CHAPTER 15: INVESTMENTS AND FAIR VALUE ACCOUNTING
1. Most companies invest excess cash in bonds as investments in order to profit long-term from the growth of
the investment.
a. True
b. False
2. Although marketable securities may be retained for several years, they continue to be classified as
temporary, provided they are readily marketable and can be sold for cash at any time.
a. True
b. False
5. When a bond is purchased for an investment, the purchase price, minus the brokerage commission, plus
any accrued interest is recorded.
a. True
b. False
,Chapter 15: Investments and Fair Value Accounting
7. To record a bond investment made between interest payment dates, Investment in Bonds would be debited
and Cash and Interest Revenue would be credited.
a. True
b. False
8. When long-term investments in bonds are sold before their maturity date, the seller deducts any accrued
interest since the last interest payment date from the selling price.
a. True
b. False
12. Ordinarily, a corporation owning a significant portion of the voting stock of another corporation accounts for
the investment using the equity method.
a. True
b. False
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