Exam 7: Accounting for Debt and Share Investments

If one company owns more than 20% of the shares of another company and the shares are being held as a long-term investment,which method would normally be used to account for this investment?

"Share investment" and "equity security" are interchangeable terms.

Consolidated financial statements show the financial position,results of operations,and cash flows of all companies under the parent's control.

After initial recognition,using ASPE,an entity should measure debt securities at

Investments in associates are

The main feature of a non-strategic investment is that the investor's intent is to generate profit primarily through short-term changes in fair value.

IFRS requires the fair value through profit and loss method for

Investments in which an investor cannot significantly influence or control the operations of the investee company are called

Non-strategic investments are usually held as an investment of cash for use in current operations.

On January 4,Year 1,Larsen Corp purchased 10,000 shares of Warner Corp for $119,000 plus a broker's fee of $2,000.Warner Corp has 50,000 common shares outstanding and it is presumed the Larsen Corp will have a significant influence over Warner Corp.During Year 1 and Year 2,Warner Corp declared and paid cash dividends of $0.85 per share.Warner Corp's profit was $72,000 and $67,000 for Year 1 and year 2,respectively.The January 12,Year 3 entry to record the sale of 5,000 shares of Warner Corp for $65,000 should be

As a significant influence investment,Transctal held 1,500 Paylolly corp.common shares with a carrying value of $35,275.It sold the shares on December 13 for $34,387.Prepare the journal entry to record the sale.

Non-strategic debt investments are accounted for using

The controlling investor is called the

Non-strategic debt investments are initially recorded using either the fair value through profit or loss method or amortized cost method.

On January 1,Year 1,Sumace Corporation purchased 5,500 shares of Zotware Corp.as a long-term investment for a total of $208,220.The 5,500 shares represented 40% of the outstanding shares of Zotware.The following transactions occurred in the remainder of year 1. Feb.1 Sold 2,000 shares of Zotware for $31.50 per share. Oct.1 Zotware declared an $0.80 per share cash dividend to shareholders of record on October 15,payable November 1. Nov.1 Received Zotware cash dividend. Dec 31 At the end of Year 1,Zotware reported a profit of $66,000 for the year Required: Record the transactions for Year 1.

Non-strategic investments usually

Investments in associates are classified as

On January 1,2015,Parris Corporation purchased 75% of Samitz Corporation for $100,000.On November 17,2015,Samitz Corporation declared total dividends of $12,000.At year-end,Samitz Corporation reported profit of $60,000.The balance in the Parris Corporation's Investment in Samitz Corporation at December 31,2015 should be

Investments in non-strategic equity investments

The distinguishing feature of debt investments held for the long-term is that they are held to maturity.