21) The fair value of a long-term available-for-sale security has decreased from the last carrying value. The journal entry to record this decrease will include:
A) a debit to the Allowance to Adjust Investment in Available-for-Sale Securities to Market.
B) a credit to the Allowance to Adjust Investment in Available-for-Sale Securities to Market.
C) a credit to the Unrealized Loss on Investment in Available-for-Sale Securities.
D) a debit to the Unrealized Gain on Investment in Available-for-Sale Securities.
22) The Allowance to Adjust Investment in Available-for-Sale Securities to Market has a debit balance. Therefore:
A) the Allowance account is subtracted from the carrying amount of the Investment in Available-for-Sale Securities.
B) the Allowance account is added to the carrying amount of the Investment in Available-for-Sale Securities.
C) the Allowance account is neither added nor subtracted from the carrying amount of the Investment in Available-for-Sale Securities.
D) the Allowance account is added to Unrealized Gain or Loss on Investment in Available-for-Sale Securities.
23) The fair value of a long-term available-for-sale security has increased from the last carrying value. The company uses an allowance account to adjust the investment. The journal entry to record this increase will include:
A) a debit to the Allowance to Adjust Investment in Available-for-Sale Securities to Market.
B) a credit to the Allowance to Adjust Investment in Available-for-Sale Securities to Market.
C) a debit to the Unrealized Gain on Investment in Available-for-Sale Securities.
D) a credit to the Unrealized Loss on Investment in Available-for-Sale Securities.
24) Unrealized gains and losses from long-term available-for-sale investments arise from:
A) the purchase of an investment.
B) the sale of the investment.
C) changes in the fair value of the investment.
D) investor's share of investee's net income or net loss.
25) Realized gains and losses from long-term available-for-sale investments arise from:
A) the purchase of an investment.
B) the sale of the investment.
C) changes in the fair value of the investment.
D) investor's share of investee's net income or net loss.
26) The balance in the Unrealized Gain on Investment in Available-for-Sale Securities account is reported on the ________. The investments are classified as long-term.
A) balance sheet as a contra asset account
B) income statement under Other Expenses and Losses
C) balance sheet, as part of the stockholders' equity section
D) balance sheet, as part of Long-Term Investments
27) The Unrealized Gain on Investment in Available-for-Sale Securities is reported in:
A) Other Revenues and Gains on the income statement.
B) Other Comprehensive Income on the Statement of Comprehensive Income.
C) Accumulated Other Comprehensive Income on the balance sheet.
D) B and C.
28) When accounting for long-term investments in available-for-sale securities, which of the following is used to compute net income?
A) Unrealized Gains on Investments in Available-for-Sale Securities
B) Realized Gains on Investments in Available-for-Sale Securities
C) Dividend Revenue
D) B and C
29) An investor receives a stock dividend from a long-term available-for-sale investment. Which journal entry is required?
A) a debit to Cash and a credit to Dividend Revenue
B) a debit to Cash and a credit to Unrealized Gain on Investments
C) a debit to Investment in Available-for-Sale Securities and a credit to Dividend Revenue
D) a memorandum entry only
30) An investor receives a cash dividend from a long-term available-for-sale investment. Which journal entry is required?
A) a debit to Cash and a credit to Dividend Revenue
B) a debit to Cash and a credit to Interest Revenue
C) a debit to Cash and credit to Investment in Available-for-Sale Securities
D) a debit to Cash and credit to Interest Receivable