405 - Ch 12 Investments Smartbook

Margot Company purchases $100,000 face amount, 6% semi-annual bonds for $110,000 when the market interest rate is 5%. Margot should recognize the following interest revenue for the first 6-month period:

$2,750

Margot Company purchases $100,000 face amount, 6% semi-annual bonds for $110,000 when the market interest rate is 5%. Margot should recognize the following interest received for the first 6-month period:

$3,000

Marian Company's records show the following account balances at 2/1/18: Investment in HTM securities, $500,000; and discount on HTM investment, $20,000. On that day, the company sells the investment for $520,000. The journal entry would include credits of (Select all that apply.) Multiple select question. $20,000 to gain from sale of investment. $40,000 to gain from sale of investment. $480,000 to investments in HTM securities. $500,000 to investments in HTM securities. $20,000 to discounts.

$40,000 to gain from sale of investment. $500,000 to investments in HTM securities.

Select all that apply Marian Company's records show the following account balances at 2/1/18: Investment in HTM securities, $500,000; and discount on HTM investment, $20,000. On that day, the company sells the investment for $520,000. The journal entry would include debits of (Select all that apply.) Multiple select question. $520,000 to cash. $20,000 to loss. $20,000 to discounts. $20,000 to gain.

$520,000 to cash. $20,000 to discounts.

Ziegler Company owns 40% of Norm Company's outstanding voting stock. During the current year, Norm reported income of $2 million and declared dividends of $1 million. Ziegler should report income from its investment of

$800,000

Merkel Company invested in Sub Company and is able to exert significant influence over the operating and financial policies of Sub Company. Merkel should

apply the equity method

Master Company owns 15% of the outstanding voting stock of Sell Company. Master should

apply the fair value through net income method.

Consistent with the equity method, investment income is

based on investee's income times ownership percentage.

Porter Company classified its investment in the bonds of Bailey Company as a trading security. Subsequent to the investment, the fair value of the investment increased by $5,000. The result of this increase in value will

be an increase in net income.

Which of the following are financial instruments? Multiple select question. cash a company's own common stock stock options common stock of another company

cash stock options common stock of another company

Which of the following represents a key difference between the three debt investment classifications (HTM, AFS, trading) with respect to financial reporting?

classification of unrealized gains and losses

The "discount on bond investments" account is a

contra-asset account.

An investor who owns more than 50% of the outstanding voting stock of an investee company is assumed to have

control

An investment in trading debt securities is initially recorded at

cost

On the date of acquisition, an investment in bonds should be recorded at:

cost

Gruen Corporation aquires a 25% interest in Blau Company for $1 million. The excess of investment cost over Gruen's share of the book value of Blau's net assets is solely attributable to goodwill. During the year, Blau reports income of $500,000 and declares dividends of $100,000. The carrying value of Gruen's investment at the end of the accounting period will be:

$1.1 million

Markus Company sells 1,000 bonds of its debt investment in Berta Inc. for $20,000. The original cost of the 1,000 bonds was $18,000. During the prior year, the bonds were reported on the balance sheet at a fair value of $19,000. On the date of sale, Markus should recognize a realized gain of _____ in net income. (Assume the debt investment was accounted for as available-for-sale and all unrealized holding gains and losses have been reversed.)

$2,000

Under the fair value option, unrealized gains and losses on HTM and AFS debt securities are recognized in (blank) (blank) in the period they occur. (Enter one word per blank.)

net income

Select all that apply Equity investments for which the investor does not have significant influence are classified as _____ in the balance sheet. (Select all that apply). Multiple select question. noncurrent assets current assets current liabilities noncurrent liabilities

noncurrent assets current assets

Adrianna Company purchases 35% of Saddle Company's outstanding stock for $450,000. At the time of acquisition, book value of the company's net assets is $1 million and the fair value of the company's net assets is $1.2 million. The difference between the book value and fair value of the net assets is attributed to undervalued land. Adrianna should

not amortize the difference between fair value and book value attributable to land.

Goodwill arising from an investment accounted for under the equity method is

not amortized.

Robert Company properly applies the equity method to its investment in Margit Corporation, At the end of the current year, the fair value of Robert Company's investment increased. Robert Company should

not recognize a gain

Under the equity method, the fair value of the investment shares at the end of the reporting period is

not reported.

