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Chapter Test 15A

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Part 1
1. Securities that represent ownership in the company are called
2. Consolidated financial statements combine a parent company with its

3–5. The three categories of securities that a company may own that affect their valuation on the balance sheet are:
6. The valuation allowance account is used to record
7. Debt investments that a company plans to hold until maturity are classified as
8. Debt and equity securities that a company has purchased to earn short-term profits are called
9. Held-to-maturity investments are reported at _______ value on the balance sheet.
10. Trading securities are reported at _______ value on the balance sheet.
11. Equity and debt securities that are not classified as trading securities or held-to-maturity securities are classified as
12. Excess cash can be invested until it is needed to earn
13. Strategic investments, such as an acquisition, are considered to be _______-term investments.
14. The accounting for an equity investment by an investor depends upon
15. A company that owns between 20% and 50% of another company must use the _______ method.
16. Dividends received from marketable securities are reported on the income statement as
17. Dividends received from equity-method securities are recorded as
18. The equity method records the investor’s share of the net income of the

Part 2
1. On January 2, Peach Company purchases 35% of the 20,000 outstanding shares of $10 par common stock of Sharpe Corporation at $18. The amount debited to Investment in Sharpe Corporation Stock is

2–4. Sharpe Corporation realizes net income of $75,000 and declares and pays cash dividends of $45,000 in the first year following acquisition by Peach Co.

2. Peach Co.’s share of the $75,000 of net income amounts to

3. Peach Co.’s share of the $45,000 of dividends amounts to

4. Peach Co.’s net increase in its investment in Sharpe Corporation amounts to

5. Pull Corporation purchases 100 shares of Bill Co.’s $15 par common stock at $47 a share, plus a brokerage fee of $100. The amount of the debit to record the purchase is

6. Pull Corporation sells the shares of Bill Co. in Question 5 at $45 a share, with net proceeds of $4,400. The amount of the gain or loss from the sale is

7. In fair value accounting, the change in the reported values of assets and liabilities will be shown in the ________________________ account.

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