1. On April 1, 2011, Albert Company purchased $50,000 of Tetter Company's 12% bonds at 122. The cost method of accounting for stock

a. Requires the investment be increased by the reported net income of the investee

b. Requires the investment be decreased by the reported net income of the investee

c. Recognizes dividends as income

d. Is only appropriate as part of a consolidation (Answer)

2. All of the following are disadvantages of fair value use except:

a. Comparability between companies may be impacted by different fair value measurement.

b. Fair values may not be readily obtainable.

c. Fair values can only be used on balance sheet accounts (Answer).

d. Fair values may cause more fluctuations as change occurs from period to period.

3. All of the following are factors contributing to the trend for regulators to adopt accounting principles using fair value concepts except:

a. The ease of applying market values to assets and liabilities.

b. Pressure on regulators to adopt an international set of accounting principles and standards.

c. A greater percentage of total assets existing as receivables and securities.

d. Hybrid measurement methods within GAAP that conflict with each other (Answer).

4. The statement of cash flows is not useful for:

a. Planning future investing and financing activities (Answer)

b. Determining a company's ability to pay dividends

c. Determining a company's ability to pay its debts

d. Calculating the net worth of a company

5. Yankton Company began the year without an investment portfolio. During the year they purchased investments classified as trading securities at a cost of $13,000. At the end of the year, the market value of the securities was $11,000. The Yankton Company's financial statements for the current year should show

a. No loss on the income statement and net trading securities of $13,000 on the balance sheet

b. No loss on the income statement, net trading securities of $11,000 and an unrealized loss of $2,000 as a stockholders' equity adjustment on the balance sheet

c. A loss of $2,000 on the income statement and temporary investments of $11,000 on the balance sheet (Answer)

d. A loss of $2,000 on the income statement and net trading securities of $13,000 on the balance sheet

6. Yankton Company began the year without an investment portfolio. During the year they purchased investments classified as available-for-sale securities at a cost of $13,000. At the end of the year, the market value of the securities was $11,000. The Yankton Company's financial statements for the current year should show

a. A loss of $2,000 on the income statement and available-for-sale securities of $13,000 on the balance sheet

b. No loss on the income statement and available-for-sale securities of $13,000 on the balance sheet

c. No loss on the income statement, available-for-sale securities of $11,000 and an unrealized loss of $2,000 as a stockholders' equity adjustment on the balance sheet (Answer)

d. A loss of $2,000 on the income statement and temporary investments of $11,000 on the balance sheet

7. Direct labor and direct materials are classified as:

a. Period costs and expensed when the goods are sold

b. Product costs and expensed when incurred

c. Period costs and expensed when incurred

d. Product costs and expensed when the goods are sold (Answer)