FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 12: Investments

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 1

Multiple Choice

Review LaterAdd Note

Review Later

If the fair value of a held-to-maturity investment declines for a reason that is viewed as "other than temporary" because the company has incurred a credit loss on the investment:

A) The investment is written down to fair value, and only the noncredit-loss component of the impairment loss is recognized in net income.
B) The investment is written down to fair value, and the entire impairment loss is recognized in net income.
C) The investment is written down to fair value, and only the credit-loss component of the impairment loss is recognized in net income.
D) The investment is written down to fair value, but none of the impairment loss is recognized in net income.

E) A) and C)
F) A) and B)

Correct Answer

verified

Show Answer

Question 2

Multiple Choice

Review LaterAdd Note

Review Later

Which of the following is not a characteristic of "simple" debt?

A) Investor's purpose is collecting cash flows.
B) An amount of principal (adjusted for premium or discount) is transferred to the borrower at issuance that will be returned to the debt holder when the debt matures.
C) The debt instrument is not a derivative.
D) The debt cannot be prepaid or settled in a way that the investor does not recover substantially all of its original investment unless that is what the investor chooses.

E) A) and D)
F) B) and C)

Correct Answer

verified

A

Question 3

Multiple Choice

Review LaterAdd Note

The journal entries for the _____________, ___________, and __________ approaches under the proposed ASU correspond to those used for the held-to-maturity, trading security, and available-for-sale approaches, respectively, in current GAAP.

Prepare appropriate entry(s) at December 31, 2014, and indicate how the scenario will affect net income, OCI, and comprehensive income.

The income statement reports changes in fair value for which type of securities?

If Pop Company exercises significant influence over Son Company and owns 40% of its common stock, then Pop Company:

On January 1, 2013, Wildcat Company purchased $93,000 of 10% bonds at face value. The bonds are to be held to maturity. The bonds pay interest semiannually on January 1 and July 1. Required: (1.) Prepare the appropriate journal entry to record the acquisition of the bonds. (2.) Record the first two interest payments (ignore year-end accruals).

Assume that Nichols concludes that the Holly bonds are other-than-temporarily impaired because Nichols is planning to sell the bonds in the near future. Before-tax net income for 2013 will be reduced by:

When using the equity method to account for an investment, cash dividends received by the investor from the investee should be recorded:

Dicker Furriers purchased 1,000 shares of Loose Corporation stock on January 10, 2012, for $800 per share and classified the investment as securities available for sale. Loose's market value was $400 per share on December 31, 2012, and the decline in value was viewed as temporary. As of December 31, 2013, Dicker still owned the Loose stock whose market value had declined to $100 per share. The decline is due to a reason that's judged to be other than temporary. Dicker's December 31, 2013, balance sheet and the 2013 income statement would show the following:

On April 1, 2013, BigBen Company acquired 30% of the shares of LittleTick, Inc. BigBen paid $100,000 for the investment, which is $40,000 more than 30% of the book value of LittleTick's identifiable net assets. BigBen attributed $15,000 of the $40,000 difference to inventory that will be sold in the remainder of 2013, and the rest to goodwill. LittleTick recognized a total of $20,000 of net income for 2013, and paid total dividends for the year $10,000; these dividends were issued quarterly. BigBen's investment in LittleTick will affect BigBen's 2013 net income by:

Under IFRS No. 9, which is not a category for accounting for investments?

Selecting the fair value option for an available-for-sale investment is equivalent to reclassifying that investment as a trading security.

On March 1, 2013, Navy Corporation used excess cash to purchase U.S. Treasury bonds for $103,000 plus accrued interest. The bonds were purchased at face value. The appropriate interest rate is 6%. Interest on these bonds is payable on January 1 and July 1 of each year. Navy's investment is accounted for as held to maturity. The fair value of the Treasury bonds is $104,000 at year-end. Required: Prepare the appropriate journal entries to record the transactions for the year, including any year-end adjustments. Show calculations, rounded to the nearest dollar.

All investment securities are initially recorded at:

Securities that are purchased with the intent of selling them in the near future to take advantage of short-term price changes are classified as:

If Dinsburry Company concluded that an investment originally classified as a trading security would now more appropriately be classified as held to maturity, Dinsburry would:

Newjohn Company owns stock in several affiliated companies. Investments in some of these affiliates are accounted for as securities available for sale while some are accounted for using the equity method. Required: (1.) What factors determine which method should be used? (2.) What events are recorded when the equity method is used? (3.) What events are recorded when the securities are accounted for as available for sale?

Goofy Inc. bought 15,000 shares of Crazy Co.'s stock for $150,000 on May 5, 2012, and classified the stock as available for sale. The market value of the stock declined to $118,000 by December 31, 2012. Goofy reclassified this investment as trading securities in December of 2013 when the market value had risen to $125,000. What effect on 2013 income should be reported by Goofy for the Crazy Co. shares?

All investments in debt and equity securities that don't fit the definitions of the other reporting categories are classified as: