Question 1

It is not possible to have control over another company without owning at least half of the outstanding voting shares.

Accepted Answer

A) True 
 B)False

Question 2

On January 1,2015,HJ paid $600,000 for 20,000 shares of MN's common shares,which represents a 15 percent investment in MN.HJ does not have the ability to exercise significant influence over MN.MN declared and paid a dividend of $1 a share to its stockholders during 2015.MN reported net income of $520,000 for the year ended December 31,2015.The balance in HJ's balance sheet account "Investment in MN" at December 31,2001 under the cost method,should be:

Accepted Answer

A) $560,000 
B) $600,000 
C) $638,000 
D) $678,000 
A) $560,000 
B) $600,000 
C) $638,000 
D) $678,000

Question 3

The book value of a bond purchased at a premium or discount and classified,as an investment in marketable securities must be adjusted each period for amortization of the premium or discount.

Accepted Answer

A) True 
 B)False

Question 4

Masters Inc.acquired 30% of Continental Corp.'s voting shares on January 1,2001 for $100,000.During 2001,Continental earned $40,000 and paid dividends of $25,000.Master's 30% interest in Continental gives Masters the ability to exercise significant influence over Continental's operating and financial policies.During 2002,Continental earned $50,000 and paid dividends of $15,000 on April 1 and $15,000 on October 1.On July 1,2002,Masters sold half of its shares in Continental for $66,000 cash.
Calculate the carrying amount of this investment in Mater's December 31,2001 balance sheet.

Accepted Answer

The answer of Masters Inc.acquired 30% of Continental Corp.'s voting...

Question 5

Amortized cost investments must have contractual terms that give rise to cash flows on specific dates.

Accepted Answer

A) True 
 B)False

Question 6

On January 1,2016,Snow Co.purchased 25% of Right Corp.'s common shares; no goodwill resulted from the purchase.Snow appropriately carries this investment at equity and the balance in Snow's investment account was $190,000 at December 31,2016.Right reported net income of $120,000 for the year ended December 31,2016,and paid common dividends totalling $48,000 during 2016.

Accepted Answer

Calculate how much S

Question 7

A corporation purchased as an FVTPL investment 200 shares of preferred of Y Corporation that cost $50 per share.
In the same year,the preferred shares were exchanged for 400 shares of no-par common of Z Corporation.At the date of exchange,the preferred stock was selling at $37.50 per share.Give the entry to record this direct exchange of shares.

Accepted Answer

The answer of A corporation purchased as an FVTPL investment...

Question 8

Assuming that ABC adheres to ASPE and opts to use the cost method,what effect (if any) would there be as on ABC's 2012 income as a result of this investment?

Accepted Answer

A) No effect. 
B) $6,000 of dividend income. 
C) $6,000 of investment income. 
D) $9,000 of dividend income. 
E) $30,000 of investment income. 
A) No effect. 
B) $6,000 of dividend income. 
C) $6,000 of investment income. 
D) $9,000 of dividend income. 
E) $30,000 of investment income.

Question 9

Drabble,Inc.owns 40 percent of the outstanding stock of Gilliam Company.During 2014,Drabble received a $4,000 cash dividend from Gilliam.What effect did this have on Drabble's 2014 financial statements? (Assume that Drabble has substantial influence over Gilliam )

Accepted Answer

A) Increased total assets 
B) Decreased total assets 
C) Increased income 
D) Decreased investment account 
E) Decreased income 
A) Increased total assets 
B) Decreased total assets 
C) Increased income 
D) Decreased investment account 
E) Decreased income

Question 10

All investments are recorded at fair value upon acquisition.

Accepted Answer

A) True 
 B)False

Question 11

The data below pertains to the values of various FVTPL investments held by a client company: $\begin{array}{|l|l|l|l|}
\hline\text { Stock } & \text { Shares } & \text { Cost } & \begin{array}{l}
\text { Market Value } \
(\mathbf{1 2} / \mathbf{3 1} / \mathbf{2 0 1 1})
\end{array} \
\hline\mathrm{X} & 500 & \$ 30=\$ 15,000 & \$ 24=\$ 12,000 \
\hline Y & 1,000 & 20=20,000 & 30=30,000 \
\hline Z & 750 & 24=18,000 & 30=22,500\\hline
\end{array}$ The company's entire FVTPL portfolio should be valued at which amount on December 31st,2011?

Accepted Answer

A) $50,000 
B) $53,000 
C) $64,500 
D) $67,500 
A) $50,000 
B) $53,000 
C) $64,500 
D) $67,500

Question 12

Assuming that the shares are designated an FVTOCI investment,the effect on ABC's 2014 financial statements as a result of owning the DEF shares would be:

Accepted Answer

A) Nil 
B) A $7,000 unrealized holding loss. 
C) A $9,000 unrealized holding gain. 
D) A $9,000 credit to OCI. 
A) Nil 
B) A $7,000 unrealized holding loss. 
C) A $9,000 unrealized holding gain. 
D) A $9,000 credit to OCI.

Question 13

Assuming that the shares are designated an FVTPL investment,the effect on ABC's 2014 income as a result of owning the DEF shares would be:

Accepted Answer

A) Nil 
B) A $2,000 unrealized holding loss. 
C) A $7,000 unrealized holding gain. 
D) A $9,000 unrealized holding gain. 
A) Nil 
B) A $2,000 unrealized holding loss. 
C) A $7,000 unrealized holding gain. 
D) A $9,000 unrealized holding gain.

