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Question 1 of 15

A company should classify a debt security as held-to-maturity only if it has the positive intent and the
ability to hold the securities to maturity.

True

False
Question 2 of 15
Consider the following information for Company A in 2016:

Company A has an equity portfolio of available-for-sale securities.


At the end of 2016, the original cost of the portfolio was $500,000.
At the end of 2016, the fair value of portfolio was $575,000.
The previous balance in Company A's Fair Value Adjustment account related to this portfolio was
$0.

In order to do the necessary fair value accounting for its available-for-sale equity portfolio for 2016,
Company A should credit its Fair Value Adjustment account for $75,000.

True

False
Question 3 of 15
If company has at least a 40% voting interest in another company, it has a controlling interest in that
other company.

True

False
Question 4 of 15
Consider the following information for Company A's investments in equity securities:

Company A owns shares in only one outside company.


Company A's percentage ownership interest in the outside company is 19%.
Company A categorizes this investment as 'trading'.

Company A should recognize all unrealized holding gains or losses on this investment in its net
income when it reports its financial results.
True

False
Question 5 of 15
A company can classify a debt security as held-to-maturity if it has the positive intent to hold the
securities to maturity.

True

False
Question 6 of 15
Generally accepted accounting principles require that a company should report its derivative
instruments at fair value.

True

False
Question 7 of 15
A company is allowed to categorize its equity securities as either of the following:
- Held-to-maturity
- Trading
- Available-for-sale

True

False
Question 8 of 15
If a company transfers an investment security from the 'available-for-sale' category to the 'trading'
category, the transfer will cause a gain or loss to be recognized in the company's net income.

True

False
Question 9 of 15
Debt securities include corporate bonds and convertible debt, but not convertible preferred stock.
True

False
Question 10 of 15
Consider the following information for Company A's investments in equity securities:

Company A owns shares in only one outside company.


Company A's percentage ownership interest in the outside company is 15%.
Company A categorizes this investment as 'available-for-sale'.

Company A should recognize all unrealized holding gains or losses on this investment in its net
income when it reports its financial results.

True

False
Question 11 of 15
Assume that Company A is accounting for its portfolio of equity securities using the fair value
method.

If the balance in its Unrealized Holding Gain or Loss-Equity account is a debit balance, then that
means that the fair value of its equity securities portfolio must be greater than its original cost.

True

False
Question 12 of 15
A put option is considered a derivative security.

True

False
Question 13 of 15
A financial futures contract is a type of derivative instrument.

True

False
Question 14 of 15
If a company's debt or equity investments experience and impairment of value, the loss of value
should be charged to the company income.

True

False
Question 15 of 15
If a company classifies a debt security as 'held-to-maturity', it should account for the securities using
fair value.

True

False