Question 1

The method of accounting for an investment under the fair value under profit or loss is irrevocable after initial designation.

Accepted Answer

A) True 
 B)False

Question 2

Long-term bonds are examples of non-strategic investments.

Accepted Answer

A) True 
 B)False

Question 3

Non-strategic investments are of two types: debt and share investments.

Accepted Answer

A) True 
 B)False

Question 4

On January 1,X Corporation purchased 80% of Y Corporation for $250,000.On May 20,Y Corporation declared total dividends of $30,000.At year-end Y Corporation reported profit of $150,000.The balance in X Corporation's Investment in Y Corporation account at December 31 should be

Accepted Answer

A) $370,000 
B) $346,000 
C) $250,000 
D) $226,000 
E) $220,000 
A) $370,000 
B) $346,000 
C) $250,000 
D) $226,000 
E) $220,000

Question 5

Non-strategic equity investments are accounted for using the

Accepted Answer

A) Cost method 
B) Equity method 
C) Consolidation method 
D) Amortized cost method 
E) Fair value method 
A) Cost method 
B) Equity method 
C) Consolidation method 
D) Amortized cost method 
E) Fair value method

Question 6

At December 31,Synthetics held Unoteq Corp.bonds with a cost of $180,000 and a fair value of $142,955.As well,they held 1,500 Interatics Corp.common shares with a cost of $50,000 and a fair value of $42,955.Both of these investments were classified as short-term investments.Prepare the journal entry to record the adjustment required to reflect the fair value of the investments as of December 31.
 $\begin{array}{|l|r|r|r|}
\hline & \text { Cost } & \text { Fair Value } & \text { Difference } \
\hline \text { Unoteq } & \$ 180,000 & \$ 142,955 & 37,045 \
\hline \text { Interatics } & 55,000 & \$ 42,225 & (12,775) \
\hline \text { Totals } & \$ 235,000 & \$ 185,180 & \$ 24,270 \
\hline
\end{array}$

Accepted Answer

The answer of At December 31,Synthetics held Unoteq Corp.bonds with...

Question 7

On December 31,as a short-term investment,Music City purchased 300 Radio Land Corporation common shares at $50 per share plus a $50 commission.The amount recorded as a debit to Short-term Investments- Radio Land would be

Accepted Answer

A) $15,050 
B) $15,000 
C) $50 
D) No transaction need be recorded 
E) $5,000 
A) $15,050 
B) $15,000 
C) $50 
D) No transaction need be recorded 
E) $5,000

Question 8

When a corporation purchases the shares or bonds of other companies,it has made an intercorporate investment.

Accepted Answer

A) True 
 B)False

Question 9

For non-strategic debt investments,the fair value through profit and loss method allows the inclusion of any transaction costs in addition to the purchase price.

Accepted Answer

A) True 
 B)False

Question 10

Prepare general journal entries to record the following transactions for The Elite Corp in its first year of operations:
(a)On May 4,as a short term investment purchased 700 shares of Value Corp.for $70/share,paying a $500 brokerage fee.
(b)On July 1,received $2.00 per share cash dividend on the Value Corp.shares.
(c)On September 15,sold 500 Value Corp.shares for $120 per share,incurring a $500 brokerage fee.
(d)The December 31 fair value of the company's short-term investment in Value Corp revealed a $2,000 unrealized gain.

Accepted Answer

The answer of Prepare general journal entries to record the...

Question 11

Under IFRS,investments in associates are accounted for using the fair value through profit or loss method.

Accepted Answer

A) True 
 B)False

Question 12

Non-strategic investments can result in gains or losses for a company.

Accepted Answer

A) True 
 B)False

Question 13

Music City paid $37,800 plus a broker's fee of $525 to acquire 8% Airport Corp bonds with a $40,000 maturity value.Music City intends to hold the bonds to maturity.The journal entry to record acquisition of the bonds includes a debit to Long-Term Investment in Airport Bonds for

Accepted Answer

A) $37,800 
B) $38,325 
C) $40,000 
D) $40,525 
E) $41,525 
A) $37,800 
B) $38,325 
C) $40,000 
D) $40,525 
E) $41,525

Question 14

Non-strategic equity investments securities are equity securities that the company has the intent and ability to hold until maturity.

Accepted Answer

A) True 
 B)False

Question 15

Investors originally record non-strategic investments using the cost method.

Accepted Answer

A) True 
 B)False

Question 16

At December 31,held Sygmia Corp bonds with a cost of $180,000 and a fair value of $156,223.As well,they held 1,400 Scribbler common shares with a cost of $90,000 and a fair value of $94,550.Both of these investments were classified as short-term investments.Prepare the journal entry to record the adjustment required to reflect the fair value of the investments at December 31.
 $\begin{array}{|l|r|r|r|} 
\hline& \text { Cost } & \text { Fair Value } & \text { Difference } \
\hline \text { Sygmia } & \$ 180,000 & \$ 156,223 & (23,777) \
\hline \text { Scribbler } & 90,000 & 94,550 & 4,550 \
\hline \text { Totals } & \$ 270,000 & \$ 250,773 & (19,227) \
\hline
\end{array}$

Accepted Answer

The answer of At December 31,held Sygmia Corp bonds with...

Question 17

On December 31,Cast Corporation had the following non-strategic short-term equity investments.Prepare the appropriate adjusting entry.

Accepted Answer

The answer of On December 31,Cast Corporation had the following...

