51.Long-term investments are held for all of the listed reasons below
except
a.to earn the interest or dividend income
b.for their long-term gain potential
c.to have influence over another business entity
d.to meet current cash needs
52.Temporary investments such as in trading securities are
a.recorded at cost but reported at fair market value
b.recorded at cost and reported at cost
c.recorded at cost but reported at lower of cost or fair market value
d.recorded at fair market value and reported at fair market value
53.On June 1, $50,000 of treasury bonds were purchased between interest dates. The broker commission was$500. The bonds pay interest at 12%, which is paid semiannually on January 1 and July 1. What is the total cost tobe debited to the Investment—Treasury Bonds account?
a. $50,000
b. $50,500
c. $49,500
d. $53,000
54.On June 1, $40,000 of treasury bonds were purchased between interest dates. The broker commission was$600. The bonds pay interest at 12%, which is paid semiannually on January 1 and July 1. How much interestrevenue will be recorded on July 1?
a. $400
b. $406
c. $2,000
d. $2,400
55.Ruben Company purchased $100,000 of Evans Company bonds at 100 plus $1,500 in accrued interest. The bondinterest rate is 8% and interest is paid semiannually. The journal entry to record the purchase would be
a.debit Investment—Evans Company Bonds, $101,500? credit Cash, $101,500
b.debit Investment—Evans Company Bonds, $100,000; credit Interest Revenue, $1,500, and Cash, $98,500
c.debit Investment—Evans Company Bonds, $100,000, and Interest Receivable $1,500; credit Cash $101,500
d.debit Investment—Evans Company Bonds, $100,000; credit Cash $100,000
56.Ruben Company purchased $100,000 of Evans Company bonds at 100 plus $1,500 in accrued interest. The bondinterest rate is 8% and interest is paid semiannually. The journal entry to record the receipt of interest on the nextinterest payment date would be
a.debit Cash, $4,000; credit Interest Revenue, $4,000
b.debit Cash, $4,000; credit Interest Receivable, $4,000
c.debit Cash, $4,000; credit Interest Receivable, $1,500, and Interest Revenue, $2,500
d.debit Cash, $2,500; credit Interest Revenue, $2,500
57.Ruben Company purchased $100,000 of Evans Company bonds at 100. Ruben later sold the bonds at $104,500 plus$500 in accrued interest. The journal entry to record the sale of the bonds would be
a.debit Cash, $105,000; credit Investment—Evans Company Bonds, $104,500, and Interest Revenue, $500
b.debit Cash, $105,000; credit Investment—Evans Company Bonds, $100,000, and Gain on Sale ofInvestments, $5,000
c.debit Cash, $104,500, and Interest Receivable, $500; credit Investment—Evans Company Bonds, $100,000,Gain on Sale of Investments, $4,500, and Interest Revenue, $500
d.debit Cash, $105,000; credit Investment—Evans Company Bonds, $100,000, Gain on Sale of Investments,$4,500, and Interest Revenue, $500
58.Jacks Corporation purchases $200,000 bonds plus accrued interest for 2 months of $2,000 from Kennedy Companyon March 1. The bonds have an annual interest rate of 6% payable on June 30 and December 31. The entry torecord the purchase of the bonds would include a
a.debit to Interest Receivable for $2,000
b.debit to Investment in Bonds for $202,000
c.debit to Cash for $200,000
d.credit to Interest Revenue for $2,000
59.On April 1, Alliance Company purchased $50,000 of Tetter Company’s 12% bonds at 100 plus accrued interest of$2,000. On June 30, Alliance received its first semiannual interest. On February 1, Alliance sold $40,000 of thebonds at 103 plus accrued interest. The journal entry Alliance will record on April 1 for the purchase of the bondswill include a
a.credit to Interest Payable for $2,000
b.debit to Investments—Tetter Company Bonds for $52,000
c.debit for Cash of $50,000
d.debit to Investments—Tetter Company Bonds for $50,000
60.The journal entry Pierce will record on June 30 will include a
a.credit to Interest Revenue for $2,400
b.debit to Cash for $3,600
c.credit to Cash for $2,400
d.credit to Interest Receivable for $1,200