Intermediate Acc II 16-6 選擇
13) Ewok Enterprises recently elected the fair value option to account for its investment in Yoda Inc. Ewok purchased the shares for $210,000 and the shares are currently trading for $195,000 at year-end. What is the amount of gain or loss reported at year-end for this investment and where is this loss reported? A) Unrealized Loss of $15,000, reported as part of Net Income. B) Unrealized Loss of $15,000, reported as part of Other Comprehensive Income. C) Unrealized Gain of $15,000, reported as part of Net Income. D) Unrealized Gain of $15,000, reported as part of Other Comprehensive Income.
Answer: A
7) Griffin buys and sells securities and typically classifies them as available for sale. On December 15, Griffin purchased $800,000 of Baker Corporation shares and elected the fair value option to account for the investment. As of December 31, the shares in Baker Corporation had a fair value of $875,000. In its December 31 financial statements, Griffin will report pretax ________. A) Investment income of $75,000 in its income statement B) Other comprehensive income of $75,000 C) An investment in Baker Corporation of $800,000 D) Accumulated other comprehensive income of $875,000
Answer: A
8) Glover buys and sells securities and typically classifies them as available for sale. On December 15, Glover purchased $700,000 of Mooney Corporation shares and elected the fair value option to account for the investment. As of December 31, the shares in Mooney Corporation had a fair value of $675,000. In its December 31 financial statements, Glover will report pretax ________. A) Investment loss of $75,000 in its income statement. B) Other comprehensive income/loss of $25,000. C) An investment in Mooney Corporation of $700,000 D) Accumulated other comprehensive income of $675,000
Answer: A
9) When must a company generally elect the fair value option for reporting assets? A) A company can elect the fair value option at any point in the assets life, but can not then revert back to accounting for those assets at cost. B) A company must typically elect the fair value option at acquisition. C) A company can typically choose the cost or fair value for each asset each year at the balance sheet date. D) Companies may not account for assets at fair value. GAAP requires these be recorded at cost.
Answer: B
15) Skywalker Limited purchased shares of Jedi Jewelers during 2015 for $124,000. Skywalker elected the fair value option for accounting for this investment. At year end 2015, 2016, and 2017, this investment had a fair value of $120,000, $130,000, and $135,000, respectively. What is the amount of unrealized gain or loss reported on this investment at year-end 2017? A) Unrealized Gain of $11,000 B) Unrealized Gain of $5,000 C) Unrealized Loss of $4,000 D) Unrealized Gain of $10,000
Answer: B Explanation: B) Unrealized Gain is the difference in Fair Value from 2017 ($135,000) and 2016 ($130,000), or $5,000.
10) If a company has elected the fair value option, where are gains and losses resulting from adjusting these accounts to fair value reported? A) Unrealized Gains are reported as part of Other Comprehensive Income while Unrealized losses are reported as part of Net Income. B) Unrealized Gains are reported as part of Net Income, while Unrealized Losses are reported as part of Other Comprehensive Income. C) Unrealized Gains and Losses are both reported as part of Net Income. D) Unrealized Gains and Losses are both reported as part of Other Comprehensive Income.
Answer: C
11) If a company elects the fair value option to account for Trading Equity securities, what will be recorded differently for these trading securities? A) Unrealized Gains and Losses will now be reported as part of Net Income instead of Other Comprehensive Income. B) Dividends received from the investee will now be credited to Dividend Revenue instead of as a reduction to the investment account. C) A proportionate share of net income will no longer need to be recorded for these trading securities. D) There is no difference in accounting for Trading securities as these are already accounted for using the fair value method.
Answer: D
14) Ewok Enterprises recently elected the fair value option to account for its investment in Yoda Inc. Ewok purchased the shares for $210,000 and the shares are currently trading for $195,000 at year-end. What is the carrying value of this investment on the balance sheet of Ewok? A) $210,000 B) $15,000 C) $202,500 D) $195,000
Answer: D
16) Skywalker Limited purchased shares of Jedi Jewelers during 2015 for $124,000. Skywalker elected the fair value option for accounting for this investment. At year end 2015, 2016, and 2017, this investment had a fair value of $120,000, $130,000, and $135,000, respectively. How will this investment be reported on the Balance Sheet at year-end, 2017? A) Investment in Jedi - $135,000 B) Investment in Jedi - $130,000, plus Fair Value Adjustment - Fair Value Option - $5,000 C) Investment In Jedi - $124,000 D) Investment in Jedi - $124,000, plus Fair Value Adjustment - Fair Value Option - $11,000
Answer: D Explanation: D) Investment account maintained at cost ($124,000); FV Adjustment Account balance is 2017 FV less cost ($135,000 - $124,000 = $11,000)