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Test Bank for Financial Accounting 5th Edition by Jay S. Rich
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Test Bank for Financial Accounting 5th Edition by Jay S. Rich, Jeff Jones ISBN-13: 2692 Full Chapters test bank in PDF
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Financial Accounting 5th Edition Rich Full Test BankName: Class: Date:
Appx 2
Indicate whether the statement is true or false.
1. Minority (or noncontrolling) interest is disclosed when the parent owns more than 50%, but less than 100% of the
outstanding common stock.
a. True
b. False
2. Held-to-maturity securities are equity and debt investments that management intends to sell in the future, but not
necessarily in the near term.
a. True
b. False
3. If the parent owns 90% of the subsidiary's stock, then 90% of the subsidiary's assets and liabilities are included in
the consolidated balance sheet.
a. True
b. False
4. If an investor holds enough common stock to control the investee (50% or more common stock ownership), then
the two corporations are no longer separate accounting entities. In such cases, the investor must prepare
consolidated financial statements, which combine its financial statements with those of the investee as if they
were a single company.
a. True
b. False
5. Securities issued by a corporation as a form of ownership in the business, such as common stock and preferred
stock, are called equity securities.
a. True
b. False
6. A purchased company must be recorded at the value of the cash and other consideration given by the acquiring
company.
a. True
b. False
7. The excess of acquisition cost over the current value of the investee's identifiable net assets, referred to as
goodwill, may not be recorded by the investor under current generally accepted accounting principles.
a. True
b. False
8. A debt security represents a creditor relationship with another company.
a. True
b. False
9. The equity method of accounting is used if an investor owns between 20% and 50% of another company and the
investor is able to exert influence over the other company.
a. True
b. False
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