106.Each of the following transactions would be reflected in both the income statement and the statement of cash flows for the current period, except:
A. The adjustment of marketable securities to their current market value.
B. Receipt of dividends earned on investments.
C. Payment of interest on bonds.
D. Sale of merchandise for cash.
107.Investments in available for sale marketable securities:
A. Only include investments in the capital stock of publicly traded corporations.
B. May be reported in the balance sheet at market values lower than cost, but never at values in excess of original cost.
C. Are adjusted to current market value at the end of each accounting period.
D. Are carried in the accounting records at current market values, and therefore do not generate gains or losses when sold at market values.
108.The purpose of the fair value adjustment for securities classified as "available-for-sale" is:
A. To adjust the valuation of a company's investment to current market value.
B. To recognize the proper amount of gain or loss on fluctuations in the market value of these securities in the current period income statement.
C. To adjust a corporation's capital stock account to reflect the current market value of the outstanding capital stock.
D. To compute the amount of taxes payable on unrealized gains and losses.
109.The fair value accounting adjustment:
A. Affects both the balance sheet and the current period income statement.
B. Is not made when the current market value of investments in marketable securities is higher than original cost.
C. May result in either a gain or a loss to be reported in the current period income statement.
D. Represents a departure from the cost principle.
110.An Unrealized Holding Gain (or Loss) on Investments classified as "available-for-sale" securities:
A. Is reported in the asset section of the balance sheet, as an adjustment to the carrying value of the marketable securities.
B. Is reported in the stockholders' equity section of the balance sheet, as either an increase or decrease in total stockholders' equity.
C. Appears in the current period income statement, combined with realized gains and losses from sales of securities.
D. Indicates the amount of cash a company would receive if the marketable securities were sold as of the balance sheet date.
111.On December 30, 2015, Varsity Corporation sold available for sale marketable securities costing $800,000 for $860,000 cash. The securities were purchased on January 2, 2013 and the market value of the securities on December 31, 2013 and December 31, 2014 was $820,000 and $780,000, respectively. How much gain or loss will Varsity report in its income statement for the year ending December 31, 2015?
A. A $20,000 loss.
B. A $40,000 gain.
C. A $60,000 gain.
D. An $80,000 gain.
112.Fisher Corporation invested $320,000 cash in available-for-sale marketable securities in early December. On December 31, the quoted market price for these securities is $337,000. Which of the following statements is correct?
A. Fisher's December income statement includes a $17,000 gain on investments.
B. If Fisher sells these investments on January 2 for $300,000, it will report a loss of $37,000.
C. Fisher's December 31 balance sheet reports marketable securities at $320,000 and an unrealized holding gain on investments of $17,000.
D. Fisher's December 31 balance sheet reports marketable securities at $337,000 and an unrealized holding gain on investments of $17,000.
113.Refer to the information above. In financial statements prepared on December 31, 2014, Neptune Corporation reports:
A. The asset Investments in Marketable Securities at $700,000 with footnote disclosure of the market value of $730,000.
B. The asset Investments in Marketable Securities at $730,000, and a $30,000 Unrealized Holding Gain included in total stockholders' equity.
C. The asset Investments in Marketable Securities at $730,000, and a $30,000 gain recognized in the income statement.
D. The asset Investments in Marketable Securities at $700,000, and a $30,000 Unrealized Holding Gain included in total stockholders' equity.
114.Refer to the information above. Assuming Neptune does not sell this investment, the fair value accounting adjustment necessary at December 31, 2015, includes:
A. A $5,000 debit to Unrealized Holding Gain on Investments.
B. A $25,000 credit to Unrealized Holding Gain on Investments.
C. A $5,000 debit to Investments in Marketable Securities.
D. A $725,000 debit to Investments in Marketable Securities.
115.Refer to the information above. Assuming Neptune does not sell this investment, the financial statements prepared at December 31, 2015 will report:
A. Investments in Marketable Securities of $700,000, reduced by a $30,000 Unrealized Holding Gain on Investments, in the asset section of the balance sheet.
B. The asset Investments in Marketable Securities of $700,000 in the balance sheet, and a $25,000 Unrealized Holding Loss on Investments in the income statement.
C. The asset Investments in Marketable Securities of $725,000, and a $5,000 Unrealized Holding Loss deducted from total stockholders' equity.
D. Investment in Marketable Securities of $725,000 in the asset section of the balance sheet, with a $25,000 Unrealized Holding Gain on Investments included in the stockholders' equity section.