Investment Quiz: 20 Questions Part 1

20 Questions | Total Attempts: 594

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Investment Quiz: 20 Questions Part 1

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Questions and Answers
  • 1. 
    On December 31, 2009, Otter Company had investments in trading securities as follows:                                                                      COST                      MARKET VALUE     Man Company                                        1,000,000                        1,300,000     Kemo Company                                        900,000                        1,100,000     Fenn Company                                       1,100,000                           900,000                                                                    3,000,000                        3,300,000Otter's December 31, 2009 balance sheet should report the following trading securities at:
    • A. 

      3,000,000

    • B. 

      2,900,000

    • C. 

      3,300,000

    • D. 

      2,800,000

  • 2. 
    On January 1, 2009, Fredo Company purchased marketable equity securities to be held as "trading" for P4,000,000. The company also paid commission to the stockbroker in the amount of P100,000. No securities were sold during 2009. The market value of the equity securities on December 31, 2009 is P4,500,000.What amount of unrealized gain on these securities should be reported in the 2009 income statement? 
    • A. 

      0

    • B. 

      300,000

    • C. 

      400,000

    • D. 

      500,000

  • 3. 
    On January 1, 2009, Trix Company purchased marketable equity securities for P5,000,000 to be held as "available for sale". The company also paid P200,000 in the form of transaction costs. The equity securities had a market value of P4,600,000 on December 31, 2009. No securities were sold during 2009.What amount of unrealized loss on these securities should be reported in the 2009 statement of changes in equity?
    • A. 

      200,000

    • B. 

      400,000

    • C. 

      600,000

    • D. 

      0

  • 4. 
    Rose Company was organized on January 1, 2009. At December 31, 2009, Rose had the following investment portfolio of marketable equity securities:                                                        TRADING                       AVAILABLE FOR SALE     Aggregate Cost                           3,000,000                                4,500,000     Aggregate Market Value             2,400,000                                3,700,000     Net Unrealized Loss                       600,000                                   800,000All of the declines are judged to be temporary. What amount of unrealized loss should be shown as component of income and shareholders' equity?
    • A. 

      Income: 600,000 Shareholder's equity: 800,000

    • B. 

      Income: 800,000 Shareholder's equity: 600,000

    • C. 

      Income: 1,400,000 Shareholder's equity: 0

    • D. 

      Income: 0 Shareholder's equity: 1,400,000

  • 5. 
    During 2009, Scotch Company purchased marketable equity securities to be held as "available for sale". Pertinent data follow:     SECURITY                         COST                            MARKET VALUE at 12/31/09           D                                360,000                                         400,000           E                                800,000                                         600,000           F                             1,800,000                                       1,860,000                                          2,960,000                                       2,860,000Scotch appropriately carries these securities at market value. The amount of unrealized loss on these securities in Scotch's 2009 income statement should be:
    • A. 

      200,000

    • B. 

      140,000

    • C. 

      100,000

    • D. 

      0

  • 6. 
    On its December 31, 2008 balance sheet, Fry Company appropriately reported a P100,000 unrealized loss. There was no change during 2009 in the composition of Fry's portfolio of marketable equity securities held as "available for sale". Pertinent data are as follows:   SECURITY                         COST                            MARKET VALUE at 12/31/09                   A                             1,200,000                                     1,300,000          B                                900,000                                        500,000          C                             1,600,000                                     1,500,000                                         3,700,000                                     3,300,000What amount of loss on these securities should be included in Fry's statement of shareholders' equity for the year ended December 31, 2009?
    • A. 

      0

    • B. 

      100,000

    • C. 

      300,000

    • D. 

      400,000

  • 7. 
    During 2008 Carr Company purchased marketable equity securities as a trading investment. For the year ended December 31, 2008, the company recognized an unrealized loss of P230,000. There were no security transactions during 2009. Pertinent information at December 31, 2009 is as follows:  SECURITY                         COST                            MARKET VALUE             A                             2,450,000                               2,300,000         B                             1,800,000                               1,820,000                                        4,250,000                                4,120,000In its 2009 income statement, Carr should report:
    • A. 