Cash flows related to equity investments for which the investor lacks significant influence and are held with an intent for short-term profit are shown in the _____ section of the Statement of Cash Flows.

operating

In the statement of cash flows, dividends received from investments are classified as cash inflows from

operating activities

When equity investments that lack significant influence are sold and a fair value adjustment account has been used to increase or decrease the carrying value of the investment, the investment account is credited for the

original cost of the investment.

If a company holds bonds that are not actively traded, it can estimate the fair value of those bonds by using (blank) (blank) techniques.

present value

The price of a bond is equal to the

present value of future cash receipts.

The price of a bond is equal to

present value of future interest payments plus present value of principal

An investor who purchased corporate bonds that are not publicly traded may estimate the bonds' fair value by determining the

present value of the future cash flows

Select all that apply Bonds typically provide two sources of cash flows to investors. These are associated with the payment of Multiple select question. principal interest dividends taxes

principal interest

Select all that apply Greenly Company acquired $40,000 face amount bonds of Neumann Company. Greenly can expect to receive the following cash flows from its investment. (Select all that apply.) Multiple select question. dividends principal interest

principal interest

If the market rate of interest decreases after a bond is purchased, the bond incurs

an unrealized holding gain

An investor that owns between ___ and ___ percent of the voting stock of an investee is assumed to have significant influence over the investee.

20; 50

How is an equity investment that lacks significant influence adjusted to fair value at the end of each reporting period?

A valuation allowance account is increased or decreased.

If the market rate of interest rises after a bond is purchased, the bond incurs

an unrealized holding loss

Which of the following statements regarding the initial recognition of debt investments is correct?

All debt investments are initially recorded at cost.

Barber Company acquires 35% of the outstanding shares of Carter Company. Which of the following is correct?

Barber may choose to apply the fair value option.

True or false: When the fair value option is chosen for equity investments with significant influence, the company must report the investments on their own line in the balance sheet.

False Reason: The investments can be shown on their own line item or combined with other equity investments.

Select all that apply Investors must disclose this information related to their investments. (Select all that apply.) Multiple select question. Changes in net unrealized holding gains and losses Aggregate fair value Gross realized and unrealized holding gains and losses Amortized cost basis by major type Expected future cash flows by investment type

Changes in net unrealized holding gains and losses Aggregate fair value Gross realized and unrealized holding gains and losses Amortized cost basis by major type

Select all that apply Which of the following are common financial instruments that are used to finance or expand a company's operations? (Select all that apply.) Multiple select question. Accounts receivable Common stock Property, plant and equipment Corporate bonds Preferred stock

Common stock Corporate bonds Preferred stock

Regarding the valuation of equity investments that lack significant influence beginning in 2018, which of the following statements is correct?

Companies are required to use the fair value through net income method.

The eventual effect of the different methods of recognizing holding gains and losses for debt securities on total income is

always the same.

Greene Company purchases an investment in bonds issued by Blue Company. Greene intends to hold the bonds until they mature and did not elect the fair value option. Greene should report the investment at

amortized cost.

Which of the following is a benefit of the required accounting treatment for investments using the equity method?

Dividend income is not included in income, but reduces the book value of the investment.

Which reporting method should be used if the investor can exert significant influence over the investee?

Equity method

True or false: Any unrealized holding gain or loss that exist when a transfer of investment category occurs should be immediately recognized into income.

False

True or false: If the investee reports a net loss, the equity investment account is not adjusted for additional expenses.

False

True or false: The various approaches to accounting for equity investments generally have similar results on the financial statements.

False

Select all that apply Which of the following are correct regarding the financial statement presentation of HTM securities? (Select all that apply.) Multiple select question. Gains and losses are shown in net income in the period in which the securities are sold. Unrealized holding gains and losses are disclosed in the notes to the financial statements. Unrealized holding gains and losses are shown in net income. Unrealized holding gains and losses are shown in other comprehensive income.

Gains and losses are shown in net income in the period in which the securities are sold. Unrealized holding gains and losses are disclosed in the notes to the financial statements.

Select all that apply For each year presented, investors should disclose the following in the disclosure notes related to investments: (Select all that apply.) Multiple select question. Gross realized and unrealized holding gains and losses Expected future cash flows for all investment types Description of the valuation techniques used in the fair value measurement process Aggregate fair value

Gross realized and unrealized holding gains and losses Description of the valuation techniques used in the fair value measurement process Aggregate fair value

Which of the following may give rise to potential earnings management?

Inaccurate fair value estimates

Select all that apply Which of the following earnings management techniques may be observed when accounting for investments? (Select all that apply). Multiple select question. Income smoothing by timing the sale of equity method investments. Increasing income when receiving dividend income for equity method investments. Using discretion in estimating the fair value of investments.

