ACCT 5010
Intermediate Accounting II
Practice Test, Chapter 14

Multiple Choice
Identify the letter of the choice that best completes the statement or answers the question.

____ 1. Changes in fair value of securities are reported in the stockholders' equity section of the balance sheet for which type of securities?
a.|Marketable equity securities|
b.|Available-for-sale securities|
c.|Trading securities|
d.|Held-to-maturity securities|

____ 2. When an investor uses the cost method to account for investments in common stock, cash dividends received by the investor from the investee should normally be recorded as
a.|a deduction from the investment account.|
b.|dividend revenue.|
c.|an addition to the investor's share of the investee's profit.|
d.|a deduction from the investor's share of the investee's profit.|

____ 3. A debit balance in the account Market Adjustment-Trading Securities at the end of a year should be interpreted as
a.|the net realized holding gain to date.|
b.|the net unrealized holding gain to date.|
c.|the net realized holding gain for that year.|
d.|the net unrealized holding gain for that year.|

____ 4. If the combined market value of trading securities at the end of the year is less than the market value of the same portfolio of trading securities at the beginning of the year, the difference should be accounted for by
a.|reporting an unrealized loss in security investments in the stockholders' equity section of the balance sheet.|
b.|reporting an unrealized loss in security investments in the income statement.|
c.|a footnote to the financial statements.|
d.|a credit to Investment in Trading Securities.|

____ 5. When an investor uses the equity method to account for investments in common stock, cash dividends received by the investor from the investee should be recorded as
a.|an increase in the investment