Exam 12: Reporting and Analyzing Investments

If 30% of the common shares of an investee are purchased as a long-term investment, the appropriate classification for this investment is most likely

Use the following information for questions. On January 1, 2018, Warner Inc. purchased 3.5%, $50,000 face value Jackson Corp. bonds at face value. Interest is payable semi-annually on July 1 and January 1. The bonds are classified as held for trading investments. The bonds were sold on July 2, 2018 for $53,000. -Warner's entry to record the sale on July 2, after the July 1 interest was received and recorded, would include a

If the fair value through other comprehensive income model is used, then unrealized gains and losses are not used to evaluate management.

The company that has the majority of its voting shares owned by a parent company is called the

Use the following information to answer questions. Wells Inc. reported these transactions relating to marketable Held for Trading Investments intended to generate net income and to be sold in the near term: -The entry to record the purchase of the Taylor shares on Feb 1 would include a

At acquisition, the investment account is debited for the cost of the shares under both the cost and equity methods of accounting for strategic investments.

Equity securities are always classified as long-term investments.

The following transactions regarding their held for trading investments were made by Amarillo Limited: InstructionsRecord the above transactions and events, including any required adjustments on Dec 31.

Eurythmics Ltd. owns 20% interest in the shares of Sydney Corporation. During the year, Sydney pays $10,000 in dividends to Eurythmic and reports a net loss of $50,000. Eurythmic's investment in Sydney will affect Eurythmics's net income by

During its first year of operation, Snapper Limited (a public company) acquired three securities as trading investments held for. Investment A cost $75,000 and had a year-end fair value of $80,000. Investment B cost $42,000 and had a year-end fair value of $26,000. Investment C cost $32,000 and had a year-end fair value of $30,000. What amount should be reported as an unrealized loss in Snapper's income statement for the first year of operation?

Held for Trading Investments are all of the following except

Use the following information for questions. On January 1, 2018, 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, 2018, the fair value of the bonds was $23,950. -What is the entry (if any) to record the fair value adjustment on December 31, 2018? Assume the adjusting entry for the interest accrual has already been recorded.

On January 1, Kensington Corporation, as a trading investment, purchased a three month, 3%, $20,000 term deposit.InstructionsPrepare entries for the purchase and maturity of the term deposit.

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

Use the following information to answer questions. Wells Inc. reported these transactions relating to marketable Held for Trading Investments intended to generate net income 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

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

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

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

Realized gains and losses are always reported in the income statement.

Interest revenue is calculated by multiplying the carrying amount of the bond investment by the market rate of interest when the bond was purchased prorated by the portion of the payment period covered during the year.