Question 1

The percentage of ownership or the degree of influence determines how a strategic investment is classified.

Accepted Answer

A) True 
 B)False

Question 2

Excess cash may be invested for the long-term to

Accepted Answer

A)  generate dividend income on bonds. 
B)  generate interest income on bonds. 
C)  generate interest income on shares. 
D)  generate additional operating income. 
A)  generate dividend income on bonds. 
B)  generate interest income on bonds. 
C)  generate interest income on shares. 
D)  generate additional operating income.

Question 3

Short- or long-term debt instruments held for trading are recorded as

Accepted Answer

A)  current assets at amortized cost. 
B)  non-current assets at amortized cost. 
C)  current asset at fair value. 
D)  non-current assets at fair value. 
A)  current assets at amortized cost. 
B)  non-current assets at amortized cost. 
C)  current asset at fair value. 
D)  non-current assets at fair value.

Question 4

In recognizing a decline in the market value of a trading investment, Loss on Fair value adjustment account is debited

Accepted Answer

A)  because management intends to realize this loss in the near future. 
B)  to reflect the fair value of the investment on the balance sheet. 
C)  because the company is no longer a going concern. 
D)  because there is a permanent decline in the fair value. 
A)  because management intends to realize this loss in the near future. 
B)  to reflect the fair value of the investment on the balance sheet. 
C)  because the company is no longer a going concern. 
D)  because there is a permanent decline in the fair value.

Question 5

The following transactions were made by Weiss Inc., a public company. Assume all investments are trading investments.
Jun 2 Purchased 200 Avery Corporation common shares for $45 per share.
Jul 1 Purchased 200 Lewis Corporation bonds for $220,000.
30 Received a cash dividend of $2 per share from Avery Corporation.
Sep 15 Sold 60 shares of Avery Corporation for $50 per share.
Dec 31 Received semi-annual interest cheque for $11,000 from Lewis Corporation.
31 Received a cash dividend of $2 per share from Avery Corporation.
31 The shares of Avery Corporation are worth $60 each on this date. The Bonds are worth $237,000.
Instructions
Journalize the transactions and required adjusting journal entries at December 31, the company's fiscal year end.

Accepted Answer

The answer of The following transactions were made by Weiss...

Question 6

Which of the following would NOT normally be considered a motive for making an equity investment in another corporation?

Accepted Answer

A)  to invest surplus cash 
B)  use of the investment for expanding its own operations 
C)  use of the investment to diversify its own operations 
D)  an increase in the amount of interest revenue from the equity investment 
A)  to invest surplus cash 
B)  use of the investment for expanding its own operations 
C)  use of the investment to diversify its own operations 
D)  an increase in the amount of interest revenue from the equity investment

Question 7

On July 2, 2014, Midtown Corp. purchased at 101, $100,000 of 6%, 10 year bonds issued by Smallville Inc., with the intention of holding the bonds to earn interest income. The bonds pay interest semi-annually on January 1 and July 1. Both companies have December 31 year ends. The relevant amortization amount for the period ending December 31, 2014 is $50.
Instructions
a. Record the purchase of the bond by Midtown and record any entries it will make related to this investment for the year end December 31, 2014.
b. Record the issue of the bond by Smallville and record any entries they will make related to this liability for the year end December 31, 2014.
c. Record the receipt of interest by Midtown on January 1, 2015.
d. Record the payment of interest by Smallville on January 1, 2015.

Accepted Answer

The answer of On July 2, 2014, Midtown Corp. purchased...

Question 8

The following is information about O'Hara Corporation's, a public company, trading investments. O'Hara has a September 30 year end.
Sep 1: On hand:
$50,000, 5% FMC Co. bond, purchased previously by O'Hara at 101. Interest on the bond is payable semi-annually on January 1 and July 1.
$100,000 3% Government of Canada bond, previously purchased by O'Hara at 98. Interest on the bond is payable semi-annually on March 31, and September 30.
Sep 1: Purchased $40,000 4% Alpha Inc. bond at 99. Interest is payable annually on August 31.
Sep 30: Received interest on Government of Canada bond.
Sep 30: Sold the Government of Canada bond at 97.
Sep 30: Fair value on FMC Co. bond is $52,500 and fair value of Alpha Inc. bond is $38,700.
Instructions
Record the transactions that occurred in September and prepare any adjusting entries required at September 30.

Accepted Answer

The answer of The following is information about O'Hara Corporation's,...

Question 9

Any premium or discount on an investment in bonds to earn interest is amortized

Accepted Answer

A)  to interest expense over the remaining term of the bonds. 
B)  only if the effective-interest method is used. 
C)  to interest revenue over the remaining term of the bonds. 
D)  only if the investor owns 20% or more of the bonds. 
A)  to interest expense over the remaining term of the bonds. 
B)  only if the effective-interest method is used. 
C)  to interest revenue over the remaining term of the bonds. 
D)  only if the investor owns 20% or more of the bonds.

Question 10

When a long-term bond investment is sold, a gain will be recorded when amortized cost of the bond is less than the cash received.

Accepted Answer

A) True 
 B)False

Question 11

At acquisition, a debt instrument is recorded at its fair value on the date of purchase.

Accepted Answer

A) True 
 B)False

Question 12

Long-term debt instruments held to earn interest income are recorded as

Accepted Answer

A)  current assets at amortized cost. 
B)  non-current assets at amortized cost. 
C)  current asset at fair value. 
D)  non-current assets at fair value. 
A)  current assets at amortized cost. 
B)  non-current assets at amortized cost. 
C)  current asset at fair value. 
D)  non-current assets at fair value.

