Test Bank For Financial and Managerial Accounting The Cornerstones of Business Decisions International 2nd Edition
Appendix 2—Investments
TRUE/FALSE
- Securities issued by a corporation as a form of ownership in the business, such as common stock and preferred stock, are called equity securities.
ANS: T                   PTS:  1                   DIF:   Easy              OBJ:  A2-1
NAT:Â AICPA FN-Reporting | AACSB Communication | ACBSP-APC-21-Corporate Investments Accounting
- The equity method of accounting is used if the investor owns between 20-50% of another company and the investor is able to exert influence over the other company.
ANS: T                   PTS:  1                   DIF:   Easy              OBJ:  A2-1
NAT:Â AICPA FN-Reporting | AACSB Communication | ACBSP-APC-21-Corporate Investments Accounting
- Debt security exists when another entity owes the security holder some combination of interest and principal.
ANS: T                   PTS:  1                   DIF:   Easy              OBJ:  A2-1
NAT:Â AICPA FN-Reporting | AACSB Communication | ACBSP-APC-21-Corporate Investments Accounting
- If the investor owns over 50 percent of the outstanding common stock, the investor is deemed to have control over the operating and financial policies of the investee.
ANS: T                   PTS:  1                   DIF:   Easy              OBJ:  A2-1
NAT:Â AICPA FN-Reporting | AACSB Communication | ACBSP-APC-21-Corporate Investments Accounting
