Accounting Skills (Securities, Derivatives and Investments)
 

  1. Question: During Year 1, XYZ Company receives a four-month, 6 percent note in the amount of $28,500. How much interest will XYZ Company earn if it holds the note to maturity?

    A
    $570

    B
    $428

    C
    $0

    D
    $1,710

    Note: Answer not sure
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  2. Question: XYZ Company reports income tax expense of $224,000 on its Income Statement for the year ending December 31 Year 4. Included in Year 4's income is interest revenue of $40,000 from some tax-exempt municipal bonds that the company owns. In computing its income tax expense of $224,000, the company also had a temporary difference of $80,000, which will result in a future tax deduction. It is assumed that a tax rate of 30 percent will apply to the future tax deduction. The tax rate for Year 4 (the company's first year of operations) is 40 percent. Given the above information, what amount would XYZ Company report as current income tax payable on its Year 4 Balance Sheet?

    A
    $224,000

    B
    $248,000

    C
    $208,000

    D
    None of these

    Note: Answer not sure
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  3. Question: XYZ Company has three securities in its portfolio available for sale, as follows: Security 1: Beatty, Cost: $78,000, 12/31/06 Market Value: $93,600, 12/31/07 Market Value:$100,100 Security 2: Cole, Cost: $117,000, 12/31/06 Market Value: $120,900, 12/31/07 Market Value:$0 Security 3: Sells, Cost: $58,500, 12/31/06 Market Value: $53,500, 12/31/07 Market Value:$50,700 The Cole stock was sold in Year 2 for $127,400. Given the above information, which of the following statements is true?

    A
    On its 12/31 Year 1 Balance Sheet, XYZ Company would report the Beatty stock at its cost of $78,000.

    B
    On its Income Statement for the year ending 12/31 Year 1, XYZ Company would report an unrealized holding gain on the Beatty stock of $15,600.

    C
    On its 12/31 Tear 1 Balance Sheet, XYZ Company would report an unrealized holding gain on the Beatty stock of $15,600 in a shareholders' equity account

    D
    On its 12/31 Year 1 Balance Sheet, XYZ Company would report the Beatty stock at its cost of $78,000. and On its Income Statement for the year ending 12/31 Year 1, XYZ Company would report an unrealized holding gain on the Beatty stock of $15,600.

    Note: Answer not sure
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  4. Question: On January 1 of Year 1, XYZ Company leases a building and records the leasehold asset and the liability at $210,620, which is the present value of five end-of-year payments of $50,000, each discounted at 6 percent. The asset has a useful life of five years and a zero salvage value. When the first lease payment is made on December 31 of Year 1, what amount would XYZ Company record for interest expense?

    A
    $0

    B
    $7,876

    C
    $39,380

    D
    None of these

    Note: Answer not sure
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  5. Question: Which of the following statements describing the effects of Investment in Securities on the Cash Flow Statement is NOT true?

    A
    When a company uses the market value method for securities available for sale, calculating cash flow from operations normally requires no adjustment to net income.

    B
    In calculating cash flow from operations, Unrealized Holding Loss for securities available for sale is usually added back to Net Income.

    C
    In calculating cash flow from operations, there is usually a subtraction from Net Income if a company uses the equity method, and if it received dividends less than its share of investee's earnings.

    D
    All of these statements are true.

    Note: Answer not sure
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  6. Question: Which of the following account titles is not associated with the use of the market value method?

    A
    Unrealized Holding Loss on Investment in Securities

    B
    Unrealized Holding Gain on Investment in Securities

    C
    Equity in Earnings of Affiliate

    D
    Investment in Securities

    Note: Answer not sure
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  7. Question: On its December 31 Year 2 Balance Sheet, XYZ Company reports a current liability for income tax payable of $180,000. During the year, the company's Deferred Tax Liability account increased by $54,000 based on a tax rate of 40 percent applying to the future period of taxable income. The tax rate for Year 2 was 30 percent. Given the above information, how did XYZ's book and taxable income relate in Year 2?

    A
    Book income exceeded taxable income.

    B
    Taxable income exceeded book income.

    C
    Book income equaled taxable income.

    D
    The difference between book income and taxable income is due to a permanent difference.

    Note: Answer not sure
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  8. Question: On January 1 of Year 1, XYZ Company leases equipment under a capital lease that calls for five payments of $25,000 at the end of each year. The first payment is due on December 31 of Year 1. Using 12 percent interest, the present value of the lease liability is $90,000 on January 1 of Year 1. What amount would XYZ Company report as the lease liability on its December 31 Year 1 Balance Sheet?

    A
    $79,200

    B
    $83,000

    C
    $100,000

    D
    $75,800

    Note: Answer not sure
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  9. Question: Which of the following methods of recording leases requires the lessee to amortize the leasehold over its useful life and recognize each lease payment as part payment of interest and part payment of principal?

    A
    Operating lease method

    B
    Capital lease method

    C
    Rental lease method

    D
    None of these

    Note: Answer not sure
    1. Report

  10. Question: Given the following entry, how has the lessee accounted for the lease? Dr: Interest Expense Dr: Liability - Present value of lease obligation Cr: Cash

    A
    Sales type lease

    B
    Operating lease

    C
    Capital lease

    D
    None of these

    Note: Answer not sure
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