Exam 17: Investments

Debt securities acquired by a corporation which are accounted for by recognizing unrealized holding gains or losses and are included as other comprehensive income and as a separate component of stockholders' equity are

Companies do not report changes in the fair value of available-for-sale debt securities as income until the security is sold.

Use the following information for questions 99 through 102. The summarized balance sheets of Goebel Company and Dobbs Company as of December 31, 2014 are as follows: -If Goebel Company acquired a 20% interest in Dobbs Company on December 31, 2014 for $145,000 and during 2015 Dobbs Company had net income of $75,000 and paid a cash dividend of $30,000, applying the fair value method would give a debit balance in the Equity Investments (Dobbs) account at the end of 2015 of

Under U.S. GAAP, which of the following models may be used to determine if an investment is consolidated?

During 2012, Hauke Company purchased 4,000, $1,000, 9% bonds. The carrying value of the bonds at December 31, 2014 was $3,920,000. The bonds mature on March 1, 2019, and pay interest on March 1 and September 1. Hauke sells 2,000 bonds on September 1, 2015, for $1,976,000, after the interest has been received. Hauke uses straight-line amortization. The gain on the sale is

Significant influence over an investee may be indicated by material intercompany trans-actions and interchange of managerial personnel.

Unrealized holding gains and losses are recognized in net income for available-for-sale debt securities.

Equity securities acquired by a corporation which are accounted for by recognizing unrealized holding gains or losses as other comprehensive income and as a separate component of stockholders' equity are

Use the following information for questions 93 and 94. On its December 31, 2014 balance sheet, Calhoun Company appropriately reported a $10,000 debit balance in its Fair Value Adjustment (available-for-sale) account. There was no change during 2015 in the composition of Calhoun's portfolio of equity investments held as available-for-sale securities. The following information pertains to that portfolio: -The amount of unrealized loss to appear as a component of comprehensive income for the year ending December 31, 2015 is

Dublin Company holds a 30% stake in Club Company which was purchased in 2015 at a cost of $3,000,000. After applying the equity method, the Investment in Club Company account has a balance of $3,040,000. At December 31, 2015 the fair value of the investment is $3,120,000. Which of the following values is acceptable for Dublin to use in its balance sheet at December 31, 2015? I.$3,000,000 II.$3,040,000 III.$3,120,000

Kramer Company's trading securities portfolio which is appropriately included in current assets is as follows: Ignoring income taxes, what amount should be reported as a charge against income in Kramer's 2014 income statement if 2014 is Kramer's first year of operation?

On October 1, 2014, Wenn Company purchased 700 of the $1,000 face value, 8% bonds of Loy, Inc., for $819,000, including accrued interest of $14,000. The bonds, which mature on January 1, 2021, pay interest semiannually on January 1 and July 1. Wenn used the straight-line method of amortization and appropriately recorded the bonds as available-for-sale. On Wenn's December 31, 2015 balance sheet, the carrying value of the bonds is

Use the following information for questions 105 and 106. Brown Corporation earns $480,000 and pays cash dividends of $160,000 during 2014. Dexter Corporation owns 3,000 of the 10,000 outstanding shares of Brown. -What amount should Dexter show in the investment account at December 31, 2014 if the beginning of the year balance in the account was $640,000?

Use the following information for questions 103 and 104. Blanco Company purchased 200 of the 1,000 outstanding shares of Darby Company's common stock for $450,000 on January 2, 2015. During 2015, Darby Company declared dividends of $75,000 and reported earnings for the year of $300,000. -If Blanco Company uses the equity method of accounting for its investment in Darby Company, its Equity Investment (Darby) account at December 31, 2015 should be

Which of the following is correct about the effective-interest method of amortization?

All of the following are requirements for disclosures related to financial instruments except

On October 1, 2014, Menke Company purchased to hold to maturity, 400, $1,000, 9% bonds for $416,000. An additional $12,000 was paid for accrued interest. Interest is paid semiannually on December 1 and June 1 and the bonds mature on December 1, 2018. Menke uses straight-line amortization. Ignoring income taxes, the amount reported in Menke's 2014 income statement from this investment should be

Use the following information for questions 97 and 98. Harrison Company owns 20,000 of the 50,000 outstanding shares of Taylor, Inc. common stock. During 2015, Taylor earns $1,000,000 and pays cash dividends of $800,000. -Harrison should report investment revenue for 2015 of

IFRS requires that Company A consolidate Company B when it controls and owns at least 50% of Company B.

Judd, Inc., owns 35% of Cosby Corporation. During the calendar year 2014, Cosby had net earnings of $300,000 and paid dividends of $30,000. Judd mistakenly recorded these transactions using the fair value method rather than the equity method of accounting. What effect would this have on the investment account, net income, and retained earnings, respectively?