Multiple Choice: Reporting for Investments Select the best answer for each of the following:

1. Cash normally is used to purchase short-term investments as a means of:

a. Earning a higher return than would be earned by investing in plant and equipment.

b. Obtaining control of another company.

c. Earning a higher return than would be earned by holding excess cash.

d. Participating in the higher returns found in the stock market.
2. Investments in securities classified as held-to-maturity:

a. May be either stock or debt securities.

b. May be debt securities only.

c. Should always be recorded at maturity value at the time of purchase.

d. Should always be reported at original cost.
3. For an investment in common stock classified as a trading security:

a. An unrealized gain is included in income if the value of the security increases during the period.

b. An unrealized loss is included in income if the value of the security decreases during the period.

c. Dividend income is recorded for dividends received during the period.

d. All of the above.
4. For an investment in common stock classified as available-for-sale:

a. An unrealized gain is included in income if the value of the security increases during the period.

b. An unrealized gain is included in other comprehensive income if the value of the security increases during the period.

c. Dividend income for dividends declared and received during the period is deferred and recognized at the time of sale.

d. Both a and c are correct.