Question 1

If Nolte Company acquired a 30% interest in Boswell Company on December 31, 2011 for $75,000 and the equity method of accounting for the investment were used, the amount of the debit to Investment in Boswell Company Stock would have been

Accepted Answer

A)  $75,000.
B)  $90,000.
C)  $60,000.
D)  $67,500.E) C) and D)
F) A) and C)

Question 2

Which of the following situations might indicate the potential impairment of the underlying securities?

Accepted Answer

A)  The issuing entity is experiencing major financial difficulties
B)  The issuing entity is unable to pay its liabilities
C)  All of these
D)  The issuing entity is undergoing a major reorganizationE) C) and D)
F) A) and D)

Question 3

When an investment is readily marketable, it means

Accepted Answer

A)  management intends to convert it to cash within a year or operating cycle, whichever is longer.
B)  it can be sold easily with minimum cost.
C)  it is an investment in shares rather than a debt security.
D)  it is a current asset.E) C) and D)
F) B) and C)

Question 4

On November 1, 2011, Roper Company purchased 600 of the $1,000 face value, 9% bonds of Poon, Limited, for $632,000, which includes accrued interest of $9,000.The bonds, which mature on January 1, 2016, pay interest semiannually on March 1 and September 1.Assuming that Roper uses the straight-line method of amortization and that the bonds are accounted for under the cost method, the net carrying value of the bonds should be shown on Roper 's December 31, 2011, balance sheet at

Accepted Answer

A)  $632,000.
B)  $600,000.
C)  $623,000.
D)  $622,080.E) C) and D)
F) B) and D)

Question 5

Which of the following is an "equity security"?

Accepted Answer

A)  Treasury shares
B)  Term preferred shares
C)  Convertible bonds
D)  WarrantsE) None of the above
F) A) and D)

Question 6

Under the fair value through other comprehensive income model, investments are reported as long term assets

Accepted Answer

A)  Depending on marketability and management intent
B)  Depending on the value and risk of the investment
C)  Depending on the balance in the accumulated comprehensive income account
D)  None of theseE) A) and B)
F) A) and C)

Question 7

When one corporation has control over another corporation, the investor corporation

Accepted Answer

A)  Is referred to as the parent
B)  Is referred to as the subsidiary
C)  Must have acquired at least 10% of the other company's voting shares
D)  (a)  and (c) E) A) and D)
F) B) and C)

Question 8

Which of the following is not a condition for investments to be classified as current?

Accepted Answer

A)  It must be held primarily for trading purposes.
B)  It must be a cash equivalent.
C)  It must be expected to be sold or realized within 12 months from the balance sheet
D)  It must be accounted for under the cost model.E) A) and B)
F) A) and C)

Question 9

The disclosure requirements for private entities are usually less extensive as compared to those for public entities because

Accepted Answer

A)  investors in private entities are expected to have less information about the company.
B)  investors in private entities are expected to have more information about the company.
C)  investors in private entities tend to be more sophisticated.
D)  investors in private entities tend to be less sophisticated.E) C) and D)
F) A) and D) B

Question 10

Under the fair value through net income model, holding gains are

Accepted Answer

A)  generally recognized in net income
B)  recognized in other comprehensive income
C)  recognized depending on management's intention
D)  (a)  and (c) E) All of the above
F) B) and D)

Question 11

In January 2011, Colt Co.had purchased an investment for $100,000.By December 31 2011 the market value of that investment had increased by $10,000.Assuming this gain was NOT included in the company's 2011 net income, which accounting model did Colt use to account for this investment?

Accepted Answer

A)  The cost model
B)  The fair value through net income model
C)  The fair value through OCI model
D)  None of theseE) A) and C)
F) A) and D)

Question 12

Pippen Co.purchased ten-year, 10% bonds that pay interest semi-annually.The bonds are sold to yield 8%.One step in calculating the issue price of the bonds is to multiply the principal by the table value for

Accepted Answer

A)  10 periods and 10% from the present value of 1 table.
B)  10 periods and 8% from the present value of 1 table.
C)  20 periods and 5% from the present value of 1 table.
D)  20 periods and 4% from the present value of 1 table.E) B) and C)
F) A) and B)

Question 13

Transaction costs must be capitalized except when the investment is accounted for under the fair value to net income model.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following does not describe a financial asset?

Accepted Answer

A)  Cash
B)  A contractual right to receive cash
C)  An equity instrument of another entity
D)  None of theseE) A) and B)
F) A) and C) D

Question 15

Under the cost/amortized cost model, holding gains are

Accepted Answer

A)  recognized in net income only when realized
B)  recognized in other comprehensive income
C)  recognized depending on management's intention
D)  None of theseE) A) and C)
F) A) and B) A

Question 16

Comprehensive income is

Accepted Answer

A)  the change in net income for the complete entity.
B)  revenue and expense items that accounting standards exclude from net income.
C)  all past changes and credits excluded from net income.
D)  the change in equity during the period from transactions and events from non-owner sources.E) None of the above
F) A) and D)

Question 17

Use the following information for questions 
Altadore Ltd.acquired 30% of Dorset Corp.'s common shares on January 1, 2011 for $240,000.During 2011, Dorset earned $100,000 and paid dividends of $60,000.Altadore's 30% interest in Dorset gives Altadore the ability to exercise significant influence over Dorset 's operating and financial policies.During 2012, Dorset earned $120,000 and paid dividends of $40,000 on April 1 and $40,000 on October 1.On July 1, 2012, Altadore sold half of its shares in Dorset for
$158,000 cash.
-Before income taxes, what amount should Altadore include in its 2011 income statement as a result of the investment?

