Cornerstones of Financial Accounting
4th Edition
ISBN: 9781337690881
Author: Jay Rich, Jeff Jones
Publisher: Cengage Learning
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Chapter A2, Problem 1MCQ
To determine
The reasons for considering the investments in equity securities to be “passive”.
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Based on the presumption in IAS 27, the cost method is applied for equity securities when the percentage of ownership of another company is:
Select one:
A. 20% to 50%.
B. Exactly 100%.
C. Less than 20%.
D. Over 50%.
23.
In accounting for minority passive equity investments, the unrealized holding gain or loss on equity securities is recorded on:
Multiple Choice
the balance sheet as a deferred charge in the period of the security price change.
the balance sheet as a separate component of stockholders’ equity.
the income statement in the period of the security price change.
the income statement in the period after the security price change.
The secondary market is the market in which:
Select one:
a. The sale proceeds of a trade flow to the issuer of the security.
b. Publicly held firms issue new shares of stock.
O c. One shareholder sells securi ties to another shareholder.
d. Only bonds or other debt securities are sold.
Chapter A2 Solutions
Cornerstones of Financial Accounting
Ch. A2 - How do long-term investments differ from...Ch. A2 - Prob. 2DQCh. A2 - Prob. 3DQCh. A2 - Prob. 4DQCh. A2 - Prob. 5DQCh. A2 - Prob. 6DQCh. A2 - Prob. 7DQCh. A2 - How does the equity method discourage the...Ch. A2 - Prob. 9DQCh. A2 - Prob. 10DQ
Ch. A2 - Prob. 11DQCh. A2 - Prob. 12DQCh. A2 - Prob. 13DQCh. A2 - Prob. 14DQCh. A2 - Prob. 15DQCh. A2 - Prob. 1MCQCh. A2 - Prob. 2MCQCh. A2 - Prob. 3MCQCh. A2 - Prob. 4MCQCh. A2 - Prob. 5MCQCh. A2 - Prob. 6MCQCh. A2 - Prob. 7MCQCh. A2 - Prob. 8MCQCh. A2 - Prob. 9MCQCh. A2 - Prob. 10MCQCh. A2 - Prob. 11MCQCh. A2 - When the market value of a companys...Ch. A2 - Prob. 13MCQCh. A2 - Prob. 14MCQCh. A2 - Prob. 15MCQCh. A2 - Prob. 16MCQCh. A2 - Prob. 17ECh. A2 - Trading Securities Pear Investments began...Ch. A2 - Prob. 19ECh. A2 - Prob. 20ECh. A2 - Adjusting the Allowance to Adjust Trading...Ch. A2 - Prob. 22ECh. A2 - Prob. 23ECh. A2 - Prob. 24ECh. A2 - Prob. 25ECh. A2 - Prob. 26ECh. A2 - Prob. 27ECh. A2 - Prob. 28ECh. A2 - Prob. 29ECh. A2 - Prob. 30E
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Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Which of the following statements is not true of the fair-value method of accounting for marketable securities? Select one: A. The investment account is recorded at current fair value on the balance sheet. B. Interim changes in the investments’ fair value may or may not affect income depending on the securities’ classification. C. This method is used when the reporting company generally owns less than 20% of the investee company. D. Dividends are treated as a return of the capital invested. E. None of the abovearrow_forwardA company should use the equity method to account for an investment if O it has the ability to exercise significant influence over the operating policies of the investee. O it owns 30% of another company's stock.. O it has a controlling interest (more than 50%) of another company's stock. O the investment was made primarily to earn a return on excess cash.arrow_forwardWhich one of the following statements about ordinary equity is correct? a. Shareholders have a residual claim to the firm's assets. b. Shareholders are repaid an ordinary share's value on the share's maturity date. c. Shareholders' return is always positive. d. Equity that is listed on the ASX must pay a dividend.arrow_forward
- If shares are issued for a non-cash asset, the share should be recorded at? a. Zero b. Fair market value c. Par or stated value d. Costarrow_forwardEquity securities acquired by a corporation which are accounted for by recognizing unrealized holding gains or losses as part of the net income are: Securities where a company has holdings of between 20% and 50% Securities where a company has holding of less than 20% O Available-for-sale securities where a company has holdings of less than 20% O Securities where a company has holdings of more than 50%arrow_forwardWhen a company decides to issue capital on the stock market what is the process called? (a) An Initial Public Offering (b) A Rights Issue (c) A Bond Issue (d) An Investment Trustarrow_forward
- 1. Identify the most acceptable value of share capital in exchange of non-cash asset. options •Fair market value of share issued •Fair market value of non-cash asset received •Par value of share capital issued. •Carrying value of the non-cash asset received. 2. Which of the following is included in the equity section of a corporate business? •Investment in equity shares •Treasury shares •Subscription Receivable – current •Unearned revenuearrow_forwardAn equity investment in less than 20% of another companys outstanding stock is accounted for using the fair value method.Answer:TrueFalsearrow_forwardWhat does the additional paid-in capital account represent?a) The difference between the par and the stated value of common stock.b) The price changes that result for stock trading subsequent to its original issue.c) The market price of all common stock issued.d) The amount by which the original sales price of stock exceeds the par value.arrow_forward
- A company’s publicly listed shares: a. Can be traded on any share market around the world b. Represent an ownership claim on the company’s real assets (net of liabilities) c. Are guaranteed to provide a dividend cash-flow d. All of the above e. None of the abovearrow_forward1. The cost method of accounting for stock investments is used when the company acquires a. Greater than 50% of the company's stock b. Between 20% to 50% of the company's stock c. Less than 20% of the company's stock 2. The significance of percentage of ownership relates to how much _____________ the acquiring company has in the new company. a. data b. control c. confidencearrow_forwardAn offering of shares to institutional investors at a discount to the current market price is known as a: Select one: a. Initial Public Offering (IPO). b. Private Placement c. Rights Issue d. Dividend Reinvestment Plan (DRP).arrow_forward
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