Question 1

The objectives of disclosures required for investments in debt and equity investments do NOT include

Accepted Answer

A)  how significant the investments are to the investor's financial position and performance. 
B)  whether the investments are classified as current or long-term. 
C)  the nature and extent of the risks that the investor faces as a result of the investments. 
D)  how the risks that the investor faces as a result of the investments are managed. 
A)  how significant the investments are to the investor's financial position and performance. 
B)  whether the investments are classified as current or long-term. 
C)  the nature and extent of the risks that the investor faces as a result of the investments. 
D)  how the risks that the investor faces as a result of the investments are managed.

Question 2

Which of the following is NOT required to report for associates accounted for using the equity method?

Accepted Answer

A)  the fair value of any of these investments that has a price quoted in an active market 
B)  separate disclosure of income related to equity-accounted associates 
C)  the investor's strategy and motivation for holding equity ownership in the associate 
D)  information about associates' year ends that are different from the investor's year end 
A)  the fair value of any of these investments that has a price quoted in an active market 
B)  separate disclosure of income related to equity-accounted associates 
C)  the investor's strategy and motivation for holding equity ownership in the associate 
D)  information about associates' year ends that are different from the investor's year end

Question 3

Types of companies that have investments
Two types of companies that carry significant amounts of investments are banks and pension plans. Explain how these companies use their investment holdings to add value for their customers.

Accepted Answer

Banks add value by investing other peopl

Question 4

Accounting for bonds - amortized cost model (IFRS)
On January 1, 2020, on their issue date, Diogenes Inc. purchased 9%, $ 200,000, 10-year bonds. Interest is paid annually on December 31. Diogenes uses the amortized cost model and the effective-interest method for amortizing premium or discount. The current market rate was 10% and as a result Diogenes paid $ 187,711 for the bonds. On December 31, 2020, the bonds have a market value of $ 185,000.
Instructions
a) Record the receipt of interest for 2020.
b) Record the amortization of the discount for 2020.

Accepted Answer

a)@#IMG-DLM&
b)No entry is required. Using the amo

Question 5

Which of the following is a reason for the differences in the disclosure requirements for investments in associates under IFRS and ASPE?

Accepted Answer

A)  ASPE requires that the associate must be a private entity. 
B)  ASPE does not include an "associates" category. 
C)  ASPE allows the use of methods other than the equity method. 
D)  ASPE does not allow the equity method. 
A)  ASPE requires that the associate must be a private entity. 
B)  ASPE does not include an "associates" category. 
C)  ASPE allows the use of methods other than the equity method. 
D)  ASPE does not allow the equity method.

Question 6

Under IFRS, which of the following is NOT a condition for an investment to be classified as current?

Accepted Answer

A)  It is held primarily for trading purposes. 
B)  It is a cash equivalent. 
C)  It must be expected to be sold or realized within 12 months from the statement of financial position date. 
D)  It must be accounted for under the cost model. 
A)  It is held primarily for trading purposes. 
B)  It is a cash equivalent. 
C)  It must be expected to be sold or realized within 12 months from the statement of financial position date. 
D)  It must be accounted for under the cost model.

Question 7

Charles Inc. purchased 30% of Nassar Corporation's 29,000 outstanding common shares at a cost of $ 15 per share on January 3, 2020. The purchase price of $ 15 per share was based solely on the book value of Nassar's net assets. On September 21, Nassar declared and paid a cash dividend of $ 37,800. On December 31, Charles's year end, Nassar reported net income of $ 82,000 for the year. Nassar shares had a fair value of $ 14.75 per share at December 31. Charles Inc., a private Canadian corporation, applies ASPE.
Instructions
Under the assumption that the 30% holding of Nassar does not give Charles significant influence over Nassar, identify the possible accounting methods Charles could use under ASPE to account for its investment. Prepare all required 2020 entries under each acceptable method.

Accepted Answer

The answer of Charles Inc. purchased 30% of Nassar Corporation's...

Question 8

On January 1, 2020, Scallop Corp. purchased 25% of Prawn Corp.'s common shares; no goodwill resulted from the purchase. Scallop correctly uses the equity method to account for this investment at equity. The Investment in Associate account related to the Scallop investment was reported on the December 31, 2020, statement of financial position at $ 360,000. Prawn had reported net income of $ 225,000 for calendar 2020, and paid dividends totalling $ 90,000 during 2020. How much did Scallop pay for its 25% interest in Prawn?

