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TEST BANK
CHAPTER 1
Intercorporate Investments: An Overview MULTIPLE CHOICE
Use the following information on a company’s investments in equity securities to answer questions 1 4 below.
The company’s accounting year ends December 31.
Investment
Ajax Company stock
Bril Corporation stock
Coy Company stock
1.
Date of acquisition 6/20/13
5/1/13
8/2/13
Cost
$40,000
20,000 16,000
Fair value
12/31/13
$35,000
N/A
16,500
Date sold 2/10/14
11/15/13
1/17/14
Selling price $32,000 26,000 23,000
Topic: Accounting for trading securities
LO 1
If the above investments are categorized as trading securities, what amount is reported for gain or loss on securities, on the 2013 income statement?
a.
b.
c.
d.
$1,500 gain
$6,000 gain no gain or loss
$4,500 loss
ANS: a
2.
Topic: Accounting for trading securities
LO 1
If the above investments are categorized as trading securities, what amount is reported for gain or loss on securities, on the 2014 income statement?
a.
b.
c.
d.
$1,000 loss
$4,000 loss
$3,500 gain
$6,000 loss
ANS: c
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3.
Topic: Accounting for AFS securities
LO 1
If the above investments are categorized as availableforsale securities, what amount is reported for gain or loss on securities, on the 2013 income statement?
a.
b.
c.
d.
$1,500 gain
$6,000 gain no gain or loss
$4,500 loss
ANS: b
4.
Topic: Accounting for AFS securities
LO 1
If the above investments are categorized as availableforsale securities, what amount is reported as gain or loss on securities, on the 2014 income statement?
a.
b.
c.
d.
