Question 1

The cost model is used to account for equity investments where there is significant influence.

Accepted Answer

A) True 
 B)False

Question 2

Both equity and debt investments are reported as current assets on the statement of financial position at their fair value.

Accepted Answer

A) True 
 B)False

Question 3

All of the following statements concerning strategic investments are true, except

Accepted Answer

A) They include trading investments. 
B) They are purchased for the strategic purpose of influencing relationships between companies. 
C) They are generally long-term investments. 
D) They are financial assets. 
A) They include trading investments. 
B) They are purchased for the strategic purpose of influencing relationships between companies. 
C) They are generally long-term investments. 
D) They are financial assets.

Question 4

Debt investments are all of the following except

Accepted Answer

A) low risk. 
B) classified according to maturity. 
C) equity securities. 
D) debt securities. 
A) low risk. 
B) classified according to maturity. 
C) equity securities. 
D) debt securities.

Question 5

Short-term investments in bonds are accounted for using the fair value model.

Accepted Answer

A) True 
 B)False

Question 6

Preferred shares are often purchased as strategic investments.

Accepted Answer

A) True 
 B)False

Question 7

If a trading investment in bonds is sold one month after its value was adjusted at year-end, the investment account is

Accepted Answer

A) debited for the carrying amount of the bonds at the sale date. 
B) credited for the cost of the bonds at the sale date. 
C) credited for the carrying amount of the bonds at the sale date. 
D) debited for the cost of the bonds at the sale date. 
A) debited for the carrying amount of the bonds at the sale date. 
B) credited for the cost of the bonds at the sale date. 
C) credited for the carrying amount of the bonds at the sale date. 
D) debited for the cost of the bonds at the sale date.

Question 8

If an investment in an associate is sold at a gain, the gain

Accepted Answer

A) is reported as operating revenue. 
B) is reported under a special section, "Discontinued Investments," on the income statement. 
C) is reported in the Other Revenues and Gains section on the income statement. 
D) contributes to gross profit on the income statement. 
A) is reported as operating revenue. 
B) is reported under a special section, "Discontinued Investments," on the income statement. 
C) is reported in the Other Revenues and Gains section on the income statement. 
D) contributes to gross profit on the income statement.

Question 9

When an investee can be significantly influenced, it is known as an associate.

Accepted Answer

A) True 
 B)False

Question 10

When an investment in bonds is made, the investment account is debited for the face value of the bond less any premium or plus any discount.

Accepted Answer

A) True 
 B)False

Question 11

Use the following information to answer questions 
Lacey Inc. reported these transactions relating to marketable trading investments intended to generate profits and to be sold in the near term:  
-The entry to record the purchase of the Cagney shares on Feb. 1 would include a

Accepted Answer

A) debit to Available-for-Sale Investments. 
B) debit to Trading Investments. 
C) debit to Strategic Investments. 
D) debit to Investment in Associates. 
A) debit to Available-for-Sale Investments. 
B) debit to Trading Investments. 
C) debit to Strategic Investments. 
D) debit to Investment in Associates.

Question 12

Short-term investments are listed on the statement of financial position immediately below

Accepted Answer

A) cash. 
B) inventory. 
C) accounts receivable. 
D) prepaid expenses. 
A) cash. 
B) inventory. 
C) accounts receivable. 
D) prepaid expenses.

Question 13

Use the following information to answer questions 
Lacey Inc. reported these transactions relating to marketable trading investments intended to generate profits and to be sold in the near term:  
-The entry, if any is required, to record the value of the investment on December 31 would include a debit to

Accepted Answer

A) Realized Loss for $450. 
B) Unrealized Loss for $750. 
C) No entry is required. 
D) Unrealized Loss of $450. 
A) Realized Loss for $450. 
B) Unrealized Loss for $750. 
C) No entry is required. 
D) Unrealized Loss of $450.

Question 14

Trading investments are always classified as current assets.

Accepted Answer

A) True 
 B)False

Question 15

Non-strategic investments can be classified as short or long-term investments.

