For accounting purposes, the method used to account for long-term investments in common stock is determined by:
A.the size of the investor.
B.the size of the investor when compared to the size of the investee.
C.vote by the Board of Directors of the investor.
D.the investor's percentage ownership of the investee's stock.
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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
A long-term investment in available-for-sale securities was acquired at a cost of $40,000. At year-end, the fair value of the securities is $42,250. The year-end adjusting entry requires a:
A.credit Investment in Available-for-Sale Securities for $2,250.
B.debit Allowance to Adjust Investment in Available-for-Sale Securities to Market for $2,250.
C.credit Allowance to Adjust Investment in Available-for-Sale Securities to Market for $2,250.
D.debit Unrealized Loss on Investment in Available-for-Sale Securities for $2,250.
On January 1, 2014, Jude Corporation purchases stock in Gelco Company. Jude Corporation owns 1% of the outstanding stock of Gelco Company. Jude Corporation intends to hold the stock for longer than one year. How should Jude Corporation classify this stock?
A.trading security
B.held-to-maturity investment in bonds
C.equity-method investment
D.investment in available-for-sale securities
On January 1, 2014, a company purchased long-term available-for-sale securities in one company. The cost was $100,000 and the investor owns 5% of the outstanding common stock of the investee. The investor does not use an allowance account to adjust the investment. At December 31, 2014, the fair value of the investment is $97,000. What journal entry is needed on December 31, 2014?
A.debit Unrealized Loss on Investment in Available-for-Sale Securities for $3,000 and credit Investment in Available-for-Sale Securities for $3,000
B.debit Investment in Available-for-Sale Securities for $2,000 and credit Unrealized Gain on Investment in Available-for-Sale Securities for $2,000
C.debit Investment in Available-for-Sale Securities for $5,000 and credit Unrealized Gain on Investment in Available-for-Sale Securities for $5,000
D.debit Investment in Available-for-Sale Securities for $3,000 and credit Unrealized Gain on Investment in Available-for-Sale Securities for $3,000
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