Exam 12: Reporting and Analyzing Investments

Mandrake Corp owns a 10% interest in the common shares of Cobra Ltd. During this year, Cobra pays a total of $15,000 in dividends and reports $130,000 profit. Mandrake's investment in Cobra will increase Mandrake's profit by

If one company owns more than 50% of the common shares of another company

Under the equity method of accounting for investments in common shares, when a dividend is received from the investee,

In June, Potter Corp paid $25,000 for 1,000 shares of Weasley Corp, which was classified as a long-term available-for-sale investment. At year-end, the fair value of the investment is $27,500. Potter will report

Dividends received on investments are accounted for in the same way under the fair value model cost and the equity method.

Equity securities are always classified as long-term investments.

Which of the following statements is not true?

Greene Limited owns a 30% interest in the shares of Fields Corporation. During the year, Fields pays $20,000 in dividends to Greene and reports $120,000 profit. Greene's investment in Fields will increase Greene's profit by

Under the equity method, revenue is recognized when profit is earned by the associate.

The amortization of a bond investment is recorded in an Interest Revenue account.

Which of the following is the correct match concerning an investor's influence on the operations and financial affairs of an investee?

During its first year of operation, Lenton Limited acquired three securities as trading investments. Investment A cost $50,000 and had a year-end fair value of $60,000. Investment B cost $35,000 and had a year-end fair value of $20,000. Investment C cost $26,000 and had a year-end fair value of $24,000. What amount should be reported as an unrealized loss in Lenton's income statement for the first year of operation?

On September 15, 2012, Wong Ltd sells 100 common shares of Tong Corp, which were being held as a trading investment. The shares were acquired six months ago at $100 a share. Wong sells the shares for $80 a share. The entry to record the sale is

Non-strategic Investments for which fair value cannot be determined are accounted for using the

Trading investments are all of the following except

Only equity securities can be purchased for the strategic purpose of influencing relationships between companies.

Which of the following statements is not correct regarding strategic investments?

If the equity method is being used, the Revenue from Investment in Associates account is

Under the equity method, the receipt of dividends from the investee results in a credit to the Dividend Revenue account.

At acquisition, non-strategic investments are recorded at their purchase cost.