Question 18

On January 1,2020,Punk Ltd purchased 10% of the outstanding 1,000,000 common shares of Sunk for $200,000.Punk considers this investment to be a non-strategic investment.At the December 31,2020 year end,the fair value of this investment was $208,000.Sunk's profit in 2020 was $100,000.Sunk paid a dividend of $.60 per common share.On January 1,2021,Punk decided to buy an additional 25% of Sunk's 1,000,000 common shares for $500,000.This second purchase allowed Punk to significantly influence Sunk.In 2021,Sunk's profit was $140,000.Sunk paid dividends of $.50 per common share in 2021.Required: Make journal entries for 2020 and 2021 on Punk's books with respect to the Investment in Sunk.

Accepted Answer

For 2020,the investment is con

Question 19

Dax purchased 200 of the 500 outstanding Minisoft Corporation common shares at $55 per share plus a $100 brokerage fee as an investment in an associate.If Minisoft has profit for the year of $50,000 and pays a dividend of $5/share,what information should Dax report on its income statement relating to the investment?

Accepted Answer

A) $20,000 for earnings from the investment in Minisoft 
B) $50,000 in investment revenue 
C) $1,000 dividend income 
D) $20,000 for earnings from the investment in Minisoft and dividend income of $1,000 
E) $50,000 in investment revenue and dividend revenue of $1,000 
A) $20,000 for earnings from the investment in Minisoft 
B) $50,000 in investment revenue 
C) $1,000 dividend income 
D) $20,000 for earnings from the investment in Minisoft and dividend income of $1,000 
E) $50,000 in investment revenue and dividend revenue of $1,000

Question 20

Changes in investment values are recognized with a credit to short-term investments and a debit to unrealized gains.

Accepted Answer

A) True 
 B)False

The method of accounting for an investment under the fair value under profit or loss is irrevocable after initial designation.

Long-term bonds are examples of non-strategic investments.

Non-strategic investments are of two types: debt and share investments.

On January 1,X Corporation purchased 80% of Y Corporation for $250,000.On May 20,Y Corporation declared total dividends of $30,000.At year-end Y Corporation reported profit of $150,000.The balance in X Corporation's Investment in Y Corporation account at December 31 should be

Non-strategic equity investments are accounted for using the

On December 31,as a short-term investment,Music City purchased 300 Radio Land Corporation common shares at $50 per share plus a $50 commission.The amount recorded as a debit to Short-term Investments- Radio Land would be

When a corporation purchases the shares or bonds of other companies,it has made an intercorporate investment.

For non-strategic debt investments,the fair value through profit and loss method allows the inclusion of any transaction costs in addition to the purchase price.

Under IFRS,investments in associates are accounted for using the fair value through profit or loss method.

Non-strategic investments can result in gains or losses for a company.

Music City paid $37,800 plus a broker's fee of $525 to acquire 8% Airport Corp bonds with a $40,000 maturity value.Music City intends to hold the bonds to maturity.The journal entry to record acquisition of the bonds includes a debit to Long-Term Investment in Airport Bonds for

Non-strategic equity investments securities are equity securities that the company has the intent and ability to hold until maturity.

Investors originally record non-strategic investments using the cost method.

On December 31,Cast Corporation had the following non-strategic short-term equity investments.Prepare the appropriate adjusting entry.

Changes in investment values are recognized with a credit to short-term investments and a debit to unrealized gains.

Property, plant and Equipment Intangibles

Current Liabilities

Partnerships

Organization and Operation of Corporations

Corporate Reporting: Income, earnings Per Share, and Retained Earnings

Bonds and Long-Term Notes Payable

Reporting and Analyzing Cash Flows

Analyzing Financial Statements

Filters

Exam 7: Accounting for Debt and Share Investments

The method of accounting for an investment under the fair value under profit or loss is irrevocable after initial designation.

Long-term bonds are examples of non-strategic investments.

Non-strategic investments are of two types: debt and share investments.

On January 1,X Corporation purchased 80% of Y Corporation for $250,000.On May 20,Y Corporation declared total dividends of $30,000.At year-end Y Corporation reported profit of $150,000.The balance in X Corporation's Investment in Y Corporation account at December 31 should be

Non-strategic equity investments are accounted for using the

On December 31,as a short-term investment,Music City purchased 300 Radio Land Corporation common shares at $50 per share plus a $50 commission.The amount recorded as a debit to Short-term Investments- Radio Land would be

When a corporation purchases the shares or bonds of other companies,it has made an intercorporate investment.

For non-strategic debt investments,the fair value through profit and loss method allows the inclusion of any transaction costs in addition to the purchase price.

Under IFRS,investments in associates are accounted for using the fair value through profit or loss method.

Non-strategic investments can result in gains or losses for a company.

Music City paid $37,800 plus a broker's fee of $525 to acquire 8% Airport Corp bonds with a $40,000 maturity value.Music City intends to hold the bonds to maturity.The journal entry to record acquisition of the bonds includes a debit to Long-Term Investment in Airport Bonds for

Non-strategic equity investments securities are equity securities that the company has the intent and ability to hold until maturity.

Investors originally record non-strategic investments using the cost method.

On December 31,Cast Corporation had the following non-strategic short-term equity investments.Prepare the appropriate adjusting entry.

Changes in investment values are recognized with a credit to short-term investments and a debit to unrealized gains.

Property, plant and Equipment Intangibles

Current Liabilities

Partnerships

Organization and Operation of Corporations

Corporate Reporting: Income, earnings Per Share, and Retained Earnings

Bonds and Long-Term Notes Payable

Reporting and Analyzing Cash Flows

Analyzing Financial Statements

Filters