Income smoothing by timing the sale of equity method investments. Using discretion in estimating the fair value of investments.

Select all that apply Markus Company sells 1,000 bonds of its debt investment in Berta Inc. for $20,000. The original cost of the 1,000 bonds was $18,000. During the prior year, the bonds were reported on the balance sheet at a fair value of $19,000. Assume the investment was accounted for as available-for-sale and all unrealized holding gains and losses have been reversed. The journal entry to record the sale of the bonds should include these credits: (Select all that apply.) Multiple select question. Investment in AFS - $18,000 Fair value adjustment AFS - $1,000 Gain on sale of investment - $1,000 Investment in AFS - $19,000 Gain on sale of investment - $2,000

Investment in AFS - $18,000 Gain on sale of investment - $2,000

Which of the following may be a valid concern that supports recognizing unrealized gains and losses associated with AFS debt securities in other comprehensive income?

Net income may otherwise appear more volatile than it actually is.

Neumann Company changes from the equity method to another method. Which of the following occur at the time of change? (Select all that apply.)

No adjustment is made to the remaining carrying amount of the investment. The balance in the investment account when the equity method is discontinued serves as the new cost basis.

Porter Company classified its debt investment in Bailey Company as an available-for-sale security. Subsequent to the purchase, the fair value of the investment increased by $5,000. The result of this increase in value will be

an increase in other comprehensive income.

Select all that apply Northern Company has bonds with an amortized cost of $600,000 and a fair value of $675,000. Northern properly classifies these bonds as trading securities. At the end of the reporting period, (Select all that apply.) Multiple select question. Northern will make a fair value adjustment of $75,000. Northern will report an unrealized holding gain in other comprehensive income. Northern will disclose the increase in fair value, but will not record an adjustment. Northern will report an unrealized holding gain in net income.

Northern will make a fair value adjustment of $75,000. Northern will report an unrealized holding gain in net income.

Adjustments must be made to _____ to account for the tax effects of debt investments. (Select all that apply.)

OCI AOCI

Parker Company owns 30% of Sandra Company's stock. Which of the following will decrease the investment account?

Parker receives dividends from Sandra Company.

How are available-for-sale debt securities reported? (Select all that apply.)

Realized gains and losses are reported in net income in the period the investment is sold. Unrealized gains and losses are reported as part of other comprehensive income when they occur.

Ricardo Company chose the fair value option (FVO) for accounting for a new investment in AFS debt securities. Which of the following statements is correct?

Ricardo's choice is irrevocable.

Under U.S. GAAP, which of the following statements regarding the classification of debt investments is correct?

The classification of investments must be reassessed each reporting period.

Which of the following is correct regarding the fair value option? (Select all that apply.)

The election can be applied to selected securities. The election is irrevocable.

Select all that apply Which of the following represent differences under IFRS (as compared to U.S. GAAP) with respect to the equity method? (Select all that apply.) Multiple select question. The fair value option may be chosen for equity method investments The fair value option is not available for most equity method investments The investee must adjust its accounting policies to correspond with the investor's policies

The fair value option is not available for most equity method investments The investee must adjust its accounting policies to correspond with the investor's policies

Select all that apply Which of the following conditions must be present for a debt security to be classified as "held-to-maturity?" (Select all that apply.) Multiple select question. The investment can be classified as a current asset. The investor has the ability to hold the security until maturity. The maturity date is less than 90 days from the date of purchase. The investor intends to hold the security until maturity.

The investor has the ability to hold the security until maturity. The investor intends to hold the security until maturity.

Which accounting standards require the equity method for use with significant influence investees?

U.S. GAAP and IFRS

Select all that apply How are equity investments that lack significant influence adjusted? (Select all that apply.) Multiple select question. Unrealized holding gain or loss is included in net income. A fair value adjustment is recorded at the end of every reporting period. A fair value adjustment is recorded only when the investment is sold. Unrealized holding gain or loss is included in other comprehensive income.

Unrealized holding gain or loss is included in net income. A fair value adjustment is recorded at the end of every reporting period.

Select all that apply Von Company properly applies the equity method in accounting for its investment in Neumann Inc. Which of the following statements are correct? (Select all that apply.) Multiple select question. Von owns more than 50% of Neumann's voting shares. Von has significant influence over Neumann. Von has control over Neumann. Von owns 20-50% of Neumann's voting shares.

Von has significant influence over Neumann. Von owns 20-50% of Neumann's voting shares.