Accepted Answer

A)  $ 393,750 
B)  $ 382,500 
C)  $ 360,000 
D)  $ 326,250 
A)  $ 393,750 
B)  $ 382,500 
C)  $ 360,000 
D)  $ 326,250

Question 9

On November 1, 2020, Fluck Corp. purchased 10-year, 9%, bonds with a face value of $ 360,000, for $ 324,000. An additional $ 10,800 was paid for the accrued interest, which is paid semi-annually on January 1 and July 1. The bonds mature on July 1, 2027 and will be held to maturity. Fluck uses the straight-line method of amortization and the amortized cost method for these bonds. Ignoring income taxes, the amount to be reported in Fluck's 2020 income statement as a result of this investment is

Accepted Answer

A)  $ 6,300. 
B)  $ 6,000. 
C)  $ 5,400. 
D)  $ 4,800. 
A)  $ 6,300. 
B)  $ 6,000. 
C)  $ 5,400. 
D)  $ 4,800.

Question 10

Financial disclosures required regarding acquisitions require that

Accepted Answer

A)  readers are able to relate the investment category on the SFP to the investment income reported on the income statement. 
B)  readers are able to understand the effects of the accounting methods that are used for different categories of investments. 
C)  major acquisition dates are disclosed, as the SFP contains all assets, and the P&L only contains income earned by the subsidiary after it was acquired. 
D)  all of these describe financial disclosures required regarding acquisitions. 
A)  readers are able to relate the investment category on the SFP to the investment income reported on the income statement. 
B)  readers are able to understand the effects of the accounting methods that are used for different categories of investments. 
C)  major acquisition dates are disclosed, as the SFP contains all assets, and the P&L only contains income earned by the subsidiary after it was acquired. 
D)  all of these describe financial disclosures required regarding acquisitions.

Question 11

When a public company holds between 20% and 50% of the outstanding common shares of an investee, which of the following statements applies?

Accepted Answer

A)  The investor should always use the equity method to account for its investment. 
B)  The investor should use the equity method to account for its investment unless circumstances indicate that it is unable to exercise "significant influence" over the investee. 
C)  The investor must use the cost method unless it can clearly demonstrate the ability to exercise "significant influence" over the investee. 
D)  The investor should always use the cost method to account for its investment. 
A)  The investor should always use the equity method to account for its investment. 
B)  The investor should use the equity method to account for its investment unless circumstances indicate that it is unable to exercise "significant influence" over the investee. 
C)  The investor must use the cost method unless it can clearly demonstrate the ability to exercise "significant influence" over the investee. 
D)  The investor should always use the cost method to account for its investment.

Question 12

Use the following information to solve the following questions:
On January 1, 2020, Abalone Ltd. acquired 30% of Flounder Corp.'s common shares for $ 240,000. During 2020, Flounder reported net income of $ 100,000 and paid total dividends of $ 60,000. Abalone's 30% interest in Flounder gives Abalone the ability to exercise significant influence over their operating and financial policies. During 2021, Flounder reported net income of $ 150,000 and paid total dividends of $ 30,000 on April 1 and $ 40,000 on October 1. On July 1, 2021, Abalone sold half of its shares in Flounder for $ 158,000 cash.
-The carrying amount of this investment in Abalone's December 31, 2020, statement of financial position should be

Accepted Answer

A)  $ 252,000. 
B)  $ 240,000. 
C)  $ 270,000. 
D)  $ 275,000. 
A)  $ 252,000. 
B)  $ 240,000. 
C)  $ 270,000. 
D)  $ 275,000.

Question 13

Equity investments that are accounted for under the cost model will result in

Accepted Answer

A)  recognition of dividend income only when actually received. 
B)  expensing transaction costs when incurred. 
C)  recognition of a gain or loss in net income at disposal. 
D)  recognition of a gain or loss in other comprehensive income at disposal. 
A)  recognition of dividend income only when actually received. 
B)  expensing transaction costs when incurred. 
C)  recognition of a gain or loss in net income at disposal. 
D)  recognition of a gain or loss in other comprehensive income at disposal.

Question 14

Motivation for investments
List three reasons why an organization would make investments.