Accepted Answer

A) True 
 B)False

Question 16

An advantage of using the fair value through other comprehensive income is that

Accepted Answer

A) the effect on other comprehensive income is reported in the income statement. 
B) unrealized gains and losses are not used to evaluate management. 
C) unrealized losses must be reversed, but unrealized gains are ignored for that security. 
D) unrealized gains must be reversed, but unrealized losses are ignored for that security. 
A) the effect on other comprehensive income is reported in the income statement. 
B) unrealized gains and losses are not used to evaluate management. 
C) unrealized losses must be reversed, but unrealized gains are ignored for that security. 
D) unrealized gains must be reversed, but unrealized losses are ignored for that security.

Question 17

Valuing available-for-sale securities at fair value could result in unrealized gains and losses that are reported on the statement of comprehensive income.

Accepted Answer

A) True 
 B)False

Question 18

Debt investments are generally low-risk investments the investor does not intend to sell in the near-term.

Accepted Answer

A) True 
 B)False

Question 19

Jet Inc. owns a 25% interest in the shares of Winnipeg Corp. During the year, Winnipeg pays $5,000 in dividends to Jet and reports a net loss of $50,000. Jet's investment in Winnipeg will affect Jet's profit by

Accepted Answer

A) $5,000 increase. 
B) $1,000 increase. 
C) $12,500 decrease. 
D) $11,250 decrease. 
A) $5,000 increase. 
B) $1,000 increase. 
C) $12,500 decrease. 
D) $11,250 decrease.

Question 20

The degree of influence determines how a strategic investment is classified.

Accepted Answer

A) True 
 B)False

The cost model is used to account for equity investments where there is significant influence.

Both equity and debt investments are reported as current assets on the statement of financial position at their fair value.

All of the following statements concerning strategic investments are true, except

Debt investments are all of the following except

Short-term investments in bonds are accounted for using the fair value model.

Preferred shares are often purchased as strategic investments.

If a trading investment in bonds is sold one month after its value was adjusted at year-end, the investment account is

If an investment in an associate is sold at a gain, the gain

When an investee can be significantly influenced, it is known as an associate.

When an investment in bonds is made, the investment account is debited for the face value of the bond less any premium or plus any discount.

Use the following information to answer questions Lacey Inc. reported these transactions relating to marketable trading investments intended to generate profits and to be sold in the near term: -The entry to record the purchase of the Cagney shares on Feb. 1 would include a

Short-term investments are listed on the statement of financial position immediately below

Trading investments are always classified as current assets.

Non-strategic investments can be classified as short or long-term investments.

An advantage of using the fair value through other comprehensive income is that

Valuing available-for-sale securities at fair value could result in unrealized gains and losses that are reported on the statement of comprehensive income.

Debt investments are generally low-risk investments the investor does not intend to sell in the near-term.

Jet Inc. owns a 25% interest in the shares of Winnipeg Corp. During the year, Winnipeg pays $5,000 in dividends to Jet and reports a net loss of $50,000. Jet's investment in Winnipeg will affect Jet's profit by

The degree of influence determines how a strategic investment is classified.

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

The cost model is used to account for equity investments where there is significant influence.

Both equity and debt investments are reported as current assets on the statement of financial position at their fair value.

All of the following statements concerning strategic investments are true, except

Debt investments are all of the following except

Short-term investments in bonds are accounted for using the fair value model.

Preferred shares are often purchased as strategic investments.

If a trading investment in bonds is sold one month after its value was adjusted at year-end, the investment account is

If an investment in an associate is sold at a gain, the gain

When an investee can be significantly influenced, it is known as an associate.

When an investment in bonds is made, the investment account is debited for the face value of the bond less any premium or plus any discount.

Use the following information to answer questions Lacey Inc. reported these transactions relating to marketable trading investments intended to generate profits and to be sold in the near term: -The entry to record the purchase of the Cagney shares on Feb. 1 would include a

Short-term investments are listed on the statement of financial position immediately below

Trading investments are always classified as current assets.

Non-strategic investments can be classified as short or long-term investments.

An advantage of using the fair value through other comprehensive income is that

Valuing available-for-sale securities at fair value could result in unrealized gains and losses that are reported on the statement of comprehensive income.

Debt investments are generally low-risk investments the investor does not intend to sell in the near-term.

Jet Inc. owns a 25% interest in the shares of Winnipeg Corp. During the year, Winnipeg pays $5,000 in dividends to Jet and reports a net loss of $50,000. Jet's investment in Winnipeg will affect Jet's profit by

The degree of influence determines how a strategic investment is classified.

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