When an equity method investment is sold,

a gain or loss is recognized if the sales price is more or less than the book value.

Select all that apply January 1, 2021, Smith Co. purchased common stock of North Company for $500,000. North Company has common stock outstanding of $10 million. How should Smith Co. record the purchase of this investment? (Select all that apply.) Multiple select question. credit cash $500,000 debit investment in North Company $500,000 credit investment in North Company $500,000 debit cash $500,000

credit cash $500,000 debit investment in North Company $500,000

James Company is paid $6,000 in dividends from Mark Corp. on its equity investment. James lacks significant influence over Mark Corp. James Company should

credit dividend revenue

Select all that apply On December 31, 2021, Gardner Company holds debt securities classified as HTM with a face amount of $100,000 and a carrying value of $95,000. The bonds have an effective interest rate of 6% and pay interest of $2,500 semi-annually on June 30 and December 31. The journal entry to record the interest payment on December 31, 2021 includes (Select all that apply.) Multiple select question. credit interest revenue $2,850 debit cash $2,500 credit interest revenue $2,500 debit discount on bond investment $350 credit premium on bond investment $350 debit cash $2,850

credit interest revenue $2,850 debit cash $2,500 debit discount on bond investment $350

January 1, 2021, Smith Co. purchased common stock of North Company for $500,000. North Company has common stock outstanding of $10 million. Smith owns 5% of the outstanding stock of North. On December 31, 2021, the investment in North Company has a fair value of $505,000. On January 1, 2022, Smith sells the investment in North Company for $505,000. What journal entry is required to record the sale? (Select all that apply.)

credit investment in North stock $500,000 credit fair value adjustment $5,000 debit cash $505,000

Select all that apply Margot Company purchases $100,000 face amount, 6% semi-annual bonds for $110,000 when the market interest rate is 5%. The journal entry to record the interest for the first 6-month period includes (Select all that apply.) Multiple select question. debit cash $2,750 credit premium on bond investment $250 credit interest revenue $2,750 debit discount on bond investment $250 credit interest revenue $3,000 debit cash $3,000

credit premium on bond investment $250 credit interest revenue $2,750 debit cash $3,000

Global Company holds a portfolio of equity securities. The company intends to sell the securities during the next accounting period. The company should classify the investment as

current

Select all that apply January 1, 2018, Smith Co. purchased common stock of North Company for $500,000. North Company has common stock outstanding of $10 million. Smith owns 5% of the outstanding stock of North. On December 31, 2018, North Company has $250,000 in net income and pays Smith Co. $5,000 in dividends. What should Smith Co. record on December 31, 2018? (Select all that apply.) Multiple select question. debit cash $17,500 credit investment revenue $12,500 debit dividend revenue $5,000 debit investment in North Company stock $12,500 debit cash $5,000 credit dividend revenue $5,000

debit cash $5,000 credit dividend revenue $5,000

Select all that apply Action Company sells bond investments classified as trading securities for $99,000. The face amount is $100,000; unamortized discount is $2,000. What must be included in the journal entry to record the sale? (Select all that apply.) Multiple select question. debit to loss on sale for $1,000 debit to cash $99,000 debit to discount $2,000 credit to gain on sale for $1,000 credit investment in bonds $100,000 credit to fair value adjustment $1,000

debit to cash $99,000 debit to discount $2,000 credit investment in bonds $100,000 credit to fair value adjustment $1,000

Select all that apply Northern Company has bonds with an amortized cost of $600,000. At the end of the first reporting period, the bonds had a fair value of $675,000. 2 days after the end of the first reporting period, the bonds have a fair value of $680,000 and Northern decides to sell the bonds. The initial investment in the bonds was $700,000 and the discount on bond account has a $100,000 balance. Northern properly classifies these bonds as trading securities. The journal entry to record the sale of the bonds includes (Select all that apply.) Multiple select question. debit to discount on bond investment $100,000 debit to cash $680,000 credit to gain on trading securities - net income $80,000 debit to fair value adjustment $80,000 credit to investment in bonds $700,000 debit to loss on trading securities-net income $20,000 credit to fair value adjustment $80,000.

debit to discount on bond investment $100,000 debit to cash $680,000 credit to investment in bonds $700,000 credit to fair value adjustment $80,000.

