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Exam 12: Investments

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Question 101

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Cost of debt investments includes the price paid plus ______________

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Question 102

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The following asset is not considered a financial asset under both GAAP and IFRS

A) inventories.
B) held-for-collection securities.
C) equity securities.
D) trading securities.

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Question 103

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If the equity method is being used, the Revenue from Share Investments account is

A typical investment to house excess cash until needed is

Barr Company acquires 50, 10%, 5 year, €1,000 Community bonds on January 1, 2014 for €50,000. Assume Community pays interest on January 1 and July 1, and the July 1 entry was done correctly. The journal entry at December 31, 2014 would include a credit to

When an investor owns between 20% and 50% of the ordinary shares of a corporation, it is generally presumed that the investor has _______________ influence over the investee and therefore, the appropriate method of accounting for this type of investment is the _______________ method.

Under the cost method, the investment is recorded at cost and revenue is recognized only when cash dividends are received.

Under the equity method, the receipt of dividends from the investee company results in an increase in the Share Investments account.

Glaser Company had the following transactions pertaining to debt securities held as a short-term investment. Jan. 1 Purchased 40, 8%, $1,000 Adcock Company bonds for $40,000 cash. Interest is payable semiannually on July 1 and January 1. July 1 Received semiannual interest on Adcock Company bonds. Oct. 1 Sold 30 Adcock Company bonds for $32,000 plus accrued interest. Instructions (a) Journalize the transactions. (b) Prepare the adjusting entry for the accrual of interest on December 31.

Companies generally report long-term assets in a separate section immediately above current assets on the statement of financial position.

Elston Corporation sells 100 ordinary shares being held as an investment. The shares were acquired six months ago at a cost of $30 a share. Elston sold the shares for $40 a share. The entry to record the sale is

Consolidated financial statements are prepared in place of the financial statements for the parent and subsidiary companies.

If a company acquires a 40% ordinary share interest in another company,

If the fair value of a non-trading security exceeds its cost, the security should be written up to fair value and a realized gain should be recognized.

At the beginning of 2014, Trichet Inc. purchased a 27% stake in the ordinary shares of Papandreou Company at a cost of €4,000,000. After applying the equity method, the Investment in Papandreou account has a balance of €4,020,000. At December 31, 2014 the fair value of the investment is €4,130,000. Which of the following values is acceptable for Trichet to report for the investment in its December 31, 2014 statement of financial position? I. €4,000,000 II) €4,020,000 III) €4,130,000

On January 1, 2014, Nott Company purchased 5,000 ordinary shares of Ace Company for $300,000. Nott's investment represents 30 percent of the total outstanding shares of Ace. During 2014, Ace paid total dividends of $100,000 and reported net income of $250,000. What revenue does Nott report related to this investment and what is the amount to be reported as the Investment in Ace at December 31?

The accounting for short-term debt investments and for long-term debt investments is similar.

The company whose shares are owned by the parent company is called the

The consolidated worksheet shows Excess of Cost Over Book Value of Subsidiary of $210,000. Management of the parent company determines that the market values for subsidiary company plant assets are $90,000 higher than book values. In the consolidated statement of financial position, goodwill will be reported at

Consolidated financial statements are appropriate when an investor controls an investee by ownership of more than 50% of the investee's ordinary shares.