11) Which of the following statements is CORRECT?
A) Trading securities can be current or long-term assets.
B) Available-for-sale securities are always current assets.
C) Held-to-maturity securities are always current assets.
D) Trading securities are always current assets.
12) All investments in securities NOT classified as trading securities or held-to-maturity securities are classified as:
A) debt securities.
B) equity securities.
C) marketable securities.
D) available-for-sale securities.
13) Matthew Company purchases a trading security for $12,000 cash. The journal entry to record this transaction will include a:
A) debit to the Investment in Trading Securities account and a credit to Cash.
B) debit to Cash and a credit to the Investment in Trading Securities account.
C) debit to Long-term Investment and credit Cash.
D) debit to Dividend Revenue and credit to Cash.
14) When a company receives a cash dividend from a trading security, the journal entry includes:
A) a debit to Investment in Trading Securities and credit to Cash.
B) a debit to Dividend Revenue and credit to Cash.
C) a debit to Cash and credit to Investment in Trading Securities.
D) a debit to Cash and credit to Dividend Revenue.
15) An unrealized gain on a trading security:
A) is recorded when a trading security is sold for more than its cost.
B) is recorded when a trading security is sold for less than its cost.
C) is recorded when the fair value of the trading security is more than its cost.
D) is recorded when the fair value of the trading security is less than its cost.
16) Investments in Trading Securities are reported on the:
A) income statement at fair value.
B) balance sheet at cost.
C) balance sheet at fair value.
D) income statement at cost.
17) A company's trading security has a fair value which exceeds its cost. When recording the journal entry:
A) the Investment in Trading Securities account will be credited.
B) the Unrealized Gain on Trading Securities account will be credited.
C) the Unrealized Loss on Trading Securities account will be debited.
D) the Gain on Treasury Securities will be credited.
18) Unrealized gains on trading securities are reported on the:
A) statement of cash flows.
B) balance sheet.
C) income statement as Sales Revenue.
D) income statement as Other Revenues and Gains.
19) A realized gain on the sale of a trading security occurs when the:
A) sales price is greater than the trading investment's carrying amount.
B) sales price is less than the trading investment's carrying amount.
C) sales price is greater than the trading investment's original cost.
D) sales price is less than the trading investment.'s original cost.
20) When a company sells a trading security, the Gain on the Sale of Trading Securities is reported in the:
A) stockholders' equity section of the balance sheet.
B) short-term investments section of the balance sheet.
C) other revenue, gains, and losses section of the balance sheet.
D) other revenues and gains of the income statement.