Question 1

Under both IFRS and ASPE,fair value through profit or loss can be used as the initial measurement of non-strategic investments.

Accepted Answer

A) True 
 B)False

Question 2

On December 31,as a short-term investment,Arlington and Fry purchased 500 shares for $50,000.The shares pay a $0.40 cash dividend on February 28.The entry to record the dividend would be:

Accepted Answer

A) 
  
B) 
  
C) 
  
D) 
  
E)  No entry 
A) 
  
B) 
  
C) 
  
D) 
  
E)  No entry

Question 3

Consolidated financial statements:

Accepted Answer

A)  Show the results of operations,cash flows,and the financial position of all companies under a parent company's control. 
B)  Show the results of operations,cash flows,and the financial position of the parent company only. 
C)  Show the results of operations,cash flows,and the financial position of the subsidiary only. 
D)  Include the investment account on the balance sheet. 
E)  Show the results of operations,cash flows,and the financial position of all companies under a parent company's control and include the investment account on the balance sheet. 
A)  Show the results of operations,cash flows,and the financial position of all companies under a parent company's control. 
B)  Show the results of operations,cash flows,and the financial position of the parent company only. 
C)  Show the results of operations,cash flows,and the financial position of the subsidiary only. 
D)  Include the investment account on the balance sheet. 
E)  Show the results of operations,cash flows,and the financial position of all companies under a parent company's control and include the investment account on the balance sheet.

Question 4

You are referred to as an investor when you:

Accepted Answer

A)  Purchase shares of company. 
B)  Issue shares of a company. 
C)  Purchase bonds of a company. 
D)  Issue bonds of a company. 
E)  Both purchase shares and purchase bonds of a company. 
A)  Purchase shares of company. 
B)  Issue shares of a company. 
C)  Purchase bonds of a company. 
D)  Issue bonds of a company. 
E)  Both purchase shares and purchase bonds of a company.

Question 5

Investors originally record non-strategic investments using the cost method.

Accepted Answer

A) True 
 B)False

Question 6

On December 31,Year 1,Winnipeg Corp purchased 8,000 shares of Bittner Corp's common shares.This purchase represented 35% of Bittner's outstanding shares and gave Winnipeg significant influence over Bittner's management and operations.On October 11,Year 2,Bittner declared and paid cash dividends of $50,000.On December 31,Year 2,Bittner reported net income of $90,000 for the year.Prepare the Year 2 journal entries Winnipeg Corp should prepare to account for its investment in Bittner Corp.

Accepted Answer

The answer of On December 31,Year 1,Winnipeg Corp purchased 8,000...

Question 7

Strategic investments are classified into three different categories: investments in associates,business combinations,or joint ventures.

Accepted Answer

A) True 
 B)False

Question 8

"Debt investment" and "debt security" are interchangeable terms.

Accepted Answer

A) True 
 B)False

Question 9

Long-term bonds are examples of non-strategic investments.

Accepted Answer

A) True 
 B)False

Question 10

If a company has cash available for longer term investments,both debt and equity investments may be considered.

Accepted Answer

A) True 
 B)False

Question 11

Investments in associates are:

Accepted Answer

A)  Recorded at historical cost when purchased and accounted for using the equity method. 
B)  Reported at historical cost,adjusted for the amortized amount of any difference between cost and maturity value. 
C)  Reported at fair value. 
D)  Recorded at historical cost when purchased and reported at historical cost,adjusted for the amortized amount of any difference between cost and maturity value. 
E)  Recorded at historical cost when purchased and reported at fair valuE. 
A)  Recorded at historical cost when purchased and accounted for using the equity method. 
B)  Reported at historical cost,adjusted for the amortized amount of any difference between cost and maturity value. 
C)  Reported at fair value. 
D)  Recorded at historical cost when purchased and reported at historical cost,adjusted for the amortized amount of any difference between cost and maturity value. 
E)  Recorded at historical cost when purchased and reported at fair valuE.

Question 12

The equity method is used in accounting for significant influence investments in associates.

Accepted Answer

A) True 
 B)False

Question 13

Consolidated financial statements show the financial position,results of operations,and cash flows of all companies under the parent's control.

Accepted Answer

A) True 
 B)False

Question 14

Comoco purchased $3,000 of Borel Ltd shares intending to sell the shares within a short time at a profit.The journal entry to record the transaction would include a debit to cash and a credit to short-term investments.

Accepted Answer

A) True 
 B)False

Question 15

Investments in debt securities are always current assets.

Accepted Answer

A) True 
 B)False

Question 16

As a significant influence investment,Music City held 1,500 Navia Ltd common shares with a carrying value of $55,275.It sold the shares on December 13 for $54,387.Prepare the journal entry to record the sale.

Accepted Answer

The answer of As a significant influence investment,Music City held...

