Ch.16 Quiz

Instructions
Read the questions carefully.

This assessment is worth 100 points.

  1. Long-term investments can include funds earmarked for special purposes.   (5 points)

      
      

  2. Bond sinking funds are examples of short-term investments.   (5 points)

      
      

  3. Trading securities, held-to-maturity debt securities, and equity securities giving an investor significant influence over an investee are always considered short-term investments.   (5 points)

      
      

  4. When an investor company owns more than 25% of the voting stock of an investee company, it has a controlling influence.   (5 points)

      
      

  5. Consolidated financial statements show the financial position, results of operations, and cash flows of all entities under the parent's control.   (5 points)

      
      

  6. Foreign exchange rates fluctuate due to many factors including changing political and economic conditions.   (5 points)

      
      

  7. If the exchange rate for Canadian and U.S. dollars is 0.6893 to 1, this implies that 2 Canadian dollars will buy 1.38 worth of U.S. dollars.   (5 points)

      
      

  8. All companies desire a low return on total assets.   (5 points)

      
      

  9. A long-term investment is recorded at cost when purchased.   (5 points)

      
      

  10. To prepare consolidated financial statements when a company has an international subsidiary, the international subsidiary's financial statements must be translated into U.S. dollars.   (5 points)

      
      

  11. Short-term investments:   (5 points)

    a.  
    b.  
    c.  
    d.  
    e.  

  12. The controlling investor is called the:   (5 points)

    a.  
    b.  
    c.  
    d.  
    e.  

  13. The currency in which a company presents its financial statements is known as the:   (5 points)

    a.  
    b.  
    c.  
    d.  
    e.  

  14. A company had net income of $40,000, net sales of $300,000, and total assets of $200,000. Its profit margin and total asset turnover were respectively:   (5 points)

    a.  
    b.  
    c.  
    d.  
    e.  

  15. Held-to-maturity securities are:   (5 points)

    a.  
    b.  
    c.  
    d.  
    e.  

  16. Held-to-maturity debt securities:   (5 points)

    a.  
    b.  
    c.  
    d.  
    e.  

  17. A company purchased $60,000 of 5% bonds on May 1. The bonds pay interest on February 1 and August 1. The amount of interest accrued on December 31 (the company's year-end) would be:   (5 points)

    a.  
    b.  
    c.  
    d.  
    e.  

  18. On January 4, 2001, Larsen Company purchased 5,000 shares of Warner Company for $59,500 plus a broker's fee of $1,000. Warner Company has 25,000 shares of common stock outstanding and it is presumed the Larsen Company will have a significant influence over Warner. During each of the next two years, Warner declared and paid cash dividends of $0.85 per share, and its net income was $72,000 and $67,000 for 2001 and 2002, respectively. The January 12, 2003, entry to record the sale of 3,000 shares of Warner Company stock for $39,000 cash should be:
       (5 points)

    a.  
    b.  
    c.  
    d.  
    e.  

  19. The price of one currency stated in terms of another currency is referred to as the:   (5 points)

    a.  
    b.  
    c.  
    d.  
    e.  

  20. On November 12, Kendra, Inc., a U.S. Company, sold merchandise on credit to Nakakura Company of Japan at a price of 1,500,000 yen. The exchange rate was $0.00837 per yen on the date of sale. On December 31, when Kendra prepared its financial statements, the exchange rate was $0.00843. Nakakura Company paid in full on January 12, when the exchange rate was $0.00861. On December 31, Kendra should prepare the following journal entry:   (5 points)

    a.  
    b.  
    c.  
    d.  
    e.  



Portions copyright ©2005 The McGraw-Hill Companies.
Any use is subject to the Terms of Use and Privacy Policy.
McGraw-Hill Higher Education is one of the many fine businesses of The McGraw-Hill Companies.