Question 1

Investments accounted for using the fair value through other comprehensive income model are called available-for-sale investments.

Accepted Answer

A) True 
 B)False

Question 2

Information flows among financial statements in this order:

Accepted Answer

A) statement of financial position to statement of changes in equity to statement of comprehensive income to income statement. 
B) income statement to statement of changes in equity to statement of comprehensive income to statement of financial position. 
C) income statement to statement of comprehensive income to statement of changes in equity to statement of financial position. 
D) statement of changes in equity to statement of financial position to statement of comprehensive income to income statement. 
A) statement of financial position to statement of changes in equity to statement of comprehensive income to income statement. 
B) income statement to statement of changes in equity to statement of comprehensive income to statement of financial position. 
C) income statement to statement of comprehensive income to statement of changes in equity to statement of financial position. 
D) statement of changes in equity to statement of financial position to statement of comprehensive income to income statement.

Question 3

If a company acquires a 40% interest in another company

Accepted Answer

A) the equity method is usually applicable. 
B) it would always have a controlling interest. 
C) the fair value model is usually applicable. 
D) the investor does not have the ability to exert significant influence over the investee. 
A) the equity method is usually applicable. 
B) it would always have a controlling interest. 
C) the fair value model is usually applicable. 
D) the investor does not have the ability to exert significant influence over the investee.

Question 4

If the equity method is being used, cash dividends received

Accepted Answer

A) are credited to the Dividend Revenue account. 
B) do not require an entry because the investee's profits have already been recorded at the proper proportion on the investor's books. 
C) are credited to the Investment in Associates account. 
D) are credited to the Revenue from Investment in Associates account. 
A) are credited to the Dividend Revenue account. 
B) do not require an entry because the investee's profits have already been recorded at the proper proportion on the investor's books. 
C) are credited to the Investment in Associates account. 
D) are credited to the Revenue from Investment in Associates account.

Question 5

Under both IFRS and ASPE, investors can use either the cost model or the equity method for significantly influenced investments.

Accepted Answer

A) True 
 B)False

Question 6

A company that controls the common shares of another company is known as the

Accepted Answer

A) charge company. 
B) subsidiary company. 
C) parent company. 
D) management company. 
A) charge company. 
B) subsidiary company. 
C) parent company. 
D) management company.

Question 7

Strategic investments are debt or equity securities that are usually purchased to generate investment income.

Accepted Answer

A) True 
 B)False

Question 8

Investments in associates are reported as current assets on the statement of financial position at their fair value.

Accepted Answer

A) True 
 B)False

Question 9

On June 1, 2012, Rouge Corp purchased Noir Corp common shares for $9,300 as a trading investment. Three months later, Rouge sold these shares for $10,000. The entry to record the sale would include a

Accepted Answer

A) debit to Cash of $9,300. 
B) credit to Interest Revenue of $700. 
C) credit to Trading Investments of $10,000. 
D) credit to Realized Gain on Trading Investments of $700. 
A) debit to Cash of $9,300. 
B) credit to Interest Revenue of $700. 
C) credit to Trading Investments of $10,000. 
D) credit to Realized Gain on Trading Investments of $700.

Question 10

Under the equity method, the Investment in Associates account is credited when the

Accepted Answer

A) associate reports profits. 
B) associate reports a net loss. 
C) associate is originally acquired. 
D) both when the investee reports profits and when the investment is originally acquired. 
A) associate reports profits. 
B) associate reports a net loss. 
C) associate is originally acquired. 
D) both when the investee reports profits and when the investment is originally acquired.

Question 11

Debt investments held to earn interest revenue are reported at amortized cost in the statement of financial position.

Accepted Answer

A) True 
 B)False

Question 12

Using the fair value method of accounting for an equity investment, the journal entry to record the receipt of dividends involves a credit to Dividend Revenue.

Accepted Answer

A) True 
 B)False

Question 13

"Other comprehensive income" does not include

Accepted Answer

A) revaluations of property, plant and equipment. 
B) certain translation gains and losses on foreign currency. 
C) realized gains and losses on available-for-sale securities. 
D) unrealized gains and losses on available-for-sale securities. 
A) revaluations of property, plant and equipment. 
B) certain translation gains and losses on foreign currency. 
C) realized gains and losses on available-for-sale securities. 
D) unrealized gains and losses on available-for-sale securities.

Question 14

When an investor owns more than 50% of the common shares of another company

Accepted Answer

A) consolidated financial statements are usually prepared. 
B) the fair value model is used. 
C) the investor is called a subsidiary. 
D) the investor recognizes revenue only when dividends are received. 
A) consolidated financial statements are usually prepared. 
B) the fair value model is used. 
C) the investor is called a subsidiary. 
D) the investor recognizes revenue only when dividends are received.

Question 15

Corporations purchase investments in debt or equity securities for the income tax write-off.

Accepted Answer

A) True 
 B)False

Question 16

Edmonton Ltd. owns 10% interest in the shares of Jasper Corporation. During the year, Jasper pays $5,000 in dividends to Edmonton and reports a net loss of $50,000. Edmonton's investment in Jasper will affect Edmonton's profit by

Accepted Answer

A) $500 increase. 
B) $5,000 increase. 
C) $5,000 decrease. 
D) $4,500 decrease. 
A) $500 increase. 
B) $5,000 increase. 
C) $5,000 decrease. 
D) $4,500 decrease.

Question 17

Which of the following is not true about the accounting for trading investments?

