21) Strategies to increase the current ratio may include:
A) increasing sales.
B) paying off current liabilities before the end of the year.
C) reclassifying long-term investments as short-term investments.
D) all of the above.
22) Trading securities purchased for $400,000, had a fair value of $410,000 at the end of the year. The adjusting entry to record this difference included a credit to:
A) Retained Earnings.
B) Unrealized Gain on Trading Securities.
C) Investment in Trading Securities.
D) Accumulated Other Comprehensive Income.
23) Trading securities purchased in 2012 for $90,000, had a fair value of $92,000 on December 31, 2012. At December 31, 2013 the securities had a fair value of $95,000. The journal entry on December 31, 2013 would include a:
A) debit to the Investment in Trading Securities account for $5,000.
B) debit to the Investment in Trading Securities account for $3,000.
C) credit to the Unrealized Gain on Trading Securities account for $5,000.
D) debit to the Unrealized Loss on Trading Securities account for $3,000.
24) Michael Company purchased a trading investment that had a carrying amount of $35,000 when they decided to sell it. Michael Company purchased the investment for $31,000. If Michael Company sold this investment for $45,000, Michael will have a(n):
A) Gain on Sale of Trading Security for $14,000.
B) Gain on Sale of Trading Security for $10,000.
C) Unrealized Loss on Trading Security of $4,000.
D) Unrealized Gain on Trading Security of $14,000.
25) When a company receives a cash dividend from a short-term available-for-sale security, the journal entry is:
A) debit to Investment in Available-for-Sale Securities and credit Cash.
B) debit to Cash and credit to Dividend Revenue.
C) debit to Dividend Revenue and credit to Cash.
D) debit to Cash and credit to Investment in Available-for-Sale Securities.
26) Investment in Available-for-Sale Securities is reported on the:
A) income statement at cost.
B) income statement at fair value.
C) balance sheet at cost.
D) balance sheet at fair value.
27) Unrealized Gains on Investment in Available-for-Sale Securities are reported on the:
A) income statement.
B) statement of Retained Earnings.
C) current asset section of the balance sheet.
D) stockholders' equity section of the balance sheet.
28) When a company sells a short-term available-for-sale security, the Gain on the Sale of the Investment in Available-for-Sale Securities is reported on the:
A) revenues section of the income statement.
B) current assets section of the balance sheet.
C) other revenues and gains section of the income statement.
D) stockholders' equity section of the balance sheet.
29) An Investment in Available-for-Sale Securities are purchased for $400,000 and have a fair value of $420,000 at the end of the year. The required journal entry at year-end will have a credit to:
A) Retained Earnings.
B) Unrealized Gain on Investment in Available-for-Sale Securities.
C) Investment in Available-for-Sale Securities.
D) Investment in Trading Securities.
30) To be classified as a current asset, an investment must meet the following criteria which include:
A) the investment must be liquid.
B) the investor must intend to convert the investment to cash within one year or operating cycle, whichever is longer.
C) the investment must be easily convertible to cash.
D) all of the above