1) Securities classified as held-to-maturity could be reported as either current or long-term in a classified balance sheet, depending upon their maturity dates. True of False?

2) Both debt and equity securities can be categorized as trading securities. True or False?

3) Both trading securities and securities available-for-sale are reported at their fair values. True or False

4) When available-for-sale securities are sold, the amount of unrealized holding gain or loss realized from the date of purchase is included in before-tax net income. True or False?

5) Under the equity method of accounting for a stock investment, cash dividends received are considered a reduction of the investee's net assets. True or False?

6) The investment category for which the investor's "positive intent and ability to hold" is important is:

Multiple Choice

• a.Securities reported under the equity method.

• b.Trading securities.

• c.Securities classified as held-to-maturity.

• d.Securities available-for-sale.

7) In which investment category are fair values and subsequent growth of an investee not relevant for reporting?

Multiple Choice

• a.Securities reported under the equity method.

• b.Trading securities.

• c.Held-to-maturity securities.

• d.Securities available-for-sale.

8) For trading securities, unrealized holding gains and losses are included in net income:

Multiple Choice

• a.Only at the end of the fiscal year.

• b.On each reporting date.

• c.Only when they exceed 10% of the underlying investment.

• d.Based on a vote of the board of directors.

9) The equity method of accounting for investments in voting common stock is appropriate when:

Multiple Choice

• a.The investor can significantly influence the investee.

• b.The investor has voting control over the investee.

• c.The investor intends to hold the common stock indefinitely.

• d.The investor is assured of a continued supply of a valuable raw material.

10) If Pop Company exercises significant influence over Son Company and owns 40% of its common stock, then Pop Company:

Multiple Choice

• a.Would record dividends received from Son Company as investment revenue.

• b.Would increase its investment account when Son Company declares dividends.

• c.Would record 40% of the net income of Son Company as investment income each year.

• d.All of these answer choices are correct.