Accepted Answer

A) They are reported as current assets on the statement of financial position. 
B) Realized gains and losses are reported on the income statement. 
C) They are valued at fair value. 
D) Unrealized gains and losses are reported on the statement of comprehensive income. 
A) They are reported as current assets on the statement of financial position. 
B) Realized gains and losses are reported on the income statement. 
C) They are valued at fair value. 
D) Unrealized gains and losses are reported on the statement of comprehensive income.

Question 18

Premiums and discounts must be amortized on all bond investments.

Accepted Answer

A) True 
 B)False

Question 19

Which one of the following would not be classified as a non-strategic investment?

Accepted Answer

A) Money-market securities 
B) Idle cash in a chequing account 
C) Trading investments 
D) Long-term bonds 
A) Money-market securities 
B) Idle cash in a chequing account 
C) Trading investments 
D) Long-term bonds

Question 20

When an investor reporting under IFRS owns more than 20% of the common shares of a corporation, it is generally presumed that the investor

Accepted Answer

A) has insignificant influence on the investee and that the cost method should be used to account for the investment. 
B) should use the fair value model to account for the investment. 
C) will prepare consolidated financial statements. 
D) has significant influence on the investee and that the equity method should be used to account for the investment. 
A) has insignificant influence on the investee and that the cost method should be used to account for the investment. 
B) should use the fair value model to account for the investment. 
C) will prepare consolidated financial statements. 
D) has significant influence on the investee and that the equity method should be used to account for the investment.

Investments accounted for using the fair value through other comprehensive income model are called available-for-sale investments.

Information flows among financial statements in this order:

If a company acquires a 40% interest in another company

If the equity method is being used, cash dividends received

Under both IFRS and ASPE, investors can use either the cost model or the equity method for significantly influenced investments.

A company that controls the common shares of another company is known as the

Strategic investments are debt or equity securities that are usually purchased to generate investment income.

Investments in associates are reported as current assets on the statement of financial position at their fair value.

On June 1, 2012, Rouge Corp purchased Noir Corp common shares for $9,300 as a trading investment. Three months later, Rouge sold these shares for $10,000. The entry to record the sale would include a

Under the equity method, the Investment in Associates account is credited when the

Debt investments held to earn interest revenue are reported at amortized cost in the statement of financial position.

Using the fair value method of accounting for an equity investment, the journal entry to record the receipt of dividends involves a credit to Dividend Revenue.

"Other comprehensive income" does not include

When an investor owns more than 50% of the common shares of another company

Corporations purchase investments in debt or equity securities for the income tax write-off.

Edmonton Ltd. owns 10% interest in the shares of Jasper Corporation. During the year, Jasper pays $5,000 in dividends to Edmonton and reports a net loss of $50,000. Edmonton's investment in Jasper will affect Edmonton's profit by

Which of the following is not true about the accounting for trading investments?

Premiums and discounts must be amortized on all bond investments.

Which one of the following would not be classified as a non-strategic investment?

When an investor reporting under IFRS owns more than 20% of the common shares of a corporation, it is generally presumed that the investor

The Purpose and Use of Financial Statements

A Further Look at Financial Statements

The Accounting Information System

Accrual Accounting Concepts

Merchandising Operations

Reporting and Analyzing Inventory

Internal Control and Cash

Reporting and Analyzing Receivables

Reporting and Analyzing Long-Lived Assets

Reporting and Analyzing Liabilities

Reporting and Analyzing Shareholders Equity

Statement of Cash Flows

Performance Measurement

Filters

Exam 12: Reporting and Analyzing Investments

Investments accounted for using the fair value through other comprehensive income model are called available-for-sale investments.

Information flows among financial statements in this order:

If a company acquires a 40% interest in another company

If the equity method is being used, cash dividends received

Under both IFRS and ASPE, investors can use either the cost model or the equity method for significantly influenced investments.

A company that controls the common shares of another company is known as the

Strategic investments are debt or equity securities that are usually purchased to generate investment income.

Investments in associates are reported as current assets on the statement of financial position at their fair value.

On June 1, 2012, Rouge Corp purchased Noir Corp common shares for $9,300 as a trading investment. Three months later, Rouge sold these shares for $10,000. The entry to record the sale would include a

Under the equity method, the Investment in Associates account is credited when the

Debt investments held to earn interest revenue are reported at amortized cost in the statement of financial position.

Using the fair value method of accounting for an equity investment, the journal entry to record the receipt of dividends involves a credit to Dividend Revenue.

"Other comprehensive income" does not include

When an investor owns more than 50% of the common shares of another company

Corporations purchase investments in debt or equity securities for the income tax write-off.

Edmonton Ltd. owns 10% interest in the shares of Jasper Corporation. During the year, Jasper pays $5,000 in dividends to Edmonton and reports a net loss of $50,000. Edmonton's investment in Jasper will affect Edmonton's profit by

Which of the following is not true about the accounting for trading investments?

Premiums and discounts must be amortized on all bond investments.

Which one of the following would not be classified as a non-strategic investment?

When an investor reporting under IFRS owns more than 20% of the common shares of a corporation, it is generally presumed that the investor

The Purpose and Use of Financial Statements

A Further Look at Financial Statements

The Accounting Information System

Accrual Accounting Concepts

Merchandising Operations

Reporting and Analyzing Inventory

Internal Control and Cash

Reporting and Analyzing Receivables

Reporting and Analyzing Long-Lived Assets

Reporting and Analyzing Liabilities

Reporting and Analyzing Shareholders Equity

Statement of Cash Flows

Performance Measurement

Filters