Question 14

MNO Company purchased 10 $1,000,9 percent bonds on February 28,2012,at 105 plus $300 total accrued interest.MNO intends to sell the bonds to finance office remodelling in 2013.Interest is paid each April 30 and October 31.MNO paid $120 in broker's fees at the date of purchase.MNO's reporting year ends December 31.Calculate the amount MNO should report on its 2012 balance sheet for this investment.

Accepted Answer

The answer of MNO Company purchased 10 $1,000,9 percent bonds...

Question 15

Once an investment is designated as FVTOCI,this designation may be changed at will by management.

Accepted Answer

A) True 
 B)False

Question 16

Impairment losses on all investments are reversible under ASPE.

Accepted Answer

A) True 
 B)False

Question 17

If an investor company does not have a controlling interest in another company,it must use either the cost method or the equity method to account for that investment in equity securities.

Accepted Answer

A) True 
 B)False

Question 18

When the equity method is used by an investor to account for investments in common stock,the investment account will be increased when the investor recognizes cash dividend received from investee.

Accepted Answer

A) True 
 B)False

Question 19

WXC incurred the following costs during 2015 to purchase LXT shares: (a) 1,000 shares of LXT at $6 per share: $\begin{array}{lll}
\text {January 1 payment. }&\$2,000\
\text {March 1 payment. }&1,000\
\text {May 1 payment.}&1,000\
\text {July 1 payment. }&1,000\
\text {September 1 payment. }&1,000\
\text {(b) Interest paid. }&400\
\text { (c) Brokerage fee paid.}&600\
\text {(d) Excise tax paid. }&300\
\end{array}$ Assuming the cost method is used,WXC should record this 2015 investment at:

Accepted Answer

A) $6,000 
B) $6,600 
C) $6,900 
D) $7,300 
A) $6,000 
B) $6,600 
C) $6,900 
D) $7,300

Question 20

The balance in the Investment in DEF account immediately following the sale of the shares was:

Accepted Answer

A) $58,000. 
B) $26,500. 
C) $53,000. 
D) $55,000. 
A) $58,000. 
B) $26,500. 
C) $53,000. 
D) $55,000.

It is not possible to have control over another company without owning at least half of the outstanding voting shares.

The book value of a bond purchased at a premium or discount and classified,as an investment in marketable securities must be adjusted each period for amortization of the premium or discount.

Amortized cost investments must have contractual terms that give rise to cash flows on specific dates.

Assuming that ABC adheres to ASPE and opts to use the cost method,what effect (if any) would there be as on ABC's 2012 income as a result of this investment?

Drabble,Inc.owns 40 percent of the outstanding stock of Gilliam Company.During 2014,Drabble received a $4,000 cash dividend from Gilliam.What effect did this have on Drabble's 2014 financial statements? (Assume that Drabble has substantial influence over Gilliam )

All investments are recorded at fair value upon acquisition.

Assuming that the shares are designated an FVTOCI investment,the effect on ABC's 2014 financial statements as a result of owning the DEF shares would be:

Assuming that the shares are designated an FVTPL investment,the effect on ABC's 2014 income as a result of owning the DEF shares would be:

Once an investment is designated as FVTOCI,this designation may be changed at will by management.

Impairment losses on all investments are reversible under ASPE.

If an investor company does not have a controlling interest in another company,it must use either the cost method or the equity method to account for that investment in equity securities.

When the equity method is used by an investor to account for investments in common stock,the investment account will be increased when the investor recognizes cash dividend received from investee.

The balance in the Investment in DEF account immediately following the sale of the shares was:

The Framework for Financial Reporting

Accounting Judgements

Statements of Income and Comprehensive Income

Statements of Financial Position and Changes in Equity; Disclosure Notes

The Statement of Cash Flows

Financial Assets: Cash and Receivables

Cost-Based Inventories and Cost of Sales

Property,Plant,and Equipment; Intangibles; and Goodwill

Depreciation,Amortization,and Impairment

Filters

Exam 11: Financial Instruments: Investments in Debt and Equity Securities

It is not possible to have control over another company without owning at least half of the outstanding voting shares.

The book value of a bond purchased at a premium or discount and classified,as an investment in marketable securities must be adjusted each period for amortization of the premium or discount.

Amortized cost investments must have contractual terms that give rise to cash flows on specific dates.

Assuming that ABC adheres to ASPE and opts to use the cost method,what effect (if any) would there be as on ABC's 2012 income as a result of this investment?

Drabble,Inc.owns 40 percent of the outstanding stock of Gilliam Company.During 2014,Drabble received a $4,000 cash dividend from Gilliam.What effect did this have on Drabble's 2014 financial statements? (Assume that Drabble has substantial influence over Gilliam )

All investments are recorded at fair value upon acquisition.

Assuming that the shares are designated an FVTOCI investment,the effect on ABC's 2014 financial statements as a result of owning the DEF shares would be:

Assuming that the shares are designated an FVTPL investment,the effect on ABC's 2014 income as a result of owning the DEF shares would be:

Once an investment is designated as FVTOCI,this designation may be changed at will by management.

Impairment losses on all investments are reversible under ASPE.

If an investor company does not have a controlling interest in another company,it must use either the cost method or the equity method to account for that investment in equity securities.

When the equity method is used by an investor to account for investments in common stock,the investment account will be increased when the investor recognizes cash dividend received from investee.

The balance in the Investment in DEF account immediately following the sale of the shares was:

The Framework for Financial Reporting

Accounting Judgements

Statements of Income and Comprehensive Income

Statements of Financial Position and Changes in Equity; Disclosure Notes

The Statement of Cash Flows

Financial Assets: Cash and Receivables

Cost-Based Inventories and Cost of Sales

Property,Plant,and Equipment; Intangibles; and Goodwill

Depreciation,Amortization,and Impairment

Filters