Chapter 13

Question 1 | |
Corporations invest in other companies for all of the following reasons except to | meet strategic goals. |

| increase trading of the other companies' stock. |

| generate earnings. |

| house excess cash until needed. |
A typical investment to house excess cash until needed is | stocks of companies in a related industry. |

| low-risk, highly liquid securities. |

| stock securities. |

| debt securities. | Question 3 | |
Pension funds and mutual funds regularly invest in debt and stock securities to | meet strategic goals. |

| control the company in which they invest. |

| generate earnings. |

| house excess cash until needed. | Question 4 | |
On January 1, 2008, Turner Company purchased at face value, a $1,000, 7% bond that pays interest on January 1 and July 1. Turner Company has a calendar year end.
The entry for the receipt of interest on July 1, 2008, is

| d |

| a |

| c |

| b | Question 5 | |
If a short-term debt investment is sold, the Investment account is | debited for the cost of the bonds at the sale date. |

| credited for the cost of the bonds at the sale date. |

| credited for the fair value of the bonds at the sale date. |

| credited for the book value of the bonds at the sale date. | Question 6 | |
Steven Co. purchased 30, 6% Johnston Company bonds for $30,000 cash plus brokerage fees of $300. Interest is payable semiannually on July 1 and January 1. The entry to record the December 31 interest accrual would include a | debit to Interest Receivable for $900. |

| debit to Interest Revenue for $900. |

| credit to Interest Revenue for $909. |

| debit to Debt Investments for $900. | Question 7 | |
If an investor owns less than 20% of the common stock of another corporation as a