Question 1

Which of the following is not true regarding consolidations under IFRS?

Accepted Answer

A) A parent and a subsidiary are permitted to have different accounting policies. 
B) While both IFRS and GAAP require a firm to consolidate entities it controls,IFRS defines control more broadly than does GAAP. 
C) The noncontrolling interest is classified on the balance sheet in the stockholders' equity section shown separate from the equity of the parent. 
D) On the income statement,noncontrolling interest is shown as a deduction from total entity (parent + 100% subsidiary)consolidated earnings. 
A) A parent and a subsidiary are permitted to have different accounting policies. 
B) While both IFRS and GAAP require a firm to consolidate entities it controls,IFRS defines control more broadly than does GAAP. 
C) The noncontrolling interest is classified on the balance sheet in the stockholders' equity section shown separate from the equity of the parent. 
D) On the income statement,noncontrolling interest is shown as a deduction from total entity (parent + 100% subsidiary)consolidated earnings.

Question 2

Any foreign translation gains or losses using the current rate method should be reported as other comprehensive income.

Accepted Answer

A) True 
 B)False

Question 3

Minority passive equity securities designated by the investor to be held for the long-term are

Accepted Answer

A) trading securities. 
B) available-for-sale securities. 
C) fair value securities. 
D) adjusted historical cost securities. 
A) trading securities. 
B) available-for-sale securities. 
C) fair value securities. 
D) adjusted historical cost securities.

Question 4

On January 1, 2015, Ramsey Company purchased 35% of the outstanding common shares of the Vapor Company for $70,000 when the net assets were $200,000. During 2015, Vapor Company earned $80,000 and declared a dividend of $40,000. Ramsey accounted for the investment using the equity method.
-What is the balance in the investment account as of December 31,2015?

Accepted Answer

A) $70,000 
B) $98,000 
C) $56,000 
D) $84,000 
A) $70,000 
B) $98,000 
C) $56,000 
D) $84,000

Question 5

When accounting for self-contained foreign subsidiaries,the parent company uses which one of the following methods for the translation of its financial statements into dollars?

Accepted Answer

A) Present value rate 
B) Historical rate 
C) Future value rate 
D) Current rate 
A) Present value rate 
B) Historical rate 
C) Future value rate 
D) Current rate

Question 6

An unrealized loss on trading securities results in a deferred tax asset because the loss reduces pre-tax income but has no effect on taxable income.

Accepted Answer

A) True 
 B)False

Question 7

On January 1, 2015, Como Company purchased 45% of the outstanding common shares of the Lite Company for $200,000. The net assets of Lite Company totaled $400,000. The inventory had a book value of $100,000 and a fair value of $120,000. Excess cost attributable to inventory is written off in 2015. During 2015, Lite Company earned $200,000 and declared a dividend of $40,000 for the year.
-The amount of the excess cost over book value attributable to inventory written off in 2015 is

Accepted Answer

A) $3,000. 
B) $4,500. 
C) $7,500. 
D) $9,000. 
A) $3,000. 
B) $4,500. 
C) $7,500. 
D) $9,000.

Question 8

Susqua,Inc.has held-to-maturity debt securities it purchased in 2014.At December 31,2015,Susqua,Inc.reported a $120,000 impairment loss related to these securities.During 2016,the debtor was successful in registering a new patent which improved the debtor's operating outlook.This change of events resulted in a reversal of $45,000 of the impairment loss.At December 31,2016,the fair value of the debt securities had increased by $68,000 over the impaired value previously recorded.Susqua,Inc.uses IFRS for its external reporting.How much,if any,of this reversal can Susqua,Inc.report in its income for 2016?

Accepted Answer

A) $-0- 
B) $120,000. 
C) $68,000. 
D) $45,000. 
A) $-0- 
B) $120,000. 
C) $68,000. 
D) $45,000.

Question 9

When accounting for a non-free-standing foreign subsidiary,translation exchange rates are accounted for using the temporal method which involves reporting all revenue accounts at the

Accepted Answer

A) current rate. 
B) historical rate. 
C) rate at time of transaction. 
D) present value rate. 
A) current rate. 
B) historical rate. 
C) rate at time of transaction. 
D) present value rate.

