Question 1

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

Accepted Answer

A) True 
 B)False  True

Question 2

Capilano Corporation has just decided to purchase 30% of the outstandingcommon shares of its major supplier Langkwat Corporation. Give two reasons why Capilano Corporation may have made this investment. The reasons given cannot include:▪ To earn greater dividend income on available excess cash than can be earned b leaving the cash in a typical bank account.▪ To earn a gain over the original purchase price on the eventual sale of the purchased shares.

Accepted Answer

Any two of the following reasons:
▪ To participate in new markets or new technologies.
▪ To build a favourable business relationship.
▪ To achieve a non-controlling interest over the investee by acquiring
enough shares to be influential to the investee's operating, financing, and investing decisions.

Question 3

After recording the initial purchase of non-strategic investments, an entity mustcontinue to measure the investment at fair value; subsequent profits or losses arising are recognized in profit.

Accepted Answer

A) True 
 B)False  True

Question 4

A business combination occurs when an investor with a long-term share investment that represents more than 50% of the investee's voting shares has control over the investee.

Accepted Answer

A) True 
 B)False

Question 5

The controlling investor is called the:

Accepted Answer

A)  Senior company. 
B)  Parent company. 
C)  Investee company. 
D)  Subsidiary company. 
E)  Owning company. 
A)  Senior company. 
B)  Parent company. 
C)  Investee company. 
D)  Subsidiary company. 
E)  Owning company.

Question 6

When you purchase a debt investment such as a bond of another corporation, this type of investment represents an "equity security."

Accepted Answer

A) True 
 B)False

Question 7

Under IFRS, non-strategic debt investments are initially recorded using:

Accepted Answer

A)  Consolidation method. 
B)  Amortized fair value method. 
C)  Fair value through profit and loss method. 
D)  Amortized cost method. 
E)  Both C & D are correct. 
A)  Consolidation method. 
B)  Amortized fair value method. 
C)  Fair value through profit and loss method. 
D)  Amortized cost method. 
E)  Both C & D are correct.

Question 8

Investments in associates are:

Accepted Answer

A)  Recorded at historical cost when purchased and reported at historical cost, adjusted for the amortized amount of any difference between cost and maturity value. 
B)  Reported at fair value. 
C)  Reported at historical cost, adjusted for the amortized amount of any difference between cost and maturity value. 
D)  Recorded at historical cost when purchased and reported at fair value. 
E)  Recorded at historical cost when purchased and accounted for using the equity method. 
A)  Recorded at historical cost when purchased and reported at historical cost, adjusted for the amortized amount of any difference between cost and maturity value. 
B)  Reported at fair value. 
C)  Reported at historical cost, adjusted for the amortized amount of any difference between cost and maturity value. 
D)  Recorded at historical cost when purchased and reported at fair value. 
E)  Recorded at historical cost when purchased and accounted for using the equity method.

Question 9

The method used to account for non-strategic investments is the:

Accepted Answer

A)  Equity method. 
B)  Effective interest method. 
C)  Fair value method. 
D)  Cost method. 
E)  All of these answers are correct. 
A)  Equity method. 
B)  Effective interest method. 
C)  Fair value method. 
D)  Cost method. 
E)  All of these answers are correct.

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

If a company has cash available for longer term investments, both debt and equity investments may be considered.

Accepted Answer

A) True 
 B)False

Question 12

Investments in debt securities are always current assets.

Accepted Answer

A) True 
 B)False

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

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

Accepted Answer

A)  Non-strategic investments. 
B)  Investments in associates. 
C)  Joint arrangements. 
D)  Business combination. 
E)  Strategic investments. 
A)  Non-strategic investments. 
B)  Investments in associates. 
C)  Joint arrangements. 
D)  Business combination. 
E)  Strategic investments.

Question 15

Joint venture arrangements are ones in which two or more parties jointly control the resulting economic activity.

Accepted Answer

A) True 
 B)False

Question 16

The balance in the "Investment in Associate - Rance Ltd" account on Ildiko's balance sheet at December 31, 2017 is:

Accepted Answer

A)  $60,000 
B)  $61,750 
C)  $103,750 
D)  $64,750 
E)  None of the above 
A)  $60,000 
B)  $61,750 
C)  $103,750 
D)  $64,750 
E)  None of the above

Question 17

Significant influence investments:

Accepted Answer

A)  Recognize a proportionate share of an investee's profit as earnings. 
B)  May be classified as either current or long-term investments. 
C)  Are held-for-trading investments. 
D)  Are accounted for using the fair value method. 
E)  May earn dividends that are reported in the income statement. 
A)  Recognize a proportionate share of an investee's profit as earnings. 
B)  May be classified as either current or long-term investments. 
C)  Are held-for-trading investments. 
D)  Are accounted for using the fair value method. 
E)  May earn dividends that are reported in the income statement.

