Question 1. Securities which could be classified as held-to-maturity are
a. redeemable preferred stock.
b. warrants.
c. municipal bonds.
d. treasury stock.
Question 2. Unrealized holding gains or losses which are recognized in income are from securities classified as
a. held-to-maturity.
b. available-for-sale.
c. trading.
d. none of these.
Question 3. When computing diluted earnings per share, convertible bonds are
a. ignored.
b. assumed converted whether they are dilutive or antidilutive.
c. assumed converted only if they are antidilutive.
d. assumed converted only if they are dilutive.
Question 4. When an investor's accounting period ends on a date that does not coincide with an interest receipt date for bonds held as an investment, the investor must
a. make an adjusting entry to debit Interest Receivable and to credit Interest Revenue for the amount of interest accrued since the last interest receipt date.
b. notify the issuer and request that a special payment be made for the appropriate portion of the interest period.
c. make an adjusting entry to debit Interest Receivable and to credit Interest Revenue for the total amount of interest to be received at the next interest receipt date.
d. do nothing special and ignore the fact that the accounting period does not coincide with the bond's interest period.
Question 5. 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.
Question 6. Dane, Inc., owns 35% of Marin Corporation. During the calendar year 2007, Marin had net earnings of $300,000 and paid dividends of $30,000. Dane mistakenly recorded these transactions using the fair value method rather than the equity method of accounting. What effect would this have on the investment account, net income, and retained earnings, respectively?
a. Understate, overstate, overstate
b. Overstate, understate, understate
c. Overstate, overstate, overstate
d. Understate, understate, understate
Question 7. The date on which total compensation expense is computed in a stock option plan is the date
a. of grant.
b. of exercise.
c. that the market price coincides with the option price.
d. that the market price exceeds the option price.
Question 8. Compensation expense resulting from a compensatory stock option plan is generally
a. recognized in the period of exercise.
b. recognized in the period of the grant.
c. allocated to the periods benefited by the employee's required service.
d. allocated over the periods of the employee's service life to retirement.
Question 9. Which type of accounting change should always be accounted for in current and future periods?
a. Change in accounting principle
b. Change in reporting entity
c. Change in accounting estimate
d. Correction of an error
Question 10. When computing diluted earnings per share, convertible bonds are
a. ignored.
b. assumed converted whether they are dilutive or antidilutive.
c. assumed converted only if they are antidilutive.
d. assumed converted only if they are dilutive.