Question 10

Consolidation adjustments that are made to prepare consolidated financial statements of the parent and subsidiary are required in order to

Accepted Answer

A) obey the state laws. 
B) avoid double counting. 
C) follow tax laws. 
D) eliminate transactions with third parties. 
A) obey the state laws. 
B) avoid double counting. 
C) follow tax laws. 
D) eliminate transactions with third parties.

Question 11

Perry Investments bought 2,000 shares of Able, Inc. common stock on January 1, 2015, for $20,000 and 2,000 shares of Baker, Inc. common stock on July 1, 2015 for $24,000. Baker paid $2,400 of previously declared dividends to Perry on December 31, 2015. At the end of 2015, the market value of the Able stock was $18,000 and the market value of the Baker stock was $28,000. The stocks were purchased for short-term speculation. Perry owns 10% of each company.
-Perry should record the year-end adjustment as

Accepted Answer

A)    
B)    
C)    
D)    
A)    
B)    
C)    
D)

Question 12

The investment account is adjusted for the investor's share of the reported income of the investee when the investor uses the equity method to account for the stock investment.

Accepted Answer

A) True 
 B)False

Question 13

Under IFRS,firms can elect to measure the noncontrolling interest at the book value of the identifiable net assets at the acquisition date,which excludes goodwill from the measurement of the noncontrolling interest.

Accepted Answer

A) True 
 B)False

Question 14

Almond Industries owns an investment that experienced a decline during 2015 that has been judged to be "other than temporary." The investment is held in Almond's trading portfolio.It was purchased in March 2014 at a cost of $460,000.At the end of 2014,the fair value of the investment was $520,000.At the end of 2015,the fair value of the investment is $410,000.What amount of loss will Almond Industries report on its income statement for the year ending December 31,2015 related to this investment?

Accepted Answer

A) an unrealized loss of $110,000. 
B) an unrealized loss of $50,000. 
C) an unrealized loss of $60,000. 
D) a realized loss of $50,000. 
A) an unrealized loss of $110,000. 
B) an unrealized loss of $50,000. 
C) an unrealized loss of $60,000. 
D) a realized loss of $50,000.

Question 15

Central Investments bought 4,000 shares of Benet Company common stock on January 1, 2015, for $20,000, and 4,000 shares of Roy Company common on July 1, 2015, for $24,000. Benet declared dividends on December 31, 2015 of $3,000. At the end of 2015, the market value of Roy was $30,000 and the market value of Benet was $28,000. At the end of 2016, the market value of Roy was $32,000 and the market value of Benet was $24,000. The stocks were considered to be held for their long-term investment potential. Central owns 8% of Benet Company and 12% of Roy Company.
-How much income was reported on the 2015 income statement?

Accepted Answer

A) $240 
B) $14,240 
C) $14,000 
D) $0 
A) $240 
B) $14,240 
C) $14,000 
D) $0

Question 16

When consolidating foreign subsidiaries,the foreign subsidiary's financial numbers must be translated into the parents' currency unit.Under GAAP,if the foreign subsidiary is merely an extension of the parent,the current rate method is used.

Accepted Answer

A) True 
 B)False

Question 17

An investment of 50% or more of a company's voting shares will require the investor to prepare consolidated financial statements.

Accepted Answer

A) True 
 B)False

Question 18

Once a company decides to use the fair value option to account for an equity method investment,the decision is irrevocable.

Accepted Answer

A) True 
 B)False

Question 19

Under IFRS,SPEs are consolidated when evidence indicates that the reporting company "controls" the SPE.Control is presumed if which of the following conditions exist?
I.The reporting entity performs activities on behalf of the SPE.
II.The SPE has decision-making powers over the activities of the reporting entity.
III.The reporting company has the right to obtain the majority of the benefits of the SPE activities.
IV.The reporting company retains the majority of the residual or ownership risks related to the SPE or its assets.

Accepted Answer

A) I and II only. 
B) I,II,and III only. 
C) III and IV only. 
D) I,II,III,and IV. 
A) I and II only. 
B) I,II,and III only. 
C) III and IV only. 
D) I,II,III,and IV.

