Jordan Company purchased ten-year, 10% bonds that pay interest semiannually. The bonds are sold to yield 8%

Jordan Company purchased ten-year, 10% bonds that pay interest semiannually. The bonds are sold to yield 8%. One step in calculating the issue price of the bonds is to multiply the principal by the table value for

a. 10 periods and 10% from the present value of 1 table.
b. 10 periods and 8% from the present value of 1 table.
c. 20 periods and 5% from the present value of 1 table.
d. 20 periods and 4% from the present value of 1 table.


Answer: 20 periods and 4% from the present value of 1 table

When investments in debt securities are purchased between interest payment dates, preferably the

a. securities account should include accrued interest.
b. accrued interest is debited to Interest Expense.
c. accrued interest is debited to Interest Revenue.
d. accrued interest is debited to Interest Receivable.


Answer: accrued interest is debited to Interest Revenue

Investments in debt securities are generally recorded at

a. cost including accrued interest.
b. maturity value.
c. cost including brokerage and other fees.
d. maturity value with a separate discount or premium account.


Answer: cost including brokerage and other fees

In accounting for investments in debt securities that are classified as trading securities,

In accounting for investments in debt securities that are classified as trading securities,

a. a discount is reported separately.
b. a premium is reported separately.
c. any discount or premium is not amortized.
d. None of these answers are correct.


Answer: any discount or premium is not amortized

Which of the following is not correct in regard to trading securities?

a. They are held with the intention of selling them in a short period of time.
b. Unrealized holding gains and losses are reported as part of net income.
c. Any discount or premium is not amortized.
d. All of these are correct.


Answer: All of these are correct.

Debt securities that are accounted for at amortized cost, not fair value, are

a. held-to-maturity debt securities.
b. trading debt securities.
c. available-for-sale debt securities.
d. never-sell debt securities.


Answer: held-to-maturity debt securities

Debt securities acquired by a corporation which are accounted for by recognizing unrealized holding gains or losses

Debt securities acquired by a corporation which are accounted for by recognizing unrealized holding gains or losses and are included as other comprehensive income and as a separate component of stockholders' equity are

a. held-to-maturity debt securities.
b. trading debt securities.
c. available-for-sale debt securities.
d. never-sell debt securities.


Answer: available-for-sale debt securities

Use of the effective-interest method in amortizing bond premiums and discounts results in

a. a greater amount of interest income over the life of the bond issue than would result from use of the straight-line method.
b. a varying amount being recorded as interest income from period to period.
c. a variable rate of return on the book value of the investment.
d. a smaller amount of interest income over the life of the bond issue than would result from use of the straight-line method.


Answer: a varying amount being recorded as interest income from period to period.

Equity securities acquired by a corporation which are accounted for by recognizing unrealized holding gains or losses as other comprehensive income and as a separate component of stockholders' equity are

a. available-for-sale securities where a company has holdings of less than 20%.
b. trading securities where a company has holdings of less than 20%.
c securities where a company has holdings of between 20% and 50%.
d. securities where a company has holdings of more than 50%.


Answer: available-for-sale securities where a company has holdings of less than 20%