      Unrealized loss of P100,000

    • B. 

      Unrealized loss of P130,000

    • C. 

      Unrealized gain of P100,000

    • D. 

      Unrealized gain of P130,000

  • 8. 
    The following information was extracted from December 31, 2009 balance sheet of Phil Company:Noncurrent assets:             Available for sale securities (carried at market)                          3,700,000Shareholders' equity:             Unrealized loss on available for sale securities                         (   300,000)Historical cost of the long-term investment in available for sale securities was:
    • A. 

      3,700,000

    • B. 

      3,400,000

    • C. 

      4,300,000

    • D. 

      4,000,000

  • 9. 
    La Goon Company purchased the following securities during 2009:                                CLASSIFICATION               COST             MARKET VALUE 12/31/09Security A                      Trading                       900,000                      1,000,000Security B                      Trading                    1,000,000                      1,600,000On July 31, 2010, the company sold all of the shares of security B for a total of P1,100,000. As of December 31, 2010, the shares of security A had a market value of P600,000. No other activity occurred during 2008 in relation to the trading security portfolio. What is the gain or loss on the sale of security B on July 31, 2010?
    • A. 

      500,000 gain

    • B. 

      100,000 gain

    • C. 

      500,000 loss

    • D. 

      100,000 loss

  • 10. 
    During 2009, Lava Company purchased trading equity securities as a short-term investment. The cost and market value at December 31, 2009 were as follows:  SECURITY                         COST                            MARKET VALUEA - 1,000 shares                 200,000                                300,000B - 10,000 shares            1,700,000                              1,600,000C - 20,000 shares            3,100,000                              2,900,000                                      5,000,000                              4,800,000Lava sold 10,000 shares of Company B stock on January 15, 2010, for P130 per share, incurring P50,000 in brokerage commission and taxes. On the sale, Lava should report a loss of
    • A. 

      300,000

    • B. 

      350,000

    • C. 

      400,000

    • D. 

      450,000

  • 11. 
    On January 1, 2009 Libya Company purchased equity securities to be held as "available for sale". On December 31, 2009, the cost and market value were:                                                   COST                                       MARKETSecurity X                                2,000,000                                    2,400,000Security Y                                3,000,000                                    3,500,000Security Z                                5,000,000                                    4,900,000On July 1, 2010, Libya Company sold Security X for P2,500,000. What amount of gain on sale of AFS securities should be reported in the 2010 income statement?
    • A. 

      0

    • B. 

      100,000

    • C. 

      400,000

    • D. 

      500,000

  • 12. 
    On January 1, 2009, Cage Company purchased equity securities to be held as "available for sale". The cost and market value of the securities were:                         COST             MARKET VALUE 12/31/09          MARKET VALUE 12/31/10Security R     3,000,000                     3,200,000                                    --------Security S     4,000,000                     3,500,000                                 3,700,000Security T     5,000,000                     4,600,000                                 4,700,000On January 31, 2010, Cage Company sold Security R for P3,500,000.What is the gain or loss on the sale of Security R on January 31, 2010?
    • A. 

      300,000 gain

    • B. 

      500,000 gain

    • C. 

      300,000 loss

    • D. 

      500,000 loss

  • 13. 
    On January 1, 2009, Cage Company purchased equity securities to be held as "available for sale". The cost and market value of the securities were:                          COST             MARKET VALUE 12/31/09          MARKET VALUE 12/31/10 Security R     3,000,000                     3,200,000                                    -------- Security S     4,000,000                     3,500,000                                 3,700,000 Security T     5,000,000                     4,600,000                                 4,700,000 On January 31, 2010, Cage Company sold Security R for P3,500,000.What amount unrealized loss on these securities should be reported in the 2010 statement of changes in equity?
    • A. 

