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Exam 12: Investments

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Question 1

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If the fair value of a held-to-maturity investment declines for a reason that is viewed as "other than temporary" because the company intends to sell the investment:

A) The investment is not written down to fair value.
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 the entire impairment loss is recognized in accumulated other comprehensive income. .
D) The investment is treated the same way it would be treated if the decline in fair value was viewed as temporary.

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

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Question 2

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On January 1,2016,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).

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Question 3

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Listed below are five terms followed by a list of phrases that describe or characterize each of the terms.Match each phrase with the number for the correct term.

Under IFRS No.9,investments for which the investor lacks significant influence use basically the same reporting classifications as those used under U.S.GAAP.

Under IAS No.39,investments for which the investor lacks significant influence use basically the same reporting classifications as those used under U.S.GAAP.

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

Discuss the following questions. Required: What securities must be classified within one of the three categories of held to maturity,available for sale,and trading? (Do not describe how to determine how securities are classified among these three categories. )Identify the four primary recording activities related to investments in securities.

Consolidated financial statements are prepared when one company has:

Jack Corporation purchased a 20% interest in Jill Corporation for $1,500,000 on January 1,2016.Jack can significantly influence Jill.On December 10,2016,Jill declared and paid $1 million in dividends.Jill reported a net loss of $6 million for the year.What amount of loss should Jack report in its income statement for 2016 relative to its investment in Jill?

Prepare appropriate entry(s)at December 31,2017,and indicate how the scenario will affect net income,OCI,and comprehensive income.

Assume Gibson Company is an equal partner in a joint venture with Glover Company.Each company owns 50% of Pesci Company,and equally shares decision-making authority. Required: Describe how U.S.GAAP and IFRS differ in how they would have Gibson account for this investment.

Which of the following investment securities held by Zoogle Inc.may be classified as held-to-maturity securities in its balance sheet?

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 2016 will be reduced by:

Jackson Company engaged in the following investment transactions during the current year. Required: Prepare the appropriate journal entries to record the transactions for the year including year-end adjustments.Show calculations.

GAAP regarding accounting for unrealized gains and losses on investments in equity securities will apply to an investment when the percentage of ownership of another company is:

Which of the following increases the investment account under the equity method of accounting?

Assume that,on January 1,2016,Matsui Co.paid $1,200,000 for its investment in 60,000 shares of Yankee Inc.Further,assume that Yankee has 200,000 total shares of stock issued.The book value and fair value of Yankee's identifiable net assets were both $4,000,000 at January 1,2016.The following information pertains to Yankee during 2016: What amount would Matsui report in its year-end 2016 balance sheet for its investment in Yankee?

If Pop Company owns 15% of the common stock of Son Company,then Pop Company typically:

Which of the following is not true about the fair value option?

Which of the following is not a reason to consider a decline in the fair value of a debt investment to be "other than temporary"?