Question 1

The amortization of a bond investment is recorded in

Accepted Answer

A)  an Interest Expense account. 
B)  an Interest Revenue account. 
C)  neither an Interest Expense or an Interest revenue account. 
D)  either an Interest Expense account or an Interest Revenue account. 
A)  an Interest Expense account. 
B)  an Interest Revenue account. 
C)  neither an Interest Expense or an Interest revenue account. 
D)  either an Interest Expense account or an Interest Revenue account.

Question 2

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 3

Under both the fair value model and the amortized cost model, investments are adjusted upwards or downwards to reflect their fair value at year end.

Accepted Answer

A) True 
 B)False

Question 4

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 5

When investing excess cash for short periods of time,

Accepted Answer

A)  corporations generally invest in equity securities. 
B)  corporations generally invest in debt securities that have both high liquidity and high risk. 
C)  corporations generally invest in debt securities that have high risk and low liquidity. 
D)  corporations generally invest in debt securities that have low risk and high liquidity. 
A)  corporations generally invest in equity securities. 
B)  corporations generally invest in debt securities that have both high liquidity and high risk. 
C)  corporations generally invest in debt securities that have high risk and low liquidity. 
D)  corporations generally invest in debt securities that have low risk and high liquidity.

Question 6

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 7

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 receipt of the dividends on Jun 1 would include a

Accepted Answer

A)  debit to Held for Trading Investments for $1,500. 
B)  debit to Dividend Revenue for $1,500. 
C)  credit to Dividend Revenue for $1,500. 
D)  credit to Strategic Investments for $1,500. 
A)  debit to Held for Trading Investments for $1,500. 
B)  debit to Dividend Revenue for $1,500. 
C)  credit to Dividend Revenue for $1,500. 
D)  credit to Strategic Investments for $1,500.

Question 8

Explain how investments are reported in the financial statements. Under IFRS, when a company has a strategic investment in a subsidiary where control has been obtained, the preparation of consolidated financial statements is required. In this case, the investment account is replaced by the specific assets and liabilities of the subsidiary. Under ASPE, parent companies can choose to use consolidation or, if the fair value of the investment is known, the investment can be accounted for using the fair value through profit or loss model or the equity method. If the fair value of the investment is not known, then in addition to consolidating financial statements, the investment can be accounted for using either the cost model or the equity method.Accumulated other comprehensive income is presented in the shareholders' equity section of the statement of financial position. Other comprehensive income is closed out at the end of the year into accumulated other comprehensive income.Changes in share capital, retained earnings, and accumulated comprehensive income are shown in the statement of changes in equity.

Accepted Answer

Horizontal analysis is a technique for e

Question 9

Under both IFRS and ASPE, the investor must use the effective-interest method to amortize bond premium or discount.

Accepted Answer

A) True 
 B)False

Question 10

Corporations purchase investments in debt or equity securities for the income tax write-off.

Accepted Answer

A) True 
 B)False

Question 11

Only debt investments can be accounted for using the fair value through other comprehensive income model.

Accepted Answer

A) True 
 B)False

Question 12

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 sale of the shares on Oct 1 would include a

Accepted Answer

A)  credit to Held for Trading Investments for $3,800. 
B)  credit to Realized Gain for $800. 
C)  credit to Unrealized Gain for $800. 
D)  debit to Unrealized Gain for $3,800. 
A)  credit to Held for Trading Investments for $3,800. 
B)  credit to Realized Gain for $800. 
C)  credit to Unrealized Gain for $800. 
D)  debit to Unrealized Gain for $3,800.

Question 13

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 14

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

Question 15

Corporations invest in other companies for all of the following reasons except to

Accepted Answer

A)  use excess cash until needed. 
B)  generate investment revenue. 
C)  meet strategic goals. 
D)  influence the market value. 
A)  use excess cash until needed. 
B)  generate investment revenue. 
C)  meet strategic goals. 
D)  influence the market value.

Question 16

On January 1, 2017, Marianne Corp. purchased $50,000 of Robbin Company's 4%, 10-year bonds for $48,000, since the market rate was approximately 4.5%. The bonds pay interest on January 1 and July 1. Marianne Corp. has a calendar year end, and classified the bonds as a long-term investment. On December 31, 2017, the fair value of these bonds was $48,400. On January 2, 2018, Marianne sold the bonds for $48,400.InstructionsPrepare the required entries to record the above transactions and events. Round all values to the nearest dollar.

Accepted Answer

The answer of On January 1, 2017, Marianne Corp. purchased...

Question 17

Use the following information for questions.
On January 1, 2017, 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 January 1, 2018 is

Accepted Answer

A)   
B)   
C)   
D)   
A)   
B)   
C)   
D)

Question 18

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 receipt of the July 1 interest payment would include a

Accepted Answer

A)  debit to Interest Expense for $875. 
B)  credit to Interest Revenue for $875. 
C)  credit to Interest Revenue for $1,750. 
D)  credit to Held for Trading Investments for $875. 
A)  debit to Interest Expense for $875. 
B)  credit to Interest Revenue for $875. 
C)  credit to Interest Revenue for $1,750. 
D)  credit to Held for Trading Investments for $875.

Question 19

A company that controls the common shares of another company is known as the

Accepted Answer

A)  charge company. 
B)  subsidiary company. 
C)  parent company. 
D)  management company. 
A)  charge company. 
B)  subsidiary company. 
C)  parent company. 
D)  management company.

Question 20

Compare the accounting for a bond investment and a bond payable (Appendix 12A).

Accepted Answer

The accounting for a bond investment is

The amortization of a bond investment is recorded in

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

Under both the fair value model and the amortized cost model, investments are adjusted upwards or downwards to reflect their fair value at year end.

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

When investing excess cash for short periods of time,

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

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 receipt of the dividends on Jun 1 would include a

Under both IFRS and ASPE, the investor must use the effective-interest method to amortize bond premium or discount.

Corporations purchase investments in debt or equity securities for the income tax write-off.

Only debt investments can be accounted for using the fair value through other comprehensive income model.

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 sale of the shares on Oct 1 would include a

Debt investments are all of the following except

Under the equity method,

Corporations invest in other companies for all of the following reasons except to

A company that controls the common shares of another company is known as the

Compare the accounting for a bond investment and a bond payable (Appendix 12A).

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

The amortization of a bond investment is recorded in

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

Under both the fair value model and the amortized cost model, investments are adjusted upwards or downwards to reflect their fair value at year end.

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

When investing excess cash for short periods of time,

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

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 receipt of the dividends on Jun 1 would include a

Under both IFRS and ASPE, the investor must use the effective-interest method to amortize bond premium or discount.

Corporations purchase investments in debt or equity securities for the income tax write-off.

Only debt investments can be accounted for using the fair value through other comprehensive income model.

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 sale of the shares on Oct 1 would include a

Debt investments are all of the following except

Under the equity method,

Corporations invest in other companies for all of the following reasons except to

A company that controls the common shares of another company is known as the

Compare the accounting for a bond investment and a bond payable (Appendix 12A).

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