Investments

In which of the following circumstances would an investor most likely have control of an investee? a. the investor owns more than 50% of the voting common stock of an investee b. the investor owns 100% of the nonvoting preferred stock of an investee c. the investor owns 90% of the voting common stock of a foreign investee on which the foreign government imposes significant financial and operating restrictions d. the investor owns 100% of the voting common stock of a domestic investee that is in bankruptcy

a. the investor owns more than 50% of the voting common stock of an investee

which if any of the following transfers between classifications of investments (which do not give the investor significant influence) are possible HTM to Held for Trading/ Held for Trading to HTM a. yes yes b. yes no c. no yes d. no no

a. yes yes

which of the following are possible ways that gains or losses on changes in the fair value of investments in equity securities may be reported under IFRS requirements? in profit or loss (income stmt) / in other comprehensive income a. yes yes b. yes no c. no yes d. no no

a. yes yes

which of the following methods may a mutual fund investor use to measure and report an equity method investment under IFRS FV Method/ Equity Method a. yes yes b. yes no c. no yes d. no no

a. yes yes

in which one of the following cases is an investor most likely to use the equity method to carry and report an investment in an investee a. investor owns 15% of the investee and has no other affiliation with the investee b. investor owns 40% of the voting stock of the investee and the investee is in bankruptcy c. investor is a manufacturing firm that owns 25% of the voting stock of a consulting firm d. investor owns 30% of the voting stock of the investee but is unable to obtain representation on the investee's board of directors or obtain significant info from the investee

c. investor is a manufacturing firm that owns 25% of the voting stock of a consulting firm

Which of either of the following statements concerning the transfer of investments between categories under IFRS no. 9 is/ are correct I. only investments in debt securities may be transferred between categories II. when investments are transferred between categories, financial statements of prior periods presented for comparative purposes must not be restated a. i only b. ii only c. both i and ii d. neither i nor ii

a. i only

an investor purchased a bond classified as a held to maturity investment between interest dates at a discount. at the purchase date, the carrying amount of the bond is more than the Cash paid to seller/ face amount of bond a. no yes b. no no c. yes no d. yes yes

b. no no

sun corp had investments in marketable equity securities costing 650,000. on june 30, 20x2, sun decided to hold the investments indefinitely and accordingly reclassified them from held for trading to available for sale on that date. the investments market value was 575,000 as of december 31, 20x1, 530,000 as of june 30 20x2, and 490,000 as of december 31, 20x2. what amount should sun report as net unrealized loss on concurrent marketable equity securities in its 20x2 statement of stockholders equity? a. 40,000 b. 45,000 c. 85,000 d. 160,000

a. 40,000

which if any of the following transfers between categories is possible under IFRS no. 9 for investments in debt securities amortized cost to fv/ fv to amortized cost a. yes yes b. yes no c. no yes d. no no

a. yes yes

when the fair value of an investment in debt securities exceeds its carrying amount, how should each of the following assets be reported at the end of the year? HTM securities/ AFS securities a. fv/ carrying amount b. carrying amount/ fv c. carrying amount/ carrying amount d. fv/ fv

b. carrying amount fv

plack co purchased 10,000 shares (2% ownership) of ty corp on february 14, 2005. black received a stock dividend of 2000 shares on april 30, 2005 when the market value per share was $35. ty paid a cash dividend of $2 per share on december 15, 2005. in its 2005 income statement what amount should place report as dividend income a. 20,000 b. 24,000 c. 90,000 d. 94,000

b. 24,000

anchor co owns 40% of main co's common stock outstanding and 75% of mains noncumulative preferred stock outstanding. anchor exercises significant influence over mains operations. during the current period, main declared dividends of 200,000 on its common stock and 100,000 on its noncumulative preferred stock. what amount of dividend income should anchor report on its income statement for the period related to its investment in main? a. 75,000 b. 80,000 c. 120,000 d. 225,000

a. 75,000

which of the following is true with respect to impairment of available for sale securities a. if the decline in the fair value is considered to be other than temporary, the unrealized losses in OCI are reclassified to earnings b. if the decline in fair value is considered to be other than temporary, the unrealized losses are recorded in OCI c. if the decline in fair value is not considered to be other than temporary, the unrealized gains in OCI are reclassified to earnings d. if the decline in fair value is not considered to be other than temporary, the unrealized gains are recorded in OCI

