INVESTMENT ACCOUNTING EXAMINATION QUESTION
AND CORRECT ANSWER WITH EXPLANATION|GRADED
A+ STUDY GUIDE SOUTHERN NEW HAMPSHIRE
UNIVERSITY
1. Investment accounting focuses on:
A. Recording employee salaries
B. Accounting for financial investments
C. Managing inventory only
D. Tax evasion
Answer: B
Rationale: It deals with recording and reporting investments in financial assets.
2. An investment is best defined as:
A. Purchase of raw materials
B. Allocation of funds to earn returns
C. Payment of wages
D. Collection of receivables
Answer: B
Rationale: Investments aim to generate future income or gains.
3. Short-term investments are also called:
A. Fixed assets
B. Marketable securities
C. Intangible assets
D. Capital reserves
Answer: B
Rationale: These are easily convertible to cash.
4. Long-term investments are held for:
,A. Less than one month
B. Immediate resale
C. More than one year
D. Daily trading only
Answer: C
Rationale: They are intended for long-term returns.
5. The primary objective of investment accounting is to:
A. Hide losses
B. Measure and report investment performance
C. Avoid taxation
D. Eliminate reporting
Answer: B
Rationale: It ensures accurate reporting of investment results.
6. Fair value is:
A. Historical purchase price
B. Current market price
C. Depreciated cost
D. Tax value
Answer: B
Rationale: Fair value reflects current market conditions.
7. Amortized cost is based on:
A. Market value
B. Historical cost adjusted for interest
C. Replacement cost
D. Liquidation value
Answer: B
Rationale: It spreads cost over time with interest adjustments.
8. Equity investments represent:
, A. Ownership in another company
B. Bank deposits
C. Loans payable
D. Payroll expenses
Answer: A
Rationale: Equity investments give ownership rights.
9. Debt investments represent:
A. Ownership shares
B. Loans or bonds held
C. Inventory purchases
D. Fixed assets
Answer: B
Rationale: Debt investments involve lending money.
10. Bonds are classified as:
A. Equity instruments
B. Debt securities
C. Intangible assets
D. Fixed assets
Answer: B
Rationale: Bonds represent borrowed funds.
11. Shares represent:
A. Debt obligations
B. Ownership interest
C. Loans payable
D. Expenses
Answer: B
Rationale: Shares give ownership in a company.
12. The cost method of accounting is used when:
AND CORRECT ANSWER WITH EXPLANATION|GRADED
A+ STUDY GUIDE SOUTHERN NEW HAMPSHIRE
UNIVERSITY
1. Investment accounting focuses on:
A. Recording employee salaries
B. Accounting for financial investments
C. Managing inventory only
D. Tax evasion
Answer: B
Rationale: It deals with recording and reporting investments in financial assets.
2. An investment is best defined as:
A. Purchase of raw materials
B. Allocation of funds to earn returns
C. Payment of wages
D. Collection of receivables
Answer: B
Rationale: Investments aim to generate future income or gains.
3. Short-term investments are also called:
A. Fixed assets
B. Marketable securities
C. Intangible assets
D. Capital reserves
Answer: B
Rationale: These are easily convertible to cash.
4. Long-term investments are held for:
,A. Less than one month
B. Immediate resale
C. More than one year
D. Daily trading only
Answer: C
Rationale: They are intended for long-term returns.
5. The primary objective of investment accounting is to:
A. Hide losses
B. Measure and report investment performance
C. Avoid taxation
D. Eliminate reporting
Answer: B
Rationale: It ensures accurate reporting of investment results.
6. Fair value is:
A. Historical purchase price
B. Current market price
C. Depreciated cost
D. Tax value
Answer: B
Rationale: Fair value reflects current market conditions.
7. Amortized cost is based on:
A. Market value
B. Historical cost adjusted for interest
C. Replacement cost
D. Liquidation value
Answer: B
Rationale: It spreads cost over time with interest adjustments.
8. Equity investments represent:
, A. Ownership in another company
B. Bank deposits
C. Loans payable
D. Payroll expenses
Answer: A
Rationale: Equity investments give ownership rights.
9. Debt investments represent:
A. Ownership shares
B. Loans or bonds held
C. Inventory purchases
D. Fixed assets
Answer: B
Rationale: Debt investments involve lending money.
10. Bonds are classified as:
A. Equity instruments
B. Debt securities
C. Intangible assets
D. Fixed assets
Answer: B
Rationale: Bonds represent borrowed funds.
11. Shares represent:
A. Debt obligations
B. Ownership interest
C. Loans payable
D. Expenses
Answer: B
Rationale: Shares give ownership in a company.
12. The cost method of accounting is used when:
