31.Held-to-maturity securities are reported at

a.acquisition cost.

b.acquisition cost plus amortization of a discount.

c.acquisition cost plus amortization of a premium.

d.fair value.

32.Solo Co. purchased $300,000 of bonds for $315,000. If Solo intends to hold the securities to maturity, the entry to record the investment includes a. a debit to Held-to-Maturity Securities at $300,000.

b.a credit to Premium on Investments of $15,000.

c.a debit to Held-to-Maturity Securities at $315,000.

d.none of these.

33.Which of the following is not correct in regard to trading securities?

a.They are held with the intention of selling them in a short period of time.

b.Unrealized holding gains and losses are reported as part of net income.

c.Any discount or premium is not amortized.

d.All of these are correct.

34.In accounting for investments in debt securities that are classified as trading securities,

a.a discount is reported separately.

b.a premium is reported separately.

c.any discount or premium is not amortized.

d.none of these.

35.Investments in debt securities are generally recorded at

a.cost including accrued interest.

b.maturity value.

c.cost including brokerage and other fees.

d.maturity value with a separate discount or premium account.

36.Pippen Co. purchased ten-year, 10% bonds that pay interest semiannually. The bonds are sold to yield 8%. One step in calculating the issue price of the bonds is to multiply the principal by the table value for

a.10 periods and 10% from the present value of 1 table.

b.10 periods and 8% from the present value of 1 table.

c.20 periods and 5% from the present value of 1 table.

d.20 periods and 4% from the present value of 1 table.

37.Investments in debt securities should be recorded on the date of acquisition at

a.lower of cost or market.

b.market value.

c.market value plus brokerage fees and other costs incident to the purchase.

d.face value plus brokerage fees and other costs incident to the purchase.

38.An available-for-sale debt security is purchased at a discount. The entry to record the amortization of the discount includes a

a.debit to Available-for-Sale Securities.

b.debit to the discount account.

c.debit to Interest Revenue.

d.none of these.

39.APB Opinion No. 21 specifies that, regarding the amortization of a premium or discount on a debt security, the

a.effective-interest method of allocation must be used.

b.straight-line method of allocation must be used.

c.effective-interest method of allocation should be used but other methods can be applied if there is no material difference in the results obtained.

d.par value method must be used and therefore no allocation is necessary.

40.Which of the following is correct about the effective-interest method of amortization?

a.The effective interest method applied to investments in debt securities is different from that applied to bonds payable.

b.Amortization of a discount decreases from period to period.

c.Amortization of a premium decreases from period to period.

d.The effective-interest method produces a constant rate of return on the book value of the investment from period to period.

 

 

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