a. if the decline in the fair value is considered to be other than temporary, the unrealized losses in OCI are reclassified to earnings

a marketable equity security is transferred from the held for trading portfolio to the available for sale portfolio. at the transfer date, the security's cost cost exceeds its market value. what amount is used at the transfer date to record the security in the available for sale portfolio? a. market value, regardless of whether the decline in market value below cost is considered permanent or temporary b. market value, only if the decline in market value below cost is considered permanent c. cost, if the decline in market value below cost is considered temporary d. cost, regardless of whether the decline in market value below cost is considered permanent or temporary

a. market value, regardless of whether the decline in market value below cost is considered permanent or temporary

eco inc, a US entity has elected to prepare financial statements in accordance with IFRS to provide to its foreign suppliers. into has the following information concerning an investment in the bonds of trice inc as of december 31, 2011: Par value= 100,000 original cost= 108,000 current premium= 3500 fair value= 105,000 ecos business model is to regularly invest in debt to receive the cash flow provided by interest and the repayment of principal on maturity. the bonds are not associated with any other asset or liability. which one of the following is the amount at which income should report its investment in trice in its december 31, 2011 IFRS based statement of financial position a. 100,000 b. 103.500 c. 105,000 d. 108,000

b. 103.500

grant inc acquired 30% of south cos voting stock for $200,000 on january 2, 2004. grants 30% interest in south gave grant the ability to exercise significant influence over souths operating and financial policies. during 2004, south earned $80,000 and paid dividends of $50,000. south reported earnings of of $100,000 for the six months ended june 30, 2005 and $200,000 for the year ended december 31, 2005. on july 1, 2005 grant sold half of its stock in south for 150,000 cash. south paid dividends of $60,000 on october 1, 2005. before income taxes what amount should grant include in its 2004 income statement as a result of the investment? a. 15,000 b. 24,000 c. 50,000 d. 80,000

b. 24,000

which of the following is not required under IFRS with the respect to equity method accounting a. the accounting policies of the associate must conform with the accounting policies of the investor b. any investor can elect to apply the fair value option to the accounting for the associate c. the reporting dates for the investor and associate cannot be more than 3 months apart d. any impairment loss on an equity investment is measured at the carrying value less the recoverable amount

b. any investor can elect to apply the fair value option to the accounting for the associate

according to IFRS guidance on equity method accounting, under which circumstances would the investor be required to recognize the associate's (investee's) losses that exceed the investor's investment? I. the associates return to profitability is imminent and assured II. the investor has guaranteed the obligations and commitments of the associate a. i only b. ii only c. both i and ii d. neither i nor ii

b. ii only

which if any of the following characteristics concerning the categories of investments under IFRS no. 9 are correct I. there is a single category for debt investments and a single category for equity investments II. the business model test used in evaluating debt instruments for classification purposes is concerned with the investors intent a. i only b. ii only c. both i and ii d. neither i nor ii

b. ii only

which of the following is not a factor to take into consideration when determining if the decline in fair value of an equity security is other than temporary a. the length of time and extent to which the market value has been less than cost b. the length of time the holder has held the security c. the financial condition and near term prospects of the issuer d. the intent and ability of the holder to retain its investment for a period of time to allow for any anticipated recovery in the market value

b. the length of time the holder has held the security

Which one of the following is least likely to be a factor in determining how an investment in debt or equity securities is accounted for and reported in the financial statements? a. the nature of the investment b. the method of payment used to acquire the investment c. the extent or portion of the investment securities acquired d. the purpose for which the investment was made

b. the method of payment used to acquire the investment

in year 1, a company reported in other comprehensive income an unrealized holding loss on an investment in available for sale securities. during year 2, these securities were sold at a loss equal to the unrealized loss previously recognized. the reclassification adjustment should include which of the following? a. the unrealized loss should be credited to the investment account b. the unrealized loss should be credited to the other comprehensive income account c. the unrealized loss should be debited to the other comprehensive income account d. the unrealized loss should be credited to beginning retained earnings

b. the unrealized loss should be credited to the other comprehensive income account