Accepted Answer

1. for the returns provided (interest, d

Question 15

At December 31, 2020, Platinum Corp. has the following equity securities (no significant influence) that were purchased earlier in 2020, its first year of operation: $\begin{array}{c}
\begin{array}{lll}
\
\text {Security A}\
\quad\quad\quad\quad\text {B}\
\text {Totals}\
\end{array}
\begin{array}{l}
\underline{\text { Cost }}\
\$ 50,000 \
\underline{70,000}\
\underline{{\$ 120,000}} 
\end{array}
\begin{array}{c}
\underline{\text { Market } }\
\$ 51,875 \
\underline{77,500}\
\underline{\$ 129,375} 
\end{array}
\end{array}$
 If the investments are being accounted for under the fair value through net income (FV-NI) model, the total book value of the investment accounts should

Accepted Answer

A)  be decreased by $ 9,375. 
B)  be increased by $ 9,375. 
C)  be decreased by $ 20,000. 
D)  remain unchanged. 
A)  be decreased by $ 9,375. 
B)  be increased by $ 9,375. 
C)  be decreased by $ 20,000. 
D)  remain unchanged.

Question 16

Accounting for investments - FV-NI
On December 31, 2020, Hubble Corp. has the following securities in its portfolio of temporary investments:
$\begin{array}{c}
\begin{array}{lll}
\
 \text {5,000 common shares of Orion Corp. }\
 \text {10,000 common shares of Rigel Ltd.}\
\
\end{array}
\begin{array}{lll}
\text { Cost }\
\$80,000\
91,000\
\$171,000
\end{array}
\begin{array}{lll}
\text { Market }\
\$69,500\
92,500\
\$162,000
\end{array}
\end{array}$
 All of the securities had been purchased in 2020. In 2021, Hubble completed the following securities transaction:
Apr$\quad$1$\quad$Bought 300 common shares of Aries Corp. @ $ 50 each, plus fees of $ 550.
On December 31, 2021, Hubble's portfolio of trading equity securities appeared as follows:
 $\begin{array}{c}
\begin{array}{lll}
\
 \text {5,000 common shares of Orion Corp.}\
  \text {10,000 common shares of Rigel Ltd. }\
 \text {300 common shares of Aries Corp.}\
\
\end{array}
\begin{array}{lll}
\text { Cost }\
\$80,000\
91,000\
15,000\
\$186,000
\end{array}
\begin{array}{lll}
\text { Market }\
\$78,000\
99,250\
12,750\
\$190,000
\end{array}
\end{array}$
 Instructions
Assuming Hubble uses the FV-NI model, prepare the general journal entries for: 
a) the 2020 year-end adjusting entry,
b) the purchase of the Aries Corp. shares,
c) the 2021 year-end adjusting entry.

Accepted Answer

The answer of Accounting for investments - FV-NI
On December 31,...

Question 17

Under the cost/amortized cost model, holding gains are

Accepted Answer

A)  recognized in net income only when realized. 
B)  recognized in other comprehensive income. 
C)  recognized depending on management's intention. 
D)  not recognized at all. 
A)  recognized in net income only when realized. 
B)  recognized in other comprehensive income. 
C)  recognized depending on management's intention. 
D)  not recognized at all.

Question 18

Use the following information to solve the following questions:
The summarized balance sheets of Thunder Bay Corp. and Fort William Corp. at December 31, 2020, are as follows:
$\quad $$\quad $$\quad $$\quad $THUNDER BAY CORP.
$\quad $$\quad $$\quad $$\quad $$\quad $$\quad $Balance Sheet
$\quad $$\quad $$\quad $$\quad $$\quad $December 31, 2020
$\begin{array}{llcc}
  \text {Assets.  } &\underline{\$400,000}  \
 \text {Liabilities.  } &\$50,000\
 \text { Common shares } &200,000\
 \text { Retained earnings } &\underline{150,000}\
 \text { Total equities } &\underline{\$400,000}\
\end{array}$

$\quad $$\quad $$\quad $$\quad $$\quad $$\quad $FORT WILLIAM CORP.
$\quad $$\quad $$\quad $$\quad $$\quad $$\quad $$\quad $$\quad $Balance Sheet
$\quad $$\quad $$\quad $$\quad $$\quad $$\quad $$\quad $December 31, 2020
$\begin{array}{llcc}
  \text { Assets } & \underline{\$300,000} \
\end{array}$
 
$\begin{array}{c}
\text {FORT WILLIAM CORP.}\
\text {Balance Sheet}\
\text {December 31,2020}\
\begin{array}{lll}
 \text { Assets.}\
 \text { Liabilities}\
 \text { Common shares.}\
 \text { Retained earnings.}\
 \text { Total equities.}
\end{array}
\begin{array}{l}
\underline{\$ 300,000}\
\$ 75,000 \
185,000 \
\underline{40,000} \
\underline{\$ 300,000 }\
\end{array}
\end{array}$

