131.Reporting investments at fair value is
a.applicable to share securities only.
b.applicable to debt securities only.
c.applicable to both debt and share securities.
d.a conservative approach because only losses are recognized.
132.Foley Corporation's trading securities portfolio at the end of the year is as follows:
Security Cost Fair Value
Ordinary Share A?10,000?12,000
Ordinary Share B 9,000 5,000
? 9,000?17,000
At the end of the year, Foley Corporation should
a.set up a Fair Value Adjustment account for Share B.
b.set up a Fair Value Adjustment account for the portfolio.
c.recognize an Unrealized Gain or Loss—Income for ?4,000.
d.report a loss on the income statement for ?4,000 under "Other income and expense."
133.Foley Corporation's trading securities portfolio at the end of the year is as follows:
Security Cost Fair Value
Ordinary Share A?10,000?12,000
Ordinary Share B 9,000 5,000
?19,000?17,000
Foley subsequently sells Share B for ?12,000. What entry is made to record the sale?
a.Cash............................................12,000
Share Investments...........................................12,000
b.Cash............................................12,000
Fair Value Adjustment........................................3,000
Share Investments...........................................9,000
c.Cash............................................12,000
Share Investments...........................................9,000
Gain on Sale of Share Investments...............................3,000
d.Cash............................................12,000
Share Investments...........................................5,000
Gain on Sale of Share Investments...............................7,000
134.Which of the following would not be reported under "Other income and expense" on the income statement?
a.Unrealized gain on non-trading securities
b.Dividend revenue
c.Interest revenue
d.Gain on sale of short-term debt investments
135.The balance in the Unrealized Loss—Equity account will
a.appear on the statement of financial position as a contra asset.
b.appear on the income statement under Other income and expense.
c.appear as a deduction in the equity section.
d.not be shown on the financial statements until the securities are sold.
136.If the cost of an non-trading security exceeds its fair value by $40,000, the entry to recognize the loss
a.is not required since the share prices will likely rebound in the long run.
b.will show a debit to an expense account.
c.will show a credit to a contra-asset account that appears in the equity section of the statement of financial position.
d.will show a debit to an unrealized loss account that is deducted in the equity section of the statement of financial position.
137.The statement of financial position presentation of an unrealized loss on a non-trading security is similar to the statement presentation of
a.treasury shares.
b.bonds payable.
c.allowance for doubtful accounts.
d.prepaid expenses.
138.At the end of its first year, the trading securities portfolio consisted of the following ordinary shares.
Cost Fair Value
Able Corporation $ 46,400$ 50,000
Benes Inc. 60,000 53,800
Cole Corporation 80,000 76,000
$186,400$179,800
The unrealized loss to be recognized under the fair value method is
a.$6,200.
b.$10,200.
c.$6,600.
d.$4,000.
139.At the end of its first year, the trading securities portfolio consisted of the following ordinary shares.
Cost Fair Value
Able Corporation $ 46,400$ 50,000
Benes Inc. 60,000 53,800
Cole Corporation 80,000 76,000
$186,400$179,800
In the following year, the Benes ordinary shares are sold for cash proceeds of $58,000. The gain or loss to be recognized on the sale is a
a.gain of $4,200.
b.loss of $2,000.
c.gain of $2,200.
d.loss of $400.
140.At the end of the first year of operations, the total cost of the trading securities portfolio is $240,000. Total fair value is $250,000. The financial statements should show
a.an addition to an asset of $10,000 and a realized gain of $10,000.
b.an addition to an asset of $10,000 and an unrealized gain of $10,000 in the equity section.
c.an addition to an asset of $10,000 in the current assets section and an unrealized gain of $10,000 in “Other income and expense.”
d.an addition to an asset of $10,000 in the current assets section and a realized gain of $10,000 in “Other income and expense.”