Question 20

IFRS reports all impairment losses for AFS-debt securities in income regardless of reason.

Accepted Answer

A) True 
 B)False

Which of the following is not true regarding consolidations under IFRS?

Any foreign translation gains or losses using the current rate method should be reported as other comprehensive income.

Minority passive equity securities designated by the investor to be held for the long-term are

When accounting for self-contained foreign subsidiaries,the parent company uses which one of the following methods for the translation of its financial statements into dollars?

An unrealized loss on trading securities results in a deferred tax asset because the loss reduces pre-tax income but has no effect on taxable income.

When accounting for a non-free-standing foreign subsidiary,translation exchange rates are accounted for using the temporal method which involves reporting all revenue accounts at the

Consolidation adjustments that are made to prepare consolidated financial statements of the parent and subsidiary are required in order to

The investment account is adjusted for the investor's share of the reported income of the investee when the investor uses the equity method to account for the stock investment.

Under IFRS,firms can elect to measure the noncontrolling interest at the book value of the identifiable net assets at the acquisition date,which excludes goodwill from the measurement of the noncontrolling interest.

When consolidating foreign subsidiaries,the foreign subsidiary's financial numbers must be translated into the parents' currency unit.Under GAAP,if the foreign subsidiary is merely an extension of the parent,the current rate method is used.

An investment of 50% or more of a company's voting shares will require the investor to prepare consolidated financial statements.

Once a company decides to use the fair value option to account for an equity method investment,the decision is irrevocable.

IFRS reports all impairment losses for AFS-debt securities in income regardless of reason.

The Economic and Institutional Setting for Financial Reporting

Accrual Accounting and Income Determination

Additional Topics in Income Determination

Structure of the Balance Sheet and Statement of Cash Flows

Essentials of Financial Statement Analysis

The Role of Financial Information in Valuation and Credit Risk Assessment

The Role of Financial Information in Contracting

Receivables

Inventories

Long-Lived Assets

Financial Instruments As Liabilities

Financial Reporting for Leases

Income Tax Reporting

Pensions and Postretirement Benefits

Financial Reporting for Owners Equity

Statement of Cash Flows

Filters

Exam 16: Intercorporate Equity Investments

Which of the following is not true regarding consolidations under IFRS?

Any foreign translation gains or losses using the current rate method should be reported as other comprehensive income.

Minority passive equity securities designated by the investor to be held for the long-term are

When accounting for self-contained foreign subsidiaries,the parent company uses which one of the following methods for the translation of its financial statements into dollars?

An unrealized loss on trading securities results in a deferred tax asset because the loss reduces pre-tax income but has no effect on taxable income.

When accounting for a non-free-standing foreign subsidiary,translation exchange rates are accounted for using the temporal method which involves reporting all revenue accounts at the

Consolidation adjustments that are made to prepare consolidated financial statements of the parent and subsidiary are required in order to

The investment account is adjusted for the investor's share of the reported income of the investee when the investor uses the equity method to account for the stock investment.

Under IFRS,firms can elect to measure the noncontrolling interest at the book value of the identifiable net assets at the acquisition date,which excludes goodwill from the measurement of the noncontrolling interest.

When consolidating foreign subsidiaries,the foreign subsidiary's financial numbers must be translated into the parents' currency unit.Under GAAP,if the foreign subsidiary is merely an extension of the parent,the current rate method is used.

An investment of 50% or more of a company's voting shares will require the investor to prepare consolidated financial statements.

Once a company decides to use the fair value option to account for an equity method investment,the decision is irrevocable.

IFRS reports all impairment losses for AFS-debt securities in income regardless of reason.

The Economic and Institutional Setting for Financial Reporting

Accrual Accounting and Income Determination

Additional Topics in Income Determination

Structure of the Balance Sheet and Statement of Cash Flows

Essentials of Financial Statement Analysis

The Role of Financial Information in Valuation and Credit Risk Assessment

The Role of Financial Information in Contracting

Receivables

Inventories

Long-Lived Assets

Financial Instruments As Liabilities

Financial Reporting for Leases

Income Tax Reporting

Pensions and Postretirement Benefits

Financial Reporting for Owners Equity

Statement of Cash Flows

Filters