-If Thunder Bay acquired a 30% interest in Fort William on December 31, 2020, for $ 75,000 and the equity method of accounting for the investment were used, the amount of the debit to Investment in Fort William Corp. would have been

Accepted Answer

A)  $ 90,000. 
B)  $ 75,000. 
C)  $ 67,500. 
D)  $ 60,000. 
A)  $ 90,000. 
B)  $ 75,000. 
C)  $ 67,500. 
D)  $ 60,000.

Question 19

Use the following information to solve the following questions:
On July 1, 2020, Harry Ltd. purchased $ 200,000 (par value) of Prince's 8% bonds. Because the market rate was 9%, Harry purchased them for $ 186,992. The bonds pay interest semi-annually on December 31 and June 30. Harry uses the amortized cost model and the effective-interest method to recognize interest income on bond investments.
-Rounding values to the nearest dollar (if necessary), the bond discount to be amortized on December 31, 2020 is

Accepted Answer

A)  $ 8,415. 
B)  $ 8,000. 
C)  $ 7,585. 
D)  $ 415. 
A)  $ 8,415. 
B)  $ 8,000. 
C)  $ 7,585. 
D)  $ 415.

Question 20

Investment in equity securities
On January 1, 2020, Sally Corp. acquired 30% of Wally Ltd.'s common shares for $ 500,000. At that time, Wally had 1 million no par common shares issued and outstanding. During 2020, Wally paid total cash dividends of $ 220,000, and later declared and issued a 5% common stock dividend when the market value was $ 2 per share. Wally's net income for 2020 was $ 480,000. Sally is using the equity method to account for this investment. What should be the balance in Sally's investment account at the end of 2020?

Accepted Answer

The answer of Investment in equity securities
On January 1, 2020,...

The objectives of disclosures required for investments in debt and equity investments do NOT include

Which of the following is NOT required to report for associates accounted for using the equity method?

Types of companies that have investments Two types of companies that carry significant amounts of investments are banks and pension plans. Explain how these companies use their investment holdings to add value for their customers.

Which of the following is a reason for the differences in the disclosure requirements for investments in associates under IFRS and ASPE?

Under IFRS, which of the following is NOT a condition for an investment to be classified as current?

Financial disclosures required regarding acquisitions require that

When a public company holds between 20% and 50% of the outstanding common shares of an investee, which of the following statements applies?

Equity investments that are accounted for under the cost model will result in

Motivation for investments List three reasons why an organization would make investments.

Under the cost/amortized cost model, holding gains are

The Canadian Financial Reporting Environment

Conceptual Framework Underlying Financial Reporting

Measurement

Reporting Financial Performance

Financial Position and Cash Flows

Revenue Recognition

Cash and Receivables

Inventory

Property, Plant, and Equipment: Accounting Model Basics

Depreciation, Impairment, and Disposition

Intangible Assets and Goodwill

Accounting Information Systems and Adjusting Entries: A Comprehensive Guide

Filters

Exam 9: Investments

The objectives of disclosures required for investments in debt and equity investments do NOT include

Which of the following is NOT required to report for associates accounted for using the equity method?

Types of companies that have investments Two types of companies that carry significant amounts of investments are banks and pension plans. Explain how these companies use their investment holdings to add value for their customers.

Which of the following is a reason for the differences in the disclosure requirements for investments in associates under IFRS and ASPE?

Under IFRS, which of the following is NOT a condition for an investment to be classified as current?

Financial disclosures required regarding acquisitions require that

When a public company holds between 20% and 50% of the outstanding common shares of an investee, which of the following statements applies?

Equity investments that are accounted for under the cost model will result in

Motivation for investments List three reasons why an organization would make investments.

Under the cost/amortized cost model, holding gains are

The Canadian Financial Reporting Environment

Conceptual Framework Underlying Financial Reporting

Measurement

Reporting Financial Performance

Financial Position and Cash Flows

Revenue Recognition

Cash and Receivables

Inventory

Property, Plant, and Equipment: Accounting Model Basics

Depreciation, Impairment, and Disposition

Intangible Assets and Goodwill

Accounting Information Systems and Adjusting Entries: A Comprehensive Guide

Filters