Dividends cause the investor's investment in the investee's net assets to

decrease

Gunter Company acquires a 25% interest in Hunter Company. The fair value of Hunter's inventory exceeds its book value by $40,000. During the subsequent year, the inventory is sold. As a result of the sale of inventory, investment revenue would:

decrease by $10,000 (recognize expense associated with higher fair value)

Silvia Company acquires a 30% interest in Small Company. The fair value of Small's inventory exceeds its carrying value by $100,000. During the subsequent year, the inventory is sold. As a result of the sale of inventory, investment revenue would:

decrease by $30,000

Under the equity method, if the investee company reports a net loss, the investment balance will

decrease by the investor's proportionate share of the investee's net loss

Abbott Inc. owns 30% of the outstanding voting shares of Berta Inc. On the date of acquisition, the fair value of Berta's equipment with a remaining useful life of five years and no residual value exceeded its carrying value by $20,000. During the year after the acquisition, the undervalued equipment will _____ Abbott's investment revenue by _____.

decrease; $1,200

Lerner Inc. owns 30% of the outstanding voting shares of Koerner Inc. On the date of acquisition, the fair value of Koerner's equipment with a remaining useful life of ten years and no residual value exceeded its carrying value by $50,000. During the year after the acquisition, the undervalued equipment will _____ Lerner's investment revenue by _____.

decrease; $1,500

An investor is assumed to have control over the investee company if the investor owns _____ of the investee's outstanding voting shares.

more than 50%

Select all that apply Adjustments made to OCI and AOCI to account for the tax effects of unrealized holding gains and losses on available-for-sale debt securities also give rise to _________. (Select all that apply.) Multiple select question. deferred tax assets current taxes payable lower net income deferred tax liabilities

deferred tax assets deferred tax liabilities

For a specific investment in equity securities, use of the equity method tends to produce ____ financial statement results than would using the fair value method.

different

If a bond sells for less than its maturity value, the bond sells at a (blank).

discount

Dividends earned on an equity investment, when there is a lack of significant influence, are credited to

dividend revenue.

The appropriateness of the classification of debt investments must be reassessed

each reporting date

Which of the following are financial instruments?

evidence of ownership interest in companies accounts receivable cash

Interest received is calculated based on the (blank) interest rate. (Enter only one word)

face or stated

At the end of the accounting period, trading debt securities must be adjusted to (blank) value. (Enter only one word.)

fair or market

Investments in debt securities classified as trading are reported on the balance sheet at (blank) (blank). (Enter one word per blank.)

fair value

Select all that apply Which of the following are categories available for classifying investments in debt securities consistent with IFRS No. 9? (Select all that apply.) Multiple select question. available-for-sale fair value through OCI trading amortized cost fair value through profit or loss

fair value through OCI amortized cost fair value through profit or loss

The fair value option can be applied to: (Select all that apply.)

financial assets financial liabilities

Equity and debt securities are commonly referred to as (blank) instruments. (Enter only one word.)

financial or financing

Select all that apply Characteristics that support classification of investments as trading securities include (Select all that apply.) Multiple select question. long-term reduction in investment risk. frequent and active trading. motivation to realize short-term profits. long-term appreciation of value.

frequent and active trading. motivation to realize short-term profits.

If an investor has the positive intent and ability to hold a debt security until it matures, it should be classified as a(n)

held-to-maturity security.

Gains and losses relating to debt securities classified as trading are presented in the (blank) (blank) in the periods in which fair value changes, regardless of whether they are realized or unrealized. (Enter one word per blank.)

income statement

Select all that apply Accounting for held-to-maturity, trading, and available-for-sale debt securities is the same with respect to (Select all that apply.) Multiple select question. interest revenue earned on investment. the initial investment. year-end fair value adjustment. the reclassification of unrealized holding gains and losses.

interest revenue earned on investment. the initial investment.

Cash flows from buying and selling AFS debt securities are typically shown on the Statement of Cash Flows in the _____ activities section.

investing

Cash flows from buying and selling held-to-maturity securities are typically classified as _____ activities on the Statement of Cash Flows.

investing

On July 1, Adrianna Company purchases 35% of Saddle Company's outstanding stock for $450,000. During the first year, Saddle reports income of $200,000 and declares dividends of 50,000. Adrianna should recognize income earned by debiting

investment in Saddle Company for $35,000. Reason: The stock was purchased July 1 so 6/12

Adrianna Company purchases 35% of Saddle Company's outstanding stock for $450,000. During the first year, Saddle Company reports income of $200,000 and declares dividends of $100,000. Adrianna Company should recognize income earned by debiting

investment in Saddle Company for $70,000.

