economic conditions.
C) Supply and demand for currencies.
D) Expectations of future events.
E) All of the above.
9. Investments can be classified as:
A) Trading securities.
B) Held-to-maturity debt securities.
C) Available-for-sale debt securities.
D) Available-for-sale equity securities.
E) All of the above.
10. Held-to-maturity securities are:
A) Always classified as Long–Term Liabilities.
B) Part of equity.
C) Debt securities that a company intends and is able to hold to maturity.
D) Equity securities that a company intends and is able to hold to maturity.
E) Equity securities that have a maturity value greater than cost.