Question 1

Under IFRS, trading investments are valued at amortized cost on the balance sheet.

Accepted Answer

A) True 
 B)False

Question 2

Match between columns
                        Premises: Treasury bill
Term deposits
Bonds
Equity investment purchased to trade
Long-term debt instrument held to earn interest
Short-term debt instrument held to earn interest
Preferred shares
Money market funds
Short-term debt instrument purchased to trade
60% of the common shares of the investee

Accepted Answer

The Answer of strategic investment and non-strategic investment is...

Question 3

All of the following are considered debt instruments EXCEPT

Accepted Answer

A)  term deposits. 
B)  treasury bills. 
C)  bonds. 
D)  preferred shares. 
A)  term deposits. 
B)  treasury bills. 
C)  bonds. 
D)  preferred shares.

Question 4

Losses and gains on the sale of instruments are reported on

Accepted Answer

A)  the income statement under current operations. 
B)  the balance sheet with long-term investments. 
C)  the income statement under other revenue and expenses. 
D)  the balance sheet with short-term investments. 
A)  the income statement under current operations. 
B)  the balance sheet with long-term investments. 
C)  the income statement under other revenue and expenses. 
D)  the balance sheet with short-term investments.

Question 5

A short-term debt instrument which is held to earn interest will be valued at fair value on the balance sheet.

Accepted Answer

A) True 
 B)False

Question 6

Regardless of the bonds purchase price, their amortized cost at maturity will equal

Accepted Answer

A)  face value. 
B)  face value less premium amounts. 
C)  purchase price. 
D)  face value plus discount amounts. 
A)  face value. 
B)  face value less premium amounts. 
C)  purchase price. 
D)  face value plus discount amounts.

Question 7

On January 1, 2014, Connors Landscaping Ltd. purchased at face value, a $1,000, 5%, bond that pays interest on January 1 and July 1. Connors has a calendar year end.
-The adjusting entry on December 31, 2014, is
A) not required.

Accepted Answer

The answer of On January 1, 2014, Connors Landscaping Ltd....

Question 8

When investing excess cash for short periods of time, corporations usually invest in shares of other companies.

Accepted Answer

A) True 
 B)False

Question 9

The purchaser of the bonds, or the bondholder, is known as the investor.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following statements is INCORRECT with regards to non-strategic instruments?

Accepted Answer

A)  They can be debt instruments. 
B)  They maintain an operating relationship with another company. 
C)  They can be equity instruments. 
D)  They generate investment income. 
A)  They can be debt instruments. 
B)  They maintain an operating relationship with another company. 
C)  They can be equity instruments. 
D)  They generate investment income.

Question 11

Trading investments in equity instruments are reported on the balance sheet at

Accepted Answer

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

Question 12

If an investment is valued at an amount that is most relevant to the type of investment, it will allow investors to better predict future cash flows of the company.

Accepted Answer

A) True 
 B)False

Question 13

Nickel District Company purchased the following instruments during the year. Assume the company's fiscal year end is January 31, 2015.
Dec 1 2014 Purchased a $5,000 120 day treasury bill for $4,935. The treasury bills are trading at a market rate of interest of 4% annually.
Feb 1, 2015 Purchased at 101 a $15,000, 5% 5 year Laurentian Bond. Interest is paid semi-annually. The market rate of interest was 3.5%. The bonds were purchased to trade.
Mar 30, 2015 Treasury bill matured.
Aug 1, 2015 Received interest on the Laurentian Bond.
Aug 2, 2015 Sold the Laurentian Bonds at 99.
Instructions
Record the above transactions and any necessary adjusting entries for Nickel District required at January 31, 2015.

Accepted Answer

The answer of Nickel District Company purchased the following instruments...

Question 14

If the cost of a trading investment exceeds its fair value by $40,000, the entry to recognize the loss

Accepted Answer

A)  is not required since the share prices will likely rebound in the long run. 
B)  will show a debit to an expense account in the operating section of the income statement. 
C)  will show a credit to a contra-asset account that appears in the shareholders' equity section of the balance sheet. 
D)  will show a debit to an loss account that appears in the other expenses section of the income statement. 
A)  is not required since the share prices will likely rebound in the long run. 
B)  will show a debit to an expense account in the operating section of the income statement. 
C)  will show a credit to a contra-asset account that appears in the shareholders' equity section of the balance sheet. 
D)  will show a debit to an loss account that appears in the other expenses section of the income statement.