Select all that apply Additional adjustments under the equity method directly affect which of the following accounts? (Select all that apply.) Multiple select question. investment revenue retained earnings dividends investment

investment revenue investment

Adrianna Company purchases 35% of Saddle Company's outstanding stock for $450,000. During the first year, Saddle Company reports income of $200,000 and declares dividends of $100,000. Adrianna Company should recognize income earned by crediting

investment revenue $70,000

Select all that apply The discount on bond investment (Select all that apply.) Multiple select question. is a contra-asset account increases the carrying value of the bond to its cost at date of purchase is a contra-liability account reduces the carrying value of the bond to its cost at date of purchase

is a contra-asset account reduces the carrying value of the bond to its cost at date of purchase

Sour Company's ownership interest in Sweet Inc. declined from 25% to 15% during Year 20X1. Sour Company previously used the equity method to account for its interest in Sweet. In 20X1, the equity method

is discontinued and the carrying value of the investment serves as the new cost basis.

Goober Company is able to control the operating and financial policies of Stein Company. Goober should

issue consolidated financial statements.

If the interest rate paid on a bond is lower than the market interest rate, the bond will sell for an amount that is

less than its maturity value.

The overall objective of derivatives is to

manage risk

Investors use this interest rate to value investments in bonds:

market interest rate

Interest revenue is calculated based on the (blank) interest rate. (Enter only one word.)

market or effective

Investors utilize the (blank) interest rate to value the stream of cash flows associated with bond investments. (Enter only one word.)

market or effective

Select all that apply Identify critical events that companies experience with respect to equity investments that must be recognized in the accounting system. (Select all that apply.) Multiple select question. purchase of investment sale of investment receiving dividends changes in fair value changes in the riskiness of investment

purchase of investment sale of investment receiving dividends changes in fair value

The investment account associated with Adam Corp.'s equity method investment shows a balance of $500,000. The investment is sold for $550,000. Adam should

recognize a gain of $50,000.

Unrealized holding gains and losses associated with debt investments properly classified as "available for sale" are

recognized as other comprehensive income.

Holding gains and losses associated with investments properly classified as "trading securities" are

recognized as part of income.

If an investment accounted for under the equity method is acquired during the year, income and other adjustments are

recognized for the portion of the year the investment was owned.

The equity method discourages income manipulation by requiring that dividends (blank) the book value of the investment, rather than affect (blank) (blank).

reduce or decrease net income

Kendrick Company elected the fair value option for its equity method investments. During the current period, the fair value of the investments increased. Kendrick Company should

report the increase as part of net income.

Select all that apply Which balance sheet presentation is acceptable for reporting an investment involving significant influence for which the fair value option was chosen? (Select all that apply.) Multiple select question. report the investment as a separate line item combine the investment with equity method investments report the investment as an investment in trading securities

report the investment as a separate line item combine the investment with equity method investments

Unrealized gains and losses for equity method investments that are carried at fair value are:

reported as part of earnings

When fair value of equity investments is not readily determinable (select all that apply)

the fair value is estimated as cost, adjusted for previous impairments and changes in the prices of similar equity investments. the investor needs to continually evaluate whether fair value is readily determinable. the investor needs to assess annually whether the investment is impaired.

When fair value of equity investments is not readily determinable,

the fair value is estimated as cost, less previously recognized impairments, then adjusted based on similar equity.

The carrying value of an equity method investment consists of its initial cost plus

the investor's equity in the investee's undistributed income

Select all that apply Which of the following represent an important difference between the fair value through net income and equity method? (Select all that apply.) Multiple select question. the recognition of the initial investment the recognition of income and dividends the treatment of holding gains and losses

the recognition of income and dividends the treatment of holding gains and losses

Which of the following represent an important similarity between the fair value through net income and equity method?

the recognition of the initial investment

Select all that apply Which of the following investment-related transactions are classified as investing activities in the statement of cash flows? (Select all that apply.) Multiple select question. the sale of investments dividends received on investments the purchase of investments fair value changes relating to investments

the sale of investments the purchase of investments

Folger Company recognizes an unrealized holding gain for debt investments that are classified as AFS. If the company had classified the investments as trading securities, its total shareholders' equity would be

the same

Accounting for held-to-maturity, trading, and available-for-sale debt securities differs with respect to

the year-end fair value adjustment.

Jones Financial Institution buys and sells debt securities frequently to maximize short-term gains in market value. Jones should classify its portfolio as

trading securities.

The choice to classify debt securities as current or noncurrent depends on

when they are expected to mature or be sold.