1 When an investor owns between 20 and 50 of the common stock of a corporation, it is generally presumed that the investor a should apply the cost method in accounting for the investment b will prepare consolidated financial statements c has significant influence on the investee and that the equity method should be used to account for the investment d has insignificant influence on the investee and that the cost method should be used to account for the investment 2 Sunland Company acquires 57, 9 , 5 year, $1000 Community bonds on January 1, 2017 for $57000 If Sunland sells all of its Community bonds for $61200, what gain or loss is recognized a Loss of $4200 b Gain of $4200 c Loss of $9330 d Gain of $9330 3 On January 1, Vaughn Company purchased as a short term investment a $3100, 6 bond for $3100 The bond pays interest on January 1 The bond is sold on July 1 for $3320 plus accrued interest Interest has not been accrued since the last interest payment date What is the entry to record the cash proceeds at the time the bond is sold a Cash 3413 Debt Investments 3100 Gain on Sale of Debt Investments 220 Interest Revenue 93 b Cash 3413 Debt Investments 3320 Interest Revenue 93 c Cash 3320 Debt Investments 3100 Gain on Sale of Debt Investments 220 d Cash 3320 Debt Investments 3320 4 Bramble Company acquires 58, 7 , 5 year, $1000 Community bonds on January 1, 2017 for $58000 The journal entry to record this investment includes a debit to a Stock Investments for $58000 b Debt Investments for $62060 c Cash for $58000 d Debt Investments for $58000 5 In accounting for stock investments between 20 and 50 , the method is used a equity b consolidated statements c controlling interest d cost 6 On January 1, 2017, Forrester Company issued $387,500, 7 , 5 year bonds at face value Interest is payable annually on January 1 Prepare the journal entry to record the issuance of the bonds Jan 1, 2017 Prepare the journal entry to record the accrual of interest on December 31, 2017 Prepare the journal entry to record the payment of interest on January 1, 2018 7 In the balance sheet, the account, Premium on Bonds Payable, is a classified as a stockholders' equity account b classified as a revenue account c deducted from bonds payable d added to bonds payable 8 Bonds that may be exchanged for common stock at the option of the bondholders are called a callable bonds b options c convertible bonds d stock bonds 9 On January 1, 2017, Sunland Company issued $4200000, 10 year, 4 bonds at 102 Interest is payable annually on January 1 The journal entry to record this transaction on January 1, 2017 is a Cash 4284000 Bonds Payable 4284000 b Premium on Bonds Payable 84000 Cash 4200000 Bonds Payable 4284000 c Cash 4200000 Bonds Payable 4200000 d Cash 4284000 Bonds Payable 4200000 Premium on Bonds Payable 84000 10 Secured bonds are bonds that a have specific assets of the issuer pledged as collateral b have detachable interest coupons c are in the possession of a bank d are registered in the name of the owner

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1. When an investor owns between 20% and 50% of the common stock of a corporation, it is generally presumed that the investor a. should

1. When an investor owns between 20% and 50% of the common stock of a corporation, it is generally presumed that the investor

a.	should apply the cost method in accounting for the investment.

b.	will prepare consolidated financial statements.

c.	has significant influence on the investee and that the equity method should be used to account for the investment.

d.	has insignificant influence on the investee and that the cost method should be used to account for the investment.

2. Sunland Company acquires 57, 9%, 5 year, $1000 Community bonds on January 1, 2017 for $57000. If Sunland sells all of its Community bonds for $61200, what gain or loss is recognized?

a.	Loss of $4200

b.	Gain of $4200

c.	Loss of $9330

d.	Gain of $9330

3. On January 1, Vaughn Company purchased as a short-term investment a $3100, 6% bond for $3100. The bond pays interest on January 1. The bond is sold on July 1 for $3320 plus accrued interest. Interest has not been accrued since the last interest payment date. What is the entry to record the cash proceeds at the time the bond is sold?

Cash	3413
Debt Investments		3100
Gain on Sale of Debt Investments		220
Interest Revenue		93

Cash	3413
Debt Investments		3320
Interest Revenue		93

Cash	3320
Debt Investments		3100
Gain on Sale of Debt Investments		220

Cash	3320
Debt Investments		3320

4. Bramble Company acquires 58, 7%, 5 year, $1000 Community bonds on January 1, 2017 for $58000. The journal entry to record this investment includes a debit to

a.	Stock Investments for $58000.

b.	Debt Investments for $62060.

c.	Cash for $58000.

d.	Debt Investments for $58000.

5. In accounting for stock investments between 20% and 50%, the _______ method is used.

equity

b.	consolidated statements

c.	controlling interest

cost

6. On January 1, 2017, Forrester Company issued $387,500, 7%, 5-year bonds at face value. Interest is payable annually on January 1. Prepare the journal entry to record the issuance of the bonds. Jan. 1, 2017. Prepare the journal entry to record the accrual of interest on December 31, 2017. Prepare the journal entry to record the payment of interest on January 1, 2018.

7. In the balance sheet, the account, Premium on Bonds Payable, is

a.	classified as a stockholders' equity account.

b.	classified as a revenue account.

c.	deducted from bonds payable.

d.	added to bonds payable.

8. Bonds that may be exchanged for common stock at the option of the bondholders are called

a.	callable bonds.

options.

c.	convertible bonds.

d.	stock bonds.

9. On January 1, 2017, Sunland Company issued $4200000, 10-year, 4% bonds at 102. Interest is payable annually on January 1. The journal entry to record this transaction on January 1, 2017 is