no other issuances or acquisitions of its own common stock. What eff
ect does the reissuance of the stock have on the following accounts?
Retained Earnings | Additional Paid-in Capital
A. Decrease | No effect
B. Decrease | Decrease
C. No effect | No effect
D. No effect | Decrease
16) An unrealized holding gain on a company‟s available-forsale securities should be reflected in the current financial statements a
s
A. a note or parenthetical disclosure only.
B. an extraordinary item shown as a direct increase to retained earni
ngs.
C. other comprehensive income and included in the equity section of
the balance sheet.
D. a current gain resulting from holding securities.
17) Which of the following is correct about the effectiveinterest method of amortization?
A. Amortization of a premium decreases from period to period.
B. The effective interest method applied to investments in debt secur
ities is different from that applied to bonds payable.
C. The effectiveinterest method produces a constant rate of return on the book value o
f the investment from period to period.
D. Amortization of a discount decreases from period to period.
18) Which of the following is NOT generally correct about recording
a sale of a debt security before maturity date?
A. The entry to amortize a premium to the date of sale includes a cre
dit to the Premium on Investments in Debt Securities.
B. A gain or loss on the sale is NOT extraordinary.
C. An entry must be made to amortize a discount to the date of sale.
D. Accrued interest will be received by the seller even though it is N
OT an interest payment date.
19) Investments in debt securities should be recorded on the date of ac
quisition at
A. market value plus brokerage fees and other costs incident to the p
urchase.