Accepted Answer

A)  $100,000.
B)  $30,000.
C)  $60,000.
D)  $18,000.E) None of the above
F) All of the above

Question 18

Reclassifications between measurement models are allowed in rare circumstances.

Accepted Answer

A) True 
 B)False

Question 19

An investor who owns 15% of an entity's voting shares can

Accepted Answer

A)  Always be assumed to have little or no influence over the investee
B)  Potentially have influence over the investee if the shares are widely held
C)  Be assumed to account for the investment under the cost model.
D)  (a)  and (c) E) C) and D)
F) All of the above

Question 20

The investment would generally require MORE extensive disclosures under IFRS.

Accepted Answer

A) True 
 B)False

Exam 9: Investments

If Nolte Company acquired a 30% interest in Boswell Company on December 31, 2011 for $75,000 and the equity method of accounting for the investment were used, the amount of the debit to Investment in Boswell Company Stock would have been

Correct Answer
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Which of the following situations might indicate the potential impairment of the underlying securities?

Correct Answer
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When an investment is readily marketable, it means

Correct Answer
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Correct Answer
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Which of the following is an "equity security"?

Correct Answer
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Under the fair value through other comprehensive income model, investments are reported as long term assets

Correct Answer
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When one corporation has control over another corporation, the investor corporation

Correct Answer
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Which of the following is not a condition for investments to be classified as current?

Correct Answer
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The disclosure requirements for private entities are usually less extensive as compared to those for public entities because

Correct Answer
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B

Under the fair value through net income model, holding gains are

Correct Answer
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In January 2011, Colt Co.had purchased an investment for $100,000.By December 31 2011 the market value of that investment had increased by $10,000.Assuming this gain was NOT included in the company's 2011 net income, which accounting model did Colt use to account for this investment?

Correct Answer
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Pippen Co.purchased ten-year, 10% bonds that pay interest semi-annually.The bonds are sold to yield 8%.One step in calculating the issue price of the bonds is to multiply the principal by the table value for

Correct Answer
verified

Transaction costs must be capitalized except when the investment is accounted for under the fair value to net income model.

Correct Answer
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Which of the following does not describe a financial asset?

Correct Answer
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D

Under the cost/amortized cost model, holding gains are

Correct Answer
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A

Comprehensive income is

Correct Answer
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Reclassifications between measurement models are allowed in rare circumstances.

Correct Answer
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An investor who owns 15% of an entity's voting shares can

Correct Answer
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The investment would generally require MORE extensive disclosures under IFRS.

Correct Answer
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Exam 9: Investments

If Nolte Company acquired a 30% interest in Boswell Company on December 31, 2011 for $75,000 and the equity method of accounting for the investment were used, the amount of the debit to Investment in Boswell Company Stock would have been

Correct AnswerverifiedShow Answer

Which of the following situations might indicate the potential impairment of the underlying securities?

Correct AnswerverifiedShow Answer

When an investment is readily marketable, it means

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following is an "equity security"?

Correct AnswerverifiedShow Answer

Under the fair value through other comprehensive income model, investments are reported as long term assets

Correct AnswerverifiedShow Answer

When one corporation has control over another corporation, the investor corporation

Correct AnswerverifiedShow Answer

Which of the following is not a condition for investments to be classified as current?

Correct AnswerverifiedShow Answer

The disclosure requirements for private entities are usually less extensive as compared to those for public entities because

Correct AnswerverifiedB

Under the fair value through net income model, holding gains are

Correct AnswerverifiedShow Answer

In January 2011, Colt Co.had purchased an investment for $100,000.By December 31 2011 the market value of that investment had increased by $10,000.Assuming this gain was NOT included in the company's 2011 net income, which accounting model did Colt use to account for this investment?

Correct AnswerverifiedShow Answer

Pippen Co.purchased ten-year, 10% bonds that pay interest semi-annually.The bonds are sold to yield 8%.One step in calculating the issue price of the bonds is to multiply the principal by the table value for

Correct AnswerverifiedShow Answer

Transaction costs must be capitalized except when the investment is accounted for under the fair value to net income model.

Correct AnswerverifiedShow Answer

Which of the following does not describe a financial asset?

Correct AnswerverifiedD

Under the cost/amortized cost model, holding gains are

Correct AnswerverifiedA

Comprehensive income is

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Reclassifications between measurement models are allowed in rare circumstances.

Correct AnswerverifiedShow Answer

An investor who owns 15% of an entity's voting shares can

Correct AnswerverifiedShow Answer

The investment would generally require MORE extensive disclosures under IFRS.

Correct AnswerverifiedShow Answer

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B

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D

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A

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