Exam 15: Investments

Reversals of impairment losses on held-to-maturity and available-for-sale securities are recognized in income under IFRS GAAP I. yes yes II. no yes III. yes no IV. no no

On January 1, 2010, Danforth Company purchased 30% of the common stock of Farley Company for $80, 000.The purchase was made at book value.Additional information for Farley Company follows: Year Net Income Dividends Paic 2010 \ 20,000 \ 24,000 2011 60,000 42,000 On Danforth's books, what would be the balance of Investment in Farley Company at December 31, 2011?

On January 1, 2010, Lightner bought 20, 000 shares (5% ownership)of Winter Corp.common stock for $360, 000.On May 3, 2010, Winter declared and distributed a 50% stock dividend.On September 1, 2010, Lightner sold 2, 000 shares of its investment in Winter stock for $21, 400. Required: Compute the amount of gain (loss)on the sale of this stock.

On July 1, 2010, Triangle, Inc.purchased Circle Company's five-year 12% bonds with a face value of $500, 000 for $569, 000, which included $25, 000 of accrued interest.The bonds, which mature on February 1, 2015, are to be held to maturity and pay interest on February 1 and August 1.Triangle uses the straight-line method of amortization.The amount of income that Triangle would report for the calendar year 2010 as a result of this long-term investment would be

Which type of investment in securities must always be classified as a current asset?

Under current GAAP for marketable securities, trading securities and available-for-sale securities are reported at their fair value, but held-to-maturity securities are reported at their amortized cost. Required: Explain why there is a difference in the reporting requirements for these three classifications of marketable securities.

Investments in debt securities include all of the following except

In a perfectly matched hedge of fixed-rate debt using an interest rate swap, the effect of a change in fair value of the derivative on the income statement

On July 1, 2010, Richmond Company purchased 8% bonds of Commonwealth Corporation with a par value of $400, 000 for $350, 000 to yield 10%.The bonds are to be held to maturity and pay interest semiannually on June 30 and December 31.The market value of the bonds on December 31, 2010, was $380, 000.Richmond should report the bond investment at December 31, 2010, at

The carrying value of available-for-sale debt and equity securities is

The method of accounting for long-term investments in equity securities that most closely fits the requirements of accrual accounting is the

The fair value method of accounting for investments was proposed to overcome which issues associated with the prior use of lower of cost or market?

Which of the following regarding trading securities is correct?

Discuss the three categories of investments described in the FASB's current standard for investments in marketable securities.

Investments that are typically held for short periods of time and sold by the company in the expectation of a profit on the short-term differences in price are classified as

Loans and receivables can be classified and accounted for as available-for-sale under IFRS GAAP I. yes yes II. yes no III. no yes IV. no no

When an investor currently using the fair market value method acquires significant influence over the investee at mid-year, the investor should

Barchak Corporation began operations on January 1, 2010.At December 31, 2010, Barchak appropriately had a credit balance in Allowance for Change in Value of Investments of $30.No transactions related to these investments occurred during 2011, and the cost and market values on December 31, 2011, are as follows: Investment Cost Market Value A Company \ 650 \6 80 B Company 115 110 C Company 445 420 D Company 80 100 In the December 31, 2011 adjusting entry, there will be a

Which of the following statements regarding available-for-sale equity investments is true?

The cash surrender value of the insurance policy on the corporation's president would be presented on the balance sheet as