Question 17

Rippa paid $150,000,plus a brokerage commission of $350,to purchase Michael Corp bonds as a long-term investment.The 7% bonds had a par value of $155,000 and pay interest semiannually.The market interest rate is 10%.Prepare the journal entry to record the receipt of the first semiannual interest payment.

Accepted Answer

The answer of Rippa paid $150,000,plus a brokerage commission of...

Question 18

Rippa paid $150,000 to purchase Michael Corp bonds as a long-term investment.The 7% bonds had a par value of $150,000 and pay interest semiannually.Prepare the journal entry to record the transaction.

Accepted Answer

The answer of Rippa paid $150,000 to purchase Michael Corp...

Question 19

Strategic investments include investments in associates,business combinations and joint arrangements.

Accepted Answer

A) True 
 B)False

Question 20

Investments in associates:

Accepted Answer

A)  Can be either debt or equity securities. 
B)  Are not actively managed. 
C)  Are purchased to earn interest,dividends,or for appreciation in value. 
D)  Are accounted for using the equity method. 
E)  All of these answers are correct. 
A)  Can be either debt or equity securities. 
B)  Are not actively managed. 
C)  Are purchased to earn interest,dividends,or for appreciation in value. 
D)  Are accounted for using the equity method. 
E)  All of these answers are correct.

Under both IFRS and ASPE,fair value through profit or loss can be used as the initial measurement of non-strategic investments.

On December 31,as a short-term investment,Arlington and Fry purchased 500 shares for $50,000.The shares pay a $0.40 cash dividend on February 28.The entry to record the dividend would be:

Consolidated financial statements:

You are referred to as an investor when you:

Investors originally record non-strategic investments using the cost method.

Strategic investments are classified into three different categories: investments in associates,business combinations,or joint ventures.

"Debt investment" and "debt security" are interchangeable terms.

Long-term bonds are examples of non-strategic investments.

If a company has cash available for longer term investments,both debt and equity investments may be considered.

Investments in associates are:

The equity method is used in accounting for significant influence investments in associates.

Consolidated financial statements show the financial position,results of operations,and cash flows of all companies under the parent's control.

Comoco purchased $3,000 of Borel Ltd shares intending to sell the shares within a short time at a profit.The journal entry to record the transaction would include a debit to cash and a credit to short-term investments.

Investments in debt securities are always current assets.

As a significant influence investment,Music City held 1,500 Navia Ltd common shares with a carrying value of $55,275.It sold the shares on December 13 for $54,387.Prepare the journal entry to record the sale.

Rippa paid $150,000 to purchase Michael Corp bonds as a long-term investment.The 7% bonds had a par value of $150,000 and pay interest semiannually.Prepare the journal entry to record the transaction.

Strategic investments include investments in associates,business combinations and joint arrangements.

Investments in associates:

Property,plant and Equipment,and Intangibles

Current Liabilities

Partnerships

Organization and Operation of Corporations

Corporate Reporting: Income,earnings Per Share,and Retained Earnings

Bonds and Long-Term Notes Payable

Reporting and Analyzing Cash Flows

Analyzing Financial Statements

Filters

Exam 16: Accounting for Debt and Share Investments

Under both IFRS and ASPE,fair value through profit or loss can be used as the initial measurement of non-strategic investments.

On December 31,as a short-term investment,Arlington and Fry purchased 500 shares for $50,000.The shares pay a $0.40 cash dividend on February 28.The entry to record the dividend would be:

Consolidated financial statements:

You are referred to as an investor when you:

Investors originally record non-strategic investments using the cost method.

Strategic investments are classified into three different categories: investments in associates,business combinations,or joint ventures.

"Debt investment" and "debt security" are interchangeable terms.

Long-term bonds are examples of non-strategic investments.

If a company has cash available for longer term investments,both debt and equity investments may be considered.

Investments in associates are:

The equity method is used in accounting for significant influence investments in associates.

Consolidated financial statements show the financial position,results of operations,and cash flows of all companies under the parent's control.

Comoco purchased $3,000 of Borel Ltd shares intending to sell the shares within a short time at a profit.The journal entry to record the transaction would include a debit to cash and a credit to short-term investments.

Investments in debt securities are always current assets.

As a significant influence investment,Music City held 1,500 Navia Ltd common shares with a carrying value of $55,275.It sold the shares on December 13 for $54,387.Prepare the journal entry to record the sale.

Rippa paid $150,000 to purchase Michael Corp bonds as a long-term investment.The 7% bonds had a par value of $150,000 and pay interest semiannually.Prepare the journal entry to record the transaction.

Strategic investments include investments in associates,business combinations and joint arrangements.

Investments in associates:

Property,plant and Equipment,and Intangibles

Current Liabilities

Partnerships

Organization and Operation of Corporations

Corporate Reporting: Income,earnings Per Share,and Retained Earnings

Bonds and Long-Term Notes Payable

Reporting and Analyzing Cash Flows

Analyzing Financial Statements

Filters