Question 15

The purpose of a strategic investment is to generate investment income.

Accepted Answer

A) True 
 B)False

Question 16

Dividend revenue is reported under revenues from operations on the Income statement.

Accepted Answer

A) True 
 B)False

Question 17

Short-term debt instruments that are 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 18

When a debt instrument is reported at amortized cost, the interest expense is calculated by multiplying the market rate of interest by the carrying value of the investment.

Accepted Answer

A) True 
 B)False

Question 19

On January 5, 2013, Barker Limited purchased the following securities as trading investments:
300 McRae Corporation common shares for $4,200
500 Gupta Corporation common shares for $10,000
600 May Corporation common shares for $19,800
On June 30, 2013, Barker received the following cash dividends:   On November 15, 2013, Barker sold 100 May Corporation common shares for $4,000.
On December 31, 2013, the market value of the securities held by Barker is as follows:   Instructions
Prepare the appropriate journal entries that Barker Limited should make on the following dates: January 5, 2013; June 30, 2013; November 15, 2013; and December 31, 2013.

Accepted Answer

The answer of On January 5, 2013, Barker Limited purchased...

Question 20

If there is a bond premium, interest revenue is increased by the amortization amount.

Accepted Answer

A) True 
 B)False

Under IFRS, trading investments are valued at amortized cost on the balance sheet.

All of the following are considered debt instruments EXCEPT

Losses and gains on the sale of instruments are reported on

A short-term debt instrument which is held to earn interest will be valued at fair value on the balance sheet.

Regardless of the bonds purchase price, their amortized cost at maturity will equal

On January 1, 2014, Connors Landscaping Ltd. purchased at face value, a $1,000, 5%, bond that pays interest on January 1 and July 1. Connors has a calendar year end. -The adjusting entry on December 31, 2014, is A) not required.

When investing excess cash for short periods of time, corporations usually invest in shares of other companies.

The purchaser of the bonds, or the bondholder, is known as the investor.

Which of the following statements is INCORRECT with regards to non-strategic instruments?

Trading investments in equity instruments are reported on the balance sheet at

If an investment is valued at an amount that is most relevant to the type of investment, it will allow investors to better predict future cash flows of the company.

If the cost of a trading investment exceeds its fair value by $40,000, the entry to recognize the loss

The purpose of a strategic investment is to generate investment income.

Dividend revenue is reported under revenues from operations on the Income statement.

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

When a debt instrument is reported at amortized cost, the interest expense is calculated by multiplying the market rate of interest by the carrying value of the investment.

If there is a bond premium, interest revenue is increased by the amortization amount.

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

Under IFRS, trading investments are valued at amortized cost on the balance sheet.

All of the following are considered debt instruments EXCEPT

Losses and gains on the sale of instruments are reported on

A short-term debt instrument which is held to earn interest will be valued at fair value on the balance sheet.

Regardless of the bonds purchase price, their amortized cost at maturity will equal

On January 1, 2014, Connors Landscaping Ltd. purchased at face value, a $1,000, 5%, bond that pays interest on January 1 and July 1. Connors has a calendar year end. -The adjusting entry on December 31, 2014, is A) not required.

When investing excess cash for short periods of time, corporations usually invest in shares of other companies.

The purchaser of the bonds, or the bondholder, is known as the investor.

Which of the following statements is INCORRECT with regards to non-strategic instruments?

Trading investments in equity instruments are reported on the balance sheet at

If an investment is valued at an amount that is most relevant to the type of investment, it will allow investors to better predict future cash flows of the company.

If the cost of a trading investment exceeds its fair value by $40,000, the entry to recognize the loss

The purpose of a strategic investment is to generate investment income.

Dividend revenue is reported under revenues from operations on the Income statement.

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

When a debt instrument is reported at amortized cost, the interest expense is calculated by multiplying the market rate of interest by the carrying value of the investment.

If there is a bond premium, interest revenue is increased by the amortization amount.

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