102.Short-term stock investments should be valued the balance sheet at
102.Short-term stock investments should be valued on the balance sheet at
a.the lower of cost or fair value.
b.the higher of cost or fair value.
103.In recognizing a decline in the fair value of short-term stock investments, an unrealized loss account is debited because
a.management intends to realize this loss in the near future.
b.the securities have not been sold.
c.the stock market is volatile.
d.management cannot determine the exact amount of the loss in value.
104.The Fair Value Adjustment account
a.is set up for each security in the company's portfolio.
b.relates to the entire portfolio of securities held by the company.
c.is closed at the end of each accounting period.
d.appears on the income statement as Other Expenses and Losses.
105.The contra-account, Fair Value Adjustment, is a(n)
106.Reporting investments at fair value is
a.applicable to stock securities only.
b.applicable to debt securities only.
c.applicable to both debt and stock securities.
d.a conservative approach because only losses are recognized.
107.Brandy Corporation's trading portfolio at the end of the year is as follows:
a.set up a Fair Value Adjustment account for Stock D.
b.set up a Fair Value Adjustment account for the portfolio.
c.recognize an Unrealized Gain or Loss—Income for $4,000.
d.report a loss on the income statement for $4,000 under "Other expenses and losses."
108.Brandy Corporation's trading portfolio at the end of the year is as follows:
109.Which of the following would not be reported under "Other Revenues and Gains" on the income statement?
a.Unrealized gain on available-for-sale securities
d.Gain on sale of short-term debt investments
110.The balance in the Unrealized Gain or Loss—Equity account will
a.appear on the balance sheet as a contra asset.
b.appear on the income statement under Other Expenses and Losses.
c.appear in the stockholders' equity section.
d.not be shown on the financial statements until the securities are sold.
111.If the cost of an available-for-sale security exceeds its fair value by $40,000, the entry to recognize the loss
a.is not required since the share prices will likely rebound in the long run.
b.will show a debit to an expense account.
c.will show a credit to a contra-asset account that appears in the stockholders' equity section of the balance sheet.
d.will show a debit to an unrealized loss account that is deducted in the stockholders' equity section of the balance sheet.