      0

    • B. 

      600,000

    • C. 

      300,000

    • D. 

      200,000

  • 14. 
    During 2009, Giant Company purchased trading securities as a short-term investment. The cost of the securities and their market value on December 31, 2009 follow:SECURITY                         COST                            MARKET VALUE       A                              650,000                                750,000       B                           1,000,000                                540,000       C                           2,200,000                             2,260,000At the beginning of 2009, Giant had a zero balance in the market adjustment for trading securities account. Before any adjustment related to these trading securities, Giant had net income of P3,000,000. What is the net income after making any necessary trading security adjustment?
    • A. 

      2,540,000

    • B. 

      2,700,000

    • C. 

      3,000,000

    • D. 

      3,300,000

  • 15. 
    On January 1, 2009, Hemingway Company acquired 200,000 ordinary shares of Universe Company for P9,000,000. At the time of purchase, Universe Company had outstanding 800,000 shares with a book value of P36,000,000. On December 31, 2009, the following events took place:   *   Universe Company reported net income of P1,800,000 for the calendar year 2009.   *   Hemingway Company received from Universe Company a dividend of P0.75 per ordinary share.   *   The market value of Universe Company share had temporarily declined to P40.The investment in Universe Company is classified as available for sale. What is the carrying value of the investment on December 31, 2009?
    • A. 

      8,000,000

    • B. 

      9,000,000

    • C. 

      9,300,000

    • D. 

      9,450,000

  • 16. 
    Letterman Company reported the following selected balances on its financial statements for each of the three years 2009 - 2011:                                                              2009                     2010                     2011Market adjustment -     Trading securities                         5,500,000              3,750,000             (1,200,000)Market adjustment -      Available for sale securities        (1,300,000)                900,000              1,350,000How much net unrealized loss should be shown in the 2011 income statement?
    • A. 

      1,200,000

    • B. 

      3,600,000

    • C. 

      4,500,000

    • D. 

      4,950,000

  • 17. 
    Neil Company held the following marketable securities as trading investments at December 31, 2009:                                                                  COST                            MARKET VALUE100,000 shares of Company A     nonredeemable preference     share capital, par value P75               775,000                                 825,0007,000 shares of Company B     preference share capital, par     value P100, subject to mandatory     redemption by the issuer at par on     December 31, 2010                             690,000                                  625,000                                                              1,465,000                                1,450,000In the December 31, 2009 balance sheet, trading securities should be reported at:
    • A. 

      1,400,000

    • B. 

      1,450,000

    • C. 

      1,465,000

    • D. 

      1,475,000

  • 18. 
    Data regarding Bondoc Company's trading securities follow:                                                               COST                            MARKETDecember 31, 2008                               5,000,000                         4,600,000December 31, 2009                               5,000,000                         5,800,000Differences between cost and market value are considered temporary. The income statement for 2009 should report unrealized gain on these securities at
    • A. 

      0

    • B. 

      400,000

    • C. 

      800,000

    • D. 

      1,200,000

  • 19. 
    Data regarding Baggy Company's available for sale securities follow:                                                                COST                            MARKETDecember 31, 2008                                4,000,000                        3,500,000December 31, 2009                                4,000,000                        3,200,000Differences between cost and market value are considered temporary. The shareholders' equity section of the December 31, 2009 balance should report unrealized loss on these securities at:
    • A. 

      0

    • B. 

      300,000

    • C. 

      500,000

    • D. 

      800,000

  • 20. 
    Data regarding Maggy Company's available for sale securities follow:                                                                COST                            MARKETDecember 31, 2008                                5,000,000                        5,200,000December 31, 2009                                5,000,000                        5,900,000Difference between cost and market value are considered temporary. The December 31, 2009 statement of shareholders' equity should report unrealized gain on these securities at
    • A. 

      0

    • B. 

      200,000

    • C. 

      700,000

    • D. 

      900,000