On april 1, north company issued bonds in the market. upon issue, south company acquired 10% of north company's issue. on november 30, south sold the north company bonds in the market; the bonds were acquired by east company. on december 31, which, if any, of the following companies is an investee North/South/East a. yes yes no b. yes no no c. no yes yes d. no no yes

b. yes no no

cobb co purchased 10,000 shares (2% ownership) of roe co. on february 12, 2004. cobb received a stock dividend of 2000 shares on march 31, 2004, when the carrying amount per share on roe's books was $35 and the market value per share was $40. roe paid a cash dividend of $1.50 per share on September 15, 2004. in comb's income statement for the year ended october 31, 2004 what amount should cobb report as dividend income? a. 98,000 b. 88,000 c. 18,000 d. 15,000

c. 18,000

larkin co has owned 25% of the common stock of devon co for a number of years and has the ability to exercise significant influence over devon. the following information relates to larkins investment in devon during the most recent year: carrying amount BOY= 200,000 Devon Net Income= 600,000 Total devon dividends paid= 400,000 what is the carrying amount of larkins investment n devon at year end a. 100,000 b. 200,000 c. 250,000 d. 350,000

c. 250,000

an investor purchased a bond as a long term investment between interest dates at a premium. at the purchase date, the cash paid to the seller is: a. the same as the face amount of the bond b. the same as the face amount of the bond plus accrued interest c. more than the face amount of the bond d. less than the face amount of the bond

c. more than the face amount of the bond

on january 1 of the current year, barton co. paid $900,000 to purchase two year, 8%, $1,000,000 face value bonds that were issued by another publicly traded corporation. barton plans to sell the bonds in the first quarter of the following year. the fair value of the bonds at the end of the current year was $1,020,000. at what amount should barton report the bonds in its balance sheet at the end of the current year? a. 900,000 b. 950,000 c. 1,000,000 d. 1,020,000

d. 1,020,000

simpson co received dividends from its common stock investments during the year ended december 31, 2005 as follows: 1. a cash dividend of 8000 from wren corp in which simpson owns a 2% interest 2. a cash dividend of 45,000 from brill corp in which simpson owns a 30% interest. this investment is appropriately accounted for using the equity method 3. a stock dividend of 500 shares from paul corp was received on december 15, 2005 when the quoted market value of pauls shares was $10 per share. simpson owns less than 1% of pauls common stock In simpsons 2005 income statement dividend revenue should be a. 58,000 b. 53,000 c. 13,000 d. 8000

d. 8000

band co uses the equity method to account for its investment in guard inc common stock. how should band record a 2% stock dividend received from guard? a. as dividend revenue at guard's carrying value of the stock b. as dividend revenue at the market value of the stock c. as a reduction on the total cost of guard stock owned d. as a memorandum entry, reducing the unit cost of all guard stock owned

d. as a memorandum entry, reducing the unit cost of all guard stock owned

the method of accounting for investments that does not give the investor significant influence over the investee is based on the investor's intent in making the investment. when investor intent changes, the classification of an accounting for the investment changes. when investments are transferred between classifications, which one of the following valuation basis is most likely to be used when recording in the new investment classification? a. historic cost b. amortized cost c. prior carrying value d. fair market value

d. fair market value

in which one of the following cases would an investor be presumed to have significant influence over the investee? a. investor acquires more than 50% of the investee's nonvoting preferred stock b. investor acquires 10% of investee voting common stock c. investor acquires 40% of investee voting common stock, which it intends to hold for 60 days d. investor acquires 18% of investee voting common stock and is the primary buyer of the investee's output

d. investor acquires 18% of investee voting common stock and is the primary buyer of the investee's output

stock dividends on common stock should be recorded at their fair market value by the investor when the related investment is accounted for under which of the following methods? cost / equity a. yes yes b. yes no c. no yes d. no no

d. no no

when the equity method is used to account for investments in common stock, which one of the following affect(s) the investors reported investment income a change in market value of investors common stock/ cash dividends from investee a. yes yes b. yes no c. no yes d. no no

d. no no

the credit losses associated with the impairment of debt securities are separated in which of the following circumstances a. when the entity has the positive ability and intent to sell the impaired security b. when the entity has the positive ability and intent to hold the impaired security c. when the entity has the positive ability and intent to hold the impaired security and expects to recover the entire cost basis of the impaired security d. when the entity has the positive ability and intent to hold the impaired security and does not expect to recover the entire cost basis of the impaired security

d. when the entity has the positive ability and intent to hold the impaired security and does not expect to recover the entire cost basis of the impaired security