Test Bank for Financial Accounting, 14th Edition by Wendy M. Tietz
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Course
Advanced Accounting
Institution
Advanced Accounting
Test Bank for Financial Accounting 14e 14th Edition by Wendy M. Tietz, C William Thomas. Full Chapters (Chapter 1 to 12 + Appendix E,F) test bank are included with answers.
Financial Statements
Transaction Analysis
Accrual Accounting and Income
Internal Control and Cash
Receivables and Reven...
Test Bank for Financial Accounting, 14th Edition Wendy M. Tietz
Financial Accounting, 14e (Thomas)
Appendix E: Investments
Complete Chapters ✅
Learning Objective E-1 Latest Edition ✅
1) To be classified as a current asset, an investment must either be liquid or the investor must intend to
use it to pay a current liability.
Answer: FALSE
Diff: 2
LO: E-1
AACSB: Reflective Thinking
AICPA Tech Comp: Measurement and Reporting
AICPA Lead Comp: Critical Thinking
2) One reason a company invests in securities of other companies is because they may have a long-term
strategic plan.
Answer: TRUE
Diff: 1
LO: E-1
AACSB: Reflective Thinking
AICPA Tech Comp: Measurement and Reporting
AICPA Lead Comp: Critical Thinking
3) GAAP rules for investments differ based on whether an investment is composed of equity securities or
debt securities.
Answer: TRUE
Diff: 1
LO: E-1
AACSB: Reflective Thinking
AICPA Tech Comp: Measurement and Reporting
AICPA Lead Comp: Critical Thinking
4) Equity securities are investments in bonds or notes payable.
Answer: FALSE
Diff: 1
LO: E-1
AACSB: Reflective Thinking
AICPA Tech Comp: Measurement and Reporting
AICPA Lead Comp: Critical Thinking
5) If an investor owns 25% of the voting stock of an investee, the investor has controlling influence.
Answer: FALSE
Diff: 1
LO: E-1
AACSB: Reflective Thinking
AICPA Tech Comp: Measurement and Reporting
AICPA Lead Comp: Critical Thinking
1
,6) Investments with insignificant influence:
A) are reported at amortized cost on the balance sheet.
B) are more liquid than cash.
C) are reported at historical cost on the balance sheet.
D) are reported using the fair value method on the balance sheet.
Answer: D
Diff: 2
LO: E-1
AACSB: Reflective Thinking
AICPA Tech Comp: Measurement and Reporting
AICPA Lead Comp: Critical Thinking
7) Investments with insignificant influence are reported on the:
A) income statement using fair value method.
B) balance sheet at cost.
C) balance sheet using fair value method.
D) income statement at cost.
Answer: C
Diff: 2
LO: E-1
AACSB: Reflective Thinking
AICPA Tech Comp: Measurement and Reporting
AICPA Lead Comp: Critical Thinking
8) To be classified as a current asset, an investment must meet which of the following criteria:
A) the investment must be liquid.
B) the investor must intend to either convert the investment to cash within one year or current operating
cycle, whichever is longer, or use it to pay a current liability.
C) the investment must be easily convertible to cash.
D) all of the above.
Answer: D
Diff: 2
LO: E-1
AACSB: Reflective Thinking
AICPA Tech Comp: Measurement and Reporting
AICPA Lead Comp: Critical Thinking
9) To be "liquid" means that an investment:
A) will be converted to cash immediately.
B) is easily convertible to cash.
C) was made in one or more banks that hold large cash deposits.
D) is legally required to be converted to cash.
Answer: B
Diff: 1
LO: E-1
AACSB: Reflective Thinking
AICPA Tech Comp: Measurement and Reporting
AICPA Lead Comp: Critical Thinking
2
,10) Marathon Corporation owns 500 shares of Mini Company's common stock. Mini Company has
100,000 shares of common stock outstanding. Marathon Corporation is the ________ and Mini Company
is the ________.
A) investee; investor
B) investor; investee
C) parent company; subsidiary company
D) controlling company; noncontrolling company
Answer: B
Diff: 2
LO: E-1
AACSB: Analytical Thinking
AICPA Tech Comp: Measurement and Reporting
AICPA Lead Comp: Critical Thinking
11) When an investment is readily convertible to cash and the investor plans to convert the investment to
cash within one year, the investment is reported on the balance sheet as:
A) a current asset.
B) a long-term asset.
C) stockholders' equity.
D) a cash equivalent.
Answer: A
Diff: 2
LO: E-1
AACSB: Analytical Thinking
AICPA Tech Comp: Measurement and Reporting
AICPA Lead Comp: Critical Thinking
12) Long-term investments include:
A) stocks and bonds that are not liquid or readily convertible to cash.
B) securities that the investor expects to hold longer than one year or operating cycle, whichever is longer.
C) securities reported in the non-current asset section of the balance sheet.
D) all of the above.
Answer: D
Diff: 2
LO: E-1
AACSB: Reflective Thinking
AICPA Tech Comp: Measurement and Reporting
AICPA Lead Comp: Critical Thinking
3
, 13) Under GAAP, the criteria for classifying investments:
A) are the same for equity and debt securities.
B) differ between equity and debt securities.
C) are the same for all long-term assets.
D) differ depending on how the owner plans to use sales proceeds.
Answer: B
Diff: 2
LO: E-1
AACSB: Reflective Thinking
AICPA Tech Comp: Measurement and Reporting
AICPA Lead Comp: Critical Thinking
14) Mason Corporation owns 500 shares of Mini Company's common stock. Mini Company has 100,000
shares of common stock outstanding. Mason Corporation is considered to have:
A) insignificant influence.
B) significant influence.
C) controlling influence.
D) noncontrolling influence.
Answer: D
Diff: 2
LO: E-1
AACSB: Analytical Thinking
AICPA Tech Comp: Measurement and Reporting
AICPA Lead Comp: Critical Thinking
15) Mason Corporation owns 1,500 shares of Mini Company's common stock. Mini Company has 2,000
shares of common stock outstanding. Mason Corporation is considered to have:
A) insignificant influence.
B) significant influence.
C) controlling influence.
D) noncontrolling influence.
Answer: C
Diff: 2
LO: E-1
AACSB: Analytical Thinking
AICPA Tech Comp: Measurement and Reporting
AICPA Lead Comp: Critical Thinking
4
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