Question 1

Which of the following is the first step in determining if one company controls another such that a parent/subsidiary relationship exists?

Accepted Answer

A) Determine the relevant activities of the investee. 
B) Determine how decisions are made regarding the relevant activities. 
C) Determine whether the investor has the current ability to direct those relevant activities. 
D) Determine the purpose and design of the investee. 
A) Determine the relevant activities of the investee. 
B) Determine how decisions are made regarding the relevant activities. 
C) Determine whether the investor has the current ability to direct those relevant activities. 
D) Determine the purpose and design of the investee.

Question 2

An associate is an entity, including an unincorporated company such as a partnership, over which the investor has significant influence and that is also a subsidiary or a joint venture.

Accepted Answer

A) True 
 B)False

Question 3

How do joint ventures differ from private corporations?

Accepted Answer

A) A joint venture does not have a board of directors. 
B) There can only be two parties in a joint venture. 
C) Venturers cannot make unilateral decisions. 
D) The venturers must share the risks and profits of the joint venture equally. 
A) A joint venture does not have a board of directors. 
B) There can only be two parties in a joint venture. 
C) Venturers cannot make unilateral decisions. 
D) The venturers must share the risks and profits of the joint venture equally.

Question 4

Which of the following statements regarding non-strategic investments in equity is FALSE?

Accepted Answer

A) There are possible exceptions to FVTPL. 
B) At the day of acquisition when the investment in shares is originally recorded, the company has the option of making an "irrevocable election" where it decides that subsequent changes to fair value will be put in other comprehensive income rather than through income. 
C) The "irrevocable election" can be made for investments that are held for trading. 
D) Items that are originally placed in Other Comprehensive Income cannot be recycled through profit and loss. 
A) There are possible exceptions to FVTPL. 
B) At the day of acquisition when the investment in shares is originally recorded, the company has the option of making an "irrevocable election" where it decides that subsequent changes to fair value will be put in other comprehensive income rather than through income. 
C) The "irrevocable election" can be made for investments that are held for trading. 
D) Items that are originally placed in Other Comprehensive Income cannot be recycled through profit and loss.

Question 5

Walton Ltd. has the following shareholders: Sifter Co. - 60%
Fallwell - 30%
Garney Ltd. - 10%
Fallwell does not conduct any business with Walton, nor has it been able to secure a seat on the Board of Directors. Which of the following statements is TRUE?

Accepted Answer

A) Falwell has significant influence over Walton. 
B) Fallwell should treat Walton as a non-strategic investment. 
C) Fallwell should consider Walton to be a structured entity. 
D) Fallwell should consider Walton to be an associated company. 
A) Falwell has significant influence over Walton. 
B) Fallwell should treat Walton as a non-strategic investment. 
C) Fallwell should consider Walton to be a structured entity. 
D) Fallwell should consider Walton to be an associated company.

Question 6

A company is a party to a joint venture when it does not have the rights to the assets or the obligations for the liabilities.

Accepted Answer

A) True 
 B)False

Question 7

Generally speaking, all parent companies are responsible for the preparation of consolidated financial statements.

Accepted Answer

A) True 
 B)False

Question 8

Where are the consolidating adjustments recorded?

Accepted Answer

A) Only on the consolidated financial statements. 
B) In the general journal of both the parent company and on the consolidated financial statements. 
C) In the general journal of both the parent and subsidiary companies and on the consolidated financial statements. 
D) In the general journal of both the parent and subsidiary companies. 
A) Only on the consolidated financial statements. 
B) In the general journal of both the parent company and on the consolidated financial statements. 
C) In the general journal of both the parent and subsidiary companies and on the consolidated financial statements. 
D) In the general journal of both the parent and subsidiary companies.

Question 9

Outline and describe the basics of the equity method.

Accepted Answer

IAS 28 provides a description of the bas

Question 10

There is a general assumption that an ownership interest of less than 20% is a financial asset and not a strategic investment.

Accepted Answer

A) True 
 B)False

Question 11

When a company has control over another company, a parent-subsidiary relationship is said to exist.

Accepted Answer

A) True 
 B)False

Question 12

What are the steps to follow to determine if one company controls another and therefore a parent/subsidiary relationship exists?

Accepted Answer

The following are the steps to follow to

Question 13

Sibery Inc. uses the equity method of reporting its 40% investment in Alway Co. The balance in the Investment in Alway was $70,750 at January 1, 2012. During the next three years, Alway reported the following net earnings (losses)and dividends paid.
 $$\begin{array} { | l | r | r | } 
\hline & \text { Net earnings (loss) } & \text { Dividends paid } \
& \$ & \$ \
\hline 2012 & 155,600 & 140,000 \
\hline 2013 & 35,700 & 140,000 \
\hline 2014 & (123,400) & 0 \
\hline
\end{array}$$ Required:
Calculate the balance of the Investment in Alway account at December 31, 2014.

