Question 1

Significant influence is typically gained by an investor company owning more than 50% of the voting shares of the investee company.

Accepted Answer

A) True 
 B)False

Question 2

Cider Jewelers purchased 3,000,000 of the outstanding 10,000,000 shares of Angel & Associates.Cider has significant influence over Angel,so Cider will account for this investment using the equity method.Angel declared dividends of $275,000 during the year.Which of the following is the correct journal entry for this transaction?

Accepted Answer

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

Question 3

Refer to Sheppard Corporation.If Sheppard sold all of its shares of Meredith for $75,000 at the end of 2017,what would be the effect on net income of this transaction?

Accepted Answer

A) $13,000 gain 
B) $10,000 gain 
C) $23,500 gain 
D) $0 gain 
A) $13,000 gain 
B) $10,000 gain 
C) $23,500 gain 
D) $0 gain

Question 4

Refer to Sheppard Corporation.What will be the effect shown on 2017 income?

Accepted Answer

A) $0 
B) $5,000 
C) $10,500 
D) $15,500 
A) $0 
B) $5,000 
C) $10,500 
D) $15,500

Question 5

Equity securities can be classified as either trading securities or held-to-maturity securities.

Accepted Answer

A) True 
 B)False

Question 6

Eagles Auto invested in bonds of ABC.,which it intends to hold until maturity 1/1/22.These 5-year bonds were dated 1/1/17,had a face value of $75,000,and pay 4% interest annually on 12/31.Eagles purchased these bonds when the market rate of interest was 3%.Complete the entire amortization table for this investment and record all entries for the life of the investment.

Accepted Answer

Cost of the investment calculated using

Question 7

Under the equity method,the investor decreases the value of the investment when it receives cash dividends.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following is the main difference between U.S.GAAP and IFRS in accounting for equity investments?

Accepted Answer

A) IFRS requires all equity securities to reported at cost,allowing companies to report gains and losses only when those securities are sold. 
B) For equity securities without quoted prices in the active market,IFRS allows companies to determine a fair value for these securities based on market comparables or a discounted cash flow methodology. 
C) For trading equity securities,unrealized gains and losses are reported as part of other comprehensive income instead of net income. 
D) IFRS requires companies to report all equity securities into one investment classification,instead of the three investment classifications allowed under U.S.GAAP. 
A) IFRS requires all equity securities to reported at cost,allowing companies to report gains and losses only when those securities are sold. 
B) For equity securities without quoted prices in the active market,IFRS allows companies to determine a fair value for these securities based on market comparables or a discounted cash flow methodology. 
C) For trading equity securities,unrealized gains and losses are reported as part of other comprehensive income instead of net income. 
D) IFRS requires companies to report all equity securities into one investment classification,instead of the three investment classifications allowed under U.S.GAAP.

Question 9

Which of the following statements is incorrect?

Accepted Answer

A) If the investor has significant influence over the investee,the investor must use the equity method of accounting for the investment. 
B) If the investor has control over the investee,financial statements for the two companies must be consolidated. 
C) If the investor has no significant influence over the investee,can readily determine the fair value of the investment,and plans to hold the investment for a very short period of time,the investor should classify the investment as a trading security. 
D) If the investor reports the investment as available-for-sale,the investment is reported at cost with unrealized gains and losses reported as part of other comprehensive income. 
A) If the investor has significant influence over the investee,the investor must use the equity method of accounting for the investment. 
B) If the investor has control over the investee,financial statements for the two companies must be consolidated. 
C) If the investor has no significant influence over the investee,can readily determine the fair value of the investment,and plans to hold the investment for a very short period of time,the investor should classify the investment as a trading security. 
D) If the investor reports the investment as available-for-sale,the investment is reported at cost with unrealized gains and losses reported as part of other comprehensive income.

Significant influence is typically gained by an investor company owning more than 50% of the voting shares of the investee company.

Refer to Sheppard Corporation.If Sheppard sold all of its shares of Meredith for $75,000 at the end of 2017,what would be the effect on net income of this transaction?

Refer to Sheppard Corporation.What will be the effect shown on 2017 income?

Equity securities can be classified as either trading securities or held-to-maturity securities.

Under the equity method,the investor decreases the value of the investment when it receives cash dividends.

Which of the following is the main difference between U.S.GAAP and IFRS in accounting for equity investments?

Which of the following statements is incorrect?

The Financial Reporting Environment

Financial Reporting Theory

Judgment and Applied Financial Accounting Research

Review of the Accounting Cycle

Statements of Net Income and Comprehensive Net Income

Statements of Financial Position and Cash Flows and the Annual Report

Accounting and the Time Value of Money

Revenue Recognition

OL: Revenue Recognition

Short-Term Operating Assets: Cash and Receivables

Short-Term Operating Assets: Inventory

Long-Term Operating Assets: Acquisition, cost Allocation, and Derecognition

Long-Term Operating Assets: Departures From Historical Cost

Operating Liabilities and Contingencies

OL: Operating Liabilities and Contingencies

Financing Liabilities

Accounting for Stockholders Equity

Accounting for Income Taxes

Accounting for Employee Compensation and Benefits

Earnings Per Share

Accounting Corrections and Error Analysis

Filters

Exam 18: Investing Assets

Significant influence is typically gained by an investor company owning more than 50% of the voting shares of the investee company.

Refer to Sheppard Corporation.If Sheppard sold all of its shares of Meredith for $75,000 at the end of 2017,what would be the effect on net income of this transaction?

Refer to Sheppard Corporation.What will be the effect shown on 2017 income?

Equity securities can be classified as either trading securities or held-to-maturity securities.

Under the equity method,the investor decreases the value of the investment when it receives cash dividends.

Which of the following is the main difference between U.S.GAAP and IFRS in accounting for equity investments?

Which of the following statements is incorrect?

The Financial Reporting Environment

Financial Reporting Theory

Judgment and Applied Financial Accounting Research

Review of the Accounting Cycle

Statements of Net Income and Comprehensive Net Income

Statements of Financial Position and Cash Flows and the Annual Report

Accounting and the Time Value of Money

Revenue Recognition

OL: Revenue Recognition

Short-Term Operating Assets: Cash and Receivables

Short-Term Operating Assets: Inventory

Long-Term Operating Assets: Acquisition, cost Allocation, and Derecognition

Long-Term Operating Assets: Departures From Historical Cost

Operating Liabilities and Contingencies

OL: Operating Liabilities and Contingencies

Financing Liabilities

Accounting for Stockholders Equity

Accounting for Income Taxes

Accounting for Employee Compensation and Benefits

Earnings Per Share

Accounting Corrections and Error Analysis

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