Question 18

A joint arrangement requires the use of consolidation to account for the investment in the joint operation.

Accepted Answer

A) True 
 B)False

Question 19

Consolidated financial statements:

Accepted Answer

A)  Show the results of operations, cash flows, and the financial position of the parent company only. 
B)  Show the results of operations, cash flows, and the financial position of all companies under a parent company's control and include the investment account on the balance sheet. 
C)  Show the results of operations, cash flows, and the financial position of all companies under a parent company's control. 
D)  Include the investment account on the balance sheet. 
E)  Show the results of operations, cash flows, and the financial position of the subsidiary only. 
A)  Show the results of operations, cash flows, and the financial position of the parent company only. 
B)  Show the results of operations, cash flows, and the financial position of all companies under a parent company's control and include the investment account on the balance sheet. 
C)  Show the results of operations, cash flows, and the financial position of all companies under a parent company's control. 
D)  Include the investment account on the balance sheet. 
E)  Show the results of operations, cash flows, and the financial position of the subsidiary only.

Question 20

A controlling influence over the investee is based on the investor owning voting shares exceeding:

Accepted Answer

A)  50%. 
B)  30%. 
C)  20%. 
D)  10%. 
E)  40%. 
A)  50%. 
B)  30%. 
C)  20%. 
D)  10%. 
E)  40%.

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

After recording the initial purchase of non-strategic investments, an entity mustcontinue to measure the investment at fair value; subsequent profits or losses arising are recognized in profit.

A business combination occurs when an investor with a long-term share investment that represents more than 50% of the investee's voting shares has control over the investee.

The controlling investor is called the:

When you purchase a debt investment such as a bond of another corporation, this type of investment represents an "equity security."

Under IFRS, non-strategic debt investments are initially recorded using:

Investments in associates are:

The method used to account for non-strategic investments is the:

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

If a company has cash available for longer term investments, both debt and equity investments may be considered.

Investments in debt securities are always current assets.

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

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

Joint venture arrangements are ones in which two or more parties jointly control the resulting economic activity.

The balance in the "Investment in Associate - Rance Ltd" account on Ildiko's balance sheet at December 31, 2017 is:

Significant influence investments:

A joint arrangement requires the use of consolidation to account for the investment in the joint operation.

Consolidated financial statements:

A controlling influence over the investee is based on the investor owning voting shares exceeding:

Property, Plant and Equipment and Intangibles

Current Liabilities

Partnerships

Organization and Operation of Corporations

Corporate Reporting: Profit, Earnings Per Share, and Retained Earnings

Bonds and Long-Term Notes Payable

Reporting and Analyzing Cash Flows

Analyzing Financial Statements

Filters

Exam 15: Accounting for Debt and Share Investments

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

After recording the initial purchase of non-strategic investments, an entity mustcontinue to measure the investment at fair value; subsequent profits or losses arising are recognized in profit.

A business combination occurs when an investor with a long-term share investment that represents more than 50% of the investee's voting shares has control over the investee.

The controlling investor is called the:

When you purchase a debt investment such as a bond of another corporation, this type of investment represents an "equity security."

Under IFRS, non-strategic debt investments are initially recorded using:

Investments in associates are:

The method used to account for non-strategic investments is the:

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

If a company has cash available for longer term investments, both debt and equity investments may be considered.

Investments in debt securities are always current assets.

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

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

Joint venture arrangements are ones in which two or more parties jointly control the resulting economic activity.

The balance in the "Investment in Associate - Rance Ltd" account on Ildiko's balance sheet at December 31, 2017 is:

Significant influence investments:

A joint arrangement requires the use of consolidation to account for the investment in the joint operation.

Consolidated financial statements:

A controlling influence over the investee is based on the investor owning voting shares exceeding:

Property, Plant and Equipment and Intangibles

Current Liabilities

Partnerships

Organization and Operation of Corporations

Corporate Reporting: Profit, Earnings Per Share, and Retained Earnings

Bonds and Long-Term Notes Payable

Reporting and Analyzing Cash Flows

Analyzing Financial Statements

Filters