Accepted Answer

The table below shows the calculation of

Question 14

At the beginning of 2013, Ridley Ltd. acquired 25% of the voting shares of Gasser Co. for $150,000. Ridley has significant influence over Gasser. In 2013, Gasser earned net income of $70,000 and paid dividends of $40,000. In 2014, Gasser earned net income of $80,000 and paid dividends of $100,000. At the end of 2014, what is the balance of Ridley's "Investment in Gasser" account?

Accepted Answer

A) $150,000 
B) $147,500 
C) $152,500 
D) $222,500 
A) $150,000 
B) $147,500 
C) $152,500 
D) $222,500

Question 15

Which of the following is false regarding structured entities?

Accepted Answer

A)  They may take the form of a corporation, trust, partnership, or unincorporated entity. 
B)  Using the definition of control, these types of arrangements are dealt with in the same manner as other types of strategic investments. 
C)   As the company may not own shares of the entity, consolidation would not be required. 
D) The company may not own any shares of the entity but typically the equity is not sufficient to sustain the entity. 
A)  They may take the form of a corporation, trust, partnership, or unincorporated entity. 
B)  Using the definition of control, these types of arrangements are dealt with in the same manner as other types of strategic investments. 
C)   As the company may not own shares of the entity, consolidation would not be required. 
D) The company may not own any shares of the entity but typically the equity is not sufficient to sustain the entity.

Question 16

When reflecting an investment using the cost method, the investment is initially recorded at cost and the balance is not adjusted in subsequent periods unless there is an impairment.

Accepted Answer

A) True 
 B)False

Which of the following is the first step in determining if one company controls another such that a parent/subsidiary relationship exists?

An associate is an entity, including an unincorporated company such as a partnership, over which the investor has significant influence and that is also a subsidiary or a joint venture.

How do joint ventures differ from private corporations?

Which of the following statements regarding non-strategic investments in equity is FALSE?

Walton Ltd. has the following shareholders: Sifter Co. - 60% Fallwell - 30% Garney Ltd. - 10% Fallwell does not conduct any business with Walton, nor has it been able to secure a seat on the Board of Directors. Which of the following statements is TRUE?

A company is a party to a joint venture when it does not have the rights to the assets or the obligations for the liabilities.

Generally speaking, all parent companies are responsible for the preparation of consolidated financial statements.

Where are the consolidating adjustments recorded?

Outline and describe the basics of the equity method.

There is a general assumption that an ownership interest of less than 20% is a financial asset and not a strategic investment.

When a company has control over another company, a parent-subsidiary relationship is said to exist.

What are the steps to follow to determine if one company controls another and therefore a parent/subsidiary relationship exists?

Which of the following is false regarding structured entities?

When reflecting an investment using the cost method, the investment is initially recorded at cost and the balance is not adjusted in subsequent periods unless there is an impairment.

Business Combinations

Consolidation: Wholly Owned Subsidiaries

Consolidations: Intragroup Transactions

Consolidation: Non-Controlling Interest

Accounting for Investments in Associates and Joint Ventures

Accounting for Foreign Currency

Accounting for Foreign Investments

Reporting for Not-For-Profit Organizations

Reporting for Public Sector Entities

Filters

Exam 1: Accounting for Investments

Which of the following is the first step in determining if one company controls another such that a parent/subsidiary relationship exists?

An associate is an entity, including an unincorporated company such as a partnership, over which the investor has significant influence and that is also a subsidiary or a joint venture.

How do joint ventures differ from private corporations?

Which of the following statements regarding non-strategic investments in equity is FALSE?

Walton Ltd. has the following shareholders: Sifter Co. - 60% Fallwell - 30% Garney Ltd. - 10% Fallwell does not conduct any business with Walton, nor has it been able to secure a seat on the Board of Directors. Which of the following statements is TRUE?

A company is a party to a joint venture when it does not have the rights to the assets or the obligations for the liabilities.

Generally speaking, all parent companies are responsible for the preparation of consolidated financial statements.

Where are the consolidating adjustments recorded?

Outline and describe the basics of the equity method.

There is a general assumption that an ownership interest of less than 20% is a financial asset and not a strategic investment.

When a company has control over another company, a parent-subsidiary relationship is said to exist.

What are the steps to follow to determine if one company controls another and therefore a parent/subsidiary relationship exists?

Which of the following is false regarding structured entities?

When reflecting an investment using the cost method, the investment is initially recorded at cost and the balance is not adjusted in subsequent periods unless there is an impairment.

Business Combinations

Consolidation: Wholly Owned Subsidiaries

Consolidations: Intragroup Transactions

Consolidation: Non-Controlling Interest

Accounting for Investments in Associates and Joint Ventures

Accounting for Foreign Currency

Accounting for Foreign Investments

Reporting for Not-For-Profit Organizations

Reporting for Public Sector Entities

Filters