Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

Use the following information for questions 
On January 1, 2021, Marianne Corp.purchased $50,000, of Robin Ltd.'s 4%, 10-year bonds for $48,000, since the market interest rate was approximately 4.5%.The bonds pay interest on January 1 and July 1.Marianne has a calendar year end, and classified the bonds as long-term investments.The fair value on December 31, 2021 was $48,500.Marianne sold the bonds on January 2, 2022 for $48,500.
-The entry for the receipt of interest on January 1, 2022 is

Accepted Answer

The answer of Use the following information for questions 
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Question 3

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

Accepted Answer

A) They are purchased with the purpose of influencing the investee company. 
B) They are generally classified as investments in associates. 
C) They are frequently debt securities. 
D) The degree of influence determines how a strategic investment is classified. 
A) They are purchased with the purpose of influencing the investee company. 
B) They are generally classified as investments in associates. 
C) They are frequently debt securities. 
D) The degree of influence determines how a strategic investment is classified.

Question 4

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) one of the fair value models 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) one of the fair value models is usually applicable. 
D) the investor does not have the ability to exert significant influence over the investee.

Question 5

Under the equity method,

Accepted Answer

A) the receipt of dividends from the investee results in an increase in the investment account. 
B) the receipt of dividends from the investee results in a credit to the Dividend Income account. 
C) the receipt of dividends from the investee results in an increase in the investment account and a credit to the Dividend Income account. 
D) the receipt of dividends from the investee reduces the carrying amount of the investment account. 
A) the receipt of dividends from the investee results in an increase in the investment account. 
B) the receipt of dividends from the investee results in a credit to the Dividend Income account. 
C) the receipt of dividends from the investee results in an increase in the investment account and a credit to the Dividend Income account. 
D) the receipt of dividends from the investee reduces the carrying amount of the investment account.

Question 6

Aroma Limited owns a 25% interest in the shares of Baltic Corporation.During the year, Baltic pays $10,000 in dividends to Aroma and reports $100,000 net income.Aroma's investment in Baltic will increase Aroma's net income by

Accepted Answer

A) $25,000. 
B) $27,500. 
C) $10,000. 
D) $ 2,500. 
A) $25,000. 
B) $27,500. 
C) $10,000. 
D) $ 2,500.

Question 7

On October 1 of last year, Hand Tools Corp.purchased 1,500 shares of the Bindo Bank for $72,000 as a trading investment.At year end, December 31, the fair value of these shares was $75,000.On February 1 of this year, Hand Tools sold all these shares for $73,000.The realized gain (loss) that Hand Tools will report this year is

Accepted Answer

A) a gain of $2,000. 
B) a gain of $1,000. 
C) a loss of $1,000. 
D) a loss of $2,000. 
A) a gain of $2,000. 
B) a gain of $1,000. 
C) a loss of $1,000. 
D) a loss of $2,000.

Question 8

If the equity method is being used, the Income from Associates account is

Accepted Answer

A) another name for a Dividend Income account. 
B) credited when dividends are declared by the investee. 
C) credited when net income is reported by the investee. 
D) debited when net income is reported by the investee. 
A) another name for a Dividend Income account. 
B) credited when dividends are declared by the investee. 
C) credited when net income is reported by the investee. 
D) debited when net income is reported by the investee.

Question 9

Use the following information for questions 
On January 1, 2022, Burkett Corporation purchased, as a long-term investment, a $25,000, 5% bond, for $21,595.At this time, the market rate of interest was approximately 7%.The bond pays interest on January 1 and July 1.On December 31, 2022, the fair value of the bonds was $23,950.
-What is the entry to record the purchase?

Accepted Answer

The answer of Use the following information for questions 
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Question 10

Use the following information for questions 
On January 1, 2021, Soo Park Corp.purchased at face value, a $5,000, 5%, bond investment that pays interest on January 1 and July 1.Soo Park classified the investment as long-term.Soo Park has a calendar year end.
-The entry for the receipt of interest on July 1, 2021, is

Accepted Answer

The answer of Use the following information for questions 
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Question 11

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 through profit or loss 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 through profit or loss 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.