Question 13

For companies reporting under IFRS, debt instruments purchased to trade are reported on the balance sheet at

Accepted Answer

A)  amortized cost. 
B)  cost. 
C)  fair value. 
D)  lower of cost and market. 
A)  amortized cost. 
B)  cost. 
C)  fair value. 
D)  lower of cost and market.

Question 14

The advantage of using fair value for trading investments is that it allows users to better predict future cash flows.

Accepted Answer

A) True 
 B)False

Question 15

Short-term and long-term debt instruments purchased to earn interest are reported at

Accepted Answer

A)  cost. 
B)  unamortized cost. 
C)  fair value. 
D)  amortized cost. 
A)  cost. 
B)  unamortized cost. 
C)  fair value. 
D)  amortized cost.

Question 16

Companies make strategic investments for several reasons. Which of the following reasons is INCORRECT?

Accepted Answer

A)  to speculate that their investment will increase in value and result in a gain when it is sold 
B)  to become a part of a different industry 
C)  to expand operations 
D)  to eliminate competition 
A)  to speculate that their investment will increase in value and result in a gain when it is sold 
B)  to become a part of a different industry 
C)  to expand operations 
D)  to eliminate competition

Question 17

Equity instruments held for trading are recorded as

Accepted Answer

A)  current assets at amortized cost. 
B)  non-current assets at amortized cost. 
C)  current asset at fair value. 
D)  non-current assets at fair value. 
A)  current assets at amortized cost. 
B)  non-current assets at amortized cost. 
C)  current asset at fair value. 
D)  non-current assets at fair value.

Question 18

If a debt instrument is sold before maturity, then a gain is recorded if the cash received is less than the carrying amount of the instruments.

Accepted Answer

A) True 
 B)False

Question 19

Instruments that will mature within 12 months of the balance sheet date are

Accepted Answer

A)  long-term debt instruments. 
B)  fair value instruments. 
C)  short-term debt instruments. 
D)  unamortized instruments. 
A)  long-term debt instruments. 
B)  fair value instruments. 
C)  short-term debt instruments. 
D)  unamortized instruments.

Question 20

Under IFRS, trading investments reported at fair value may include investments in common shares, preferred shares, and debt investments.

Accepted Answer

A) True 
 B)False

The percentage of ownership or the degree of influence determines how a strategic investment is classified.

Excess cash may be invested for the long-term to

Short- or long-term debt instruments held for trading are recorded as

In recognizing a decline in the market value of a trading investment, Loss on Fair value adjustment account is debited

Which of the following would NOT normally be considered a motive for making an equity investment in another corporation?

Any premium or discount on an investment in bonds to earn interest is amortized

When a long-term bond investment is sold, a gain will be recorded when amortized cost of the bond is less than the cash received.

At acquisition, a debt instrument is recorded at its fair value on the date of purchase.

Long-term debt instruments held to earn interest income are recorded as

For companies reporting under IFRS, debt instruments purchased to trade are reported on the balance sheet at

The advantage of using fair value for trading investments is that it allows users to better predict future cash flows.

Short-term and long-term debt instruments purchased to earn interest are reported at

Companies make strategic investments for several reasons. Which of the following reasons is INCORRECT?

Equity instruments held for trading are recorded as

If a debt instrument is sold before maturity, then a gain is recorded if the cash received is less than the carrying amount of the instruments.

Instruments that will mature within 12 months of the balance sheet date are

Under IFRS, trading investments reported at fair value may include investments in common shares, preferred shares, and debt investments.

Accounting in Action

The Recording Process

Adjusting the Accounts

Completion of the Accounting Cycle

Accounting for Merchandising Operations

Inventory Costing

Internal Control and Cash

Long-Lived Assets

Current Liabilities

Accounting Principles

Accounting for Partnerships

Introduction to Corporations

Corporations: Additional Topics and Ifrs

Non-Current Liabilities

The Cash Flow Statement

Financial Statement Analysis

Filters

Exam 18: Investments

The percentage of ownership or the degree of influence determines how a strategic investment is classified.

Excess cash may be invested for the long-term to

Short- or long-term debt instruments held for trading are recorded as

In recognizing a decline in the market value of a trading investment, Loss on Fair value adjustment account is debited

Which of the following would NOT normally be considered a motive for making an equity investment in another corporation?

Any premium or discount on an investment in bonds to earn interest is amortized

When a long-term bond investment is sold, a gain will be recorded when amortized cost of the bond is less than the cash received.

At acquisition, a debt instrument is recorded at its fair value on the date of purchase.

Long-term debt instruments held to earn interest income are recorded as

For companies reporting under IFRS, debt instruments purchased to trade are reported on the balance sheet at

The advantage of using fair value for trading investments is that it allows users to better predict future cash flows.

Short-term and long-term debt instruments purchased to earn interest are reported at

Companies make strategic investments for several reasons. Which of the following reasons is INCORRECT?

Equity instruments held for trading are recorded as

If a debt instrument is sold before maturity, then a gain is recorded if the cash received is less than the carrying amount of the instruments.

Instruments that will mature within 12 months of the balance sheet date are

Under IFRS, trading investments reported at fair value may include investments in common shares, preferred shares, and debt investments.

Accounting in Action

The Recording Process

Adjusting the Accounts

Completion of the Accounting Cycle

Accounting for Merchandising Operations

Inventory Costing

Internal Control and Cash

Long-Lived Assets

Current Liabilities

Accounting Principles

Accounting for Partnerships

Introduction to Corporations

Corporations: Additional Topics and Ifrs

Non-Current Liabilities

The Cash Flow Statement

Financial Statement Analysis

Filters