Test Bank for Financial Accounting, 13th Edition by C. William Thomas

Financial Accounting, 13e (Thomas/Tietz)
Appendix E: Investments

Learning Objective E-1

1) To be classified as a current asset, an investment must either be liquid or the investor must intend to
use it to pay a current liability.
Answer: FALSE
Diff: 2
LO: E-1
AACSB: Reflective Thinking
AICPA Bus Persp: Strategic/Critical Thinking
AICPA Functional: Measurement, Reporting

2) One reason a company invests in securities of other companies is because they may have a long-term
strategic plan.
Answer: TRUE
Diff: 1
LO: E-1
AACSB: Reflective Thinking
AICPA Bus Persp: Strategic/Critical Thinking
AICPA Functional: Measurement, Reporting

3) GAAP rules for investments differ based on whether an investment is composed of equity securities or
debt securities.
Answer: TRUE
Diff: 1
LO: E-1
AACSB: Reflective Thinking
AICPA Bus Persp: Strategic/Critical Thinking
AICPA Functional: Measurement, Reporting

4) Equity securities are investments in bonds or notes payable.
Answer: FALSE
Diff: 1
LO: E-1
AACSB: Reflective Thinking
AICPA Bus Persp: Strategic/Critical Thinking
AICPA Functional: Measurement, Reporting

5) If an investor owns 25% of the voting stock of an investee, the investor has controlling influence.
Answer: FALSE
Diff: 1
LO: E-1
AACSB: Reflective Thinking
AICPA Bus Persp: Strategic/Critical Thinking
AICPA Functional: Measurement, Reporting