Question 12

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 statement of income. 
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 statement of income. 
C) They are valued at fair value. 
D) Unrealized gains and losses are reported on the statement of comprehensive income.

Question 13

Which of the following statements is not true?

Accepted Answer

A) Under the fair value through other comprehensive income model gains and losses are critical to the evaluation of management. 
B) Under the fair value through profit or loss model, both realized and unrealized gains and losses are reported in the statement of income. 
C) Under the amortized cost model, no unrealized gains or losses are reported. 
D) Non-strategic investments are purchased to generate investment income. 
A) Under the fair value through other comprehensive income model gains and losses are critical to the evaluation of management. 
B) Under the fair value through profit or loss model, both realized and unrealized gains and losses are reported in the statement of income. 
C) Under the amortized cost model, no unrealized gains or losses are reported. 
D) Non-strategic investments are purchased to generate investment income.

Question 14

The equity method should generally be used to account for an investment in shares when the level of ownership is

Accepted Answer

A) less than 10%. 
B) between 10% and 20%. 
C) 20% or more. 
D) 10% or more. 
A) less than 10%. 
B) between 10% and 20%. 
C) 20% or more. 
D) 10% or more.

Question 15

Debt investments include all the following except

Accepted Answer

A) common shares. 
B) guaranteed investment certificates. 
C) treasury bills. 
D) bonds. 
A) common shares. 
B) guaranteed investment certificates. 
C) treasury bills. 
D) bonds.

Question 16

Equity securities are always classified as long-term investments.

Accepted Answer

A) True 
 B)False

Question 17

Amortization of bond premiums for bond investments will

Accepted Answer

A) increase Interest Income and increase the Investment account. 
B) increase Interest Income and decrease the Investment account. 
C) decrease Interest Income and decrease the Investment account. 
D) decrease Interest Income and increase the Investment account. 
A) increase Interest Income and increase the Investment account. 
B) increase Interest Income and decrease the Investment account. 
C) decrease Interest Income and decrease the Investment account. 
D) decrease Interest Income and increase the Investment account.

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

Using the fair value through profit and loss model of accounting for an equity investment, the journal entry to record the receipt of dividends involves a credit to Dividend Income.

Accepted Answer

A) True 
 B)False

Question 20

All 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 equity securities. 
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 equity securities.

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

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

If a company acquires a 40% interest in another company

Under the equity method,

Aroma Limited owns a 25% interest in the shares of Baltic Corporation.During the year, Baltic pays $10,000 in dividends to Aroma and reports $100,000 net income.Aroma's investment in Baltic will increase Aroma's net income by

If the equity method is being used, the Income from Associates account is

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

Which of the following is not true about the accounting for Trading Investments?

Which of the following statements is not true?

The equity method should generally be used to account for an investment in shares when the level of ownership is

Debt investments include all the following except

Equity securities are always classified as long-term investments.

Amortization of bond premiums for bond investments will

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

Using the fair value through profit and loss model of accounting for an equity investment, the journal entry to record the receipt of dividends involves a credit to Dividend Income.

All the following statements concerning strategic investments are true, except

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

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Exam 12: Reporting and Analyzing Investments

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

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

If a company acquires a 40% interest in another company

Under the equity method,

Aroma Limited owns a 25% interest in the shares of Baltic Corporation.During the year, Baltic pays $10,000 in dividends to Aroma and reports $100,000 net income.Aroma's investment in Baltic will increase Aroma's net income by

If the equity method is being used, the Income from Associates account is

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

Which of the following is not true about the accounting for Trading Investments?

Which of the following statements is not true?

The equity method should generally be used to account for an investment in shares when the level of ownership is

Debt investments include all the following except

Equity securities are always classified as long-term investments.

Amortization of bond premiums for bond investments will

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

Using the fair value through profit and loss model of accounting for an equity investment, the journal entry to record the receipt of dividends involves a credit to Dividend Income.

All the following statements concerning strategic investments are true, except

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