7 simple accounting questions

1)

In which section of the investor's income statement will interest earned on T-bill appear?

Select one:

a.Operating Expenses

b.Sales Revenue

c.Operating Revenue

d.Other Revenue

2)

BBB Inc., a public company, purchased 25% of Wonderful World Company's total common shares. A few days later, Wonderful World Company paid a total dividend of $1,000,000. From BBB Inc.'s perspective, the entry to record this transaction is

Select one:

a.Debit Cash, Credit Dividend Revenue

b.Debit Investment in AssociateWonderful World Company, Credit Dividend Revenue

c.Debit Dividend Revenue, Credit Cash

d.Debit Cash, Credit Investment in AssociateWonderful World Company

3)

The initial classification of investment as strategic or non-strategic is based on

Select one:

a.intent

b.its value

c.its maturity date

d.its acquisition date

4)

When an investor plans to generate investment income without intending to establish a long-term relationship with the investee, this investment would be classified as a/an

Select one:

a.non-strategic investment

b.held to maturity investment

c.strategic investment

d.available for sale investment

5)

Which of the following debt instruments would be reported on the balance sheet as a long-term investment?

Select one:

a.A debt instrument that matures in 9 months and the investor intends to hold to maturity for interest revenue.

b.A debt instrument that matures in 6 months but the investor intends to sell at a gain within 3 months.

c.A debt instrument that matures in 5 years but the investor intends to sell at a gain within 1 year.

d.A debt instrument that matures in 5 years and the investor intends to hold to maturity for interest revenue.

6)

When the fair value method is used in accounting for strategic equity investment, which of the following events does not require a journal entry?

Select one:

a.The investee company reports a net loss at its year-end.

b.The investee company pays dividends.

c.The investor pays cash to acquire the investee's shares.

d.The market value of the investee's shares is different from the book value in the investor's books at the investor's year-end.

7)

Savvy Co. has decided to sell shares in Priceless Co., which had an original cost of $45,000, for $40,000. Savvy uses the cost method for recording the strategic equity investment in Priceless Co. The journal entry to record this sale in Savvy's books would include

Select one:

a.A debit to Loss on Sale of Investment

b.A credit to Cash

c.A credit to Investment Revenue

d.A debit to Short-Term Investments-Trading