Chapter 15

Question 1

Investments in debt and equity securities that are not classified as trading securities or held-to-maturity securities.

Answer 1

Available-for-sale (AFS) securities

Question 2

Financial statements that show all (combined) activities under the parent’s control, including those of any subsidiaries.

Answer 2

Consolidated financial statements

Question 3

Accounting method used for long-term investments when the investor has “significant influence” over the investee

Answer 3

Equity method

Question 4

Long-term investment when the investor is able to exert controlling influence over the investee; investors owning 50% or more of voting stock are presumed to exert controlling influence.

Answer 4

Equity securities with controlling influence

Question 5

Long-term investment when the investor is able to exert significant influence over the investee; investors owning 20 percent or more (but less than 50 percent) of voting stock are presumed to exert significant influence.

Answer 5

Equity securities with significant influence

Question 6

Price of one currency stated in terms of another currency.

Answer 6

Foreign exchange rate

Question 7

Debt securities that a company has the intent and ability to hold until they mature.

Answer 7

Held-to-maturity (HTM) securities

Question 8

Long-term assets not used in operating activities such as notes receivable and investments in stocks and bonds.

Answer 8

Long-term investments

Question 9

Company that owns a controlling interest in a corporation (requires more than 50% of voting stock).

Answer 9

Parent (Corporation)

Question 10

Ratio reflecting operating efficiency; defined as net income divided by average total assets for the period; also called return on assets or return on investment.

Answer 10

Return on total assets

Question 11

Debt and equity securities that management expects to convert to cash within the next 3 to 12 months (or the operating cycle if longer); also called temporary investments or marketable securities.

Answer 11

Short-term investments

Question 12

Entity controlled by another entity (parent) in which the parent owns more than 50% of the subsidiary’s voting stock.

Answer 12

Subsidiary (Corporation)

Question 13

Investments in debt and equity securities that the company intends to actively trade for profit.

Answer 13

Trading securities

Question 14

Gain (loss) not yet realized by an actual transaction or event such as a sale.

Answer 14

Unrealized gain (loss)