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Exam 12: Investments

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Question 31

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What total unrealized holding gain would Beresford report in its 2016 income statement relative to its investment securities?

A) $55,900.
B) $36,000.
C) $80,900.
D) $48,200.

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

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Question 32

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In 2014,Osgood Corporation purchased $4 million of 10-year municipal bonds at face value.On December 31,2016,the bonds had a market value of $3,600,000 and Osgood reclassified the bonds from held to maturity to trading securities.Osgood's December 31,2016,balance sheet and the 2016 income statement would show the following:

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Question 33

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Listed below are five terms followed by a list of phrases that describe or characterize each of the terms with respect to accounting for investments under IFRS.Match each phrase with the correct term by placing the number designating the best term in the space provided by the phrase.

The equity method is in many ways a partial consolidation.

On January 1,2016,Green Corporation purchased 20% of the outstanding voting common stock of Gold Company for $300,000.The book value of the acquired shares was $275,000.The excess of cost over book value is attributable to an intangible asset on Gold's books that was undervalued and had a remaining useful life of five years.For the year ended December 31,2016,Gold reported net income of $125,000 and paid cash dividends of $25,000.What is the carrying value of Green's investment in Gold at December 31,2016?

The total amount of additional depreciation to be recognized by SBC over the remaining life of the assets is:

Routine transfers of debt and equity investments among the trading,available for sale,and held to maturity portfolios need not be disclosed in the financial statements.

Investments in securities available for sale are reported at:

Trading securities,by definition,are properly classified in the balance sheet as:

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

IFRS No.9 is a standard that indicates accounting for investments when the investor does not have significant influence under the investee. Required: Explain how debt investments are accounted for under IFRS No.9.What alternative accounting approaches are available,what determines whether an investment qualifies for each approach,and what are the key features of each approach with respect to accounting for unrealized gains and losses?

For trading securities,unrealized holding gains and losses are included in earnings:

The amount of purchased goodwill is:

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

Sloan Company has owned an investment during 2016 that has increased in fair value.After all closing entries for 2016 are completed,the effect of the increase in fair value on total shareholders' equity would be:

Nichols Enterprises has an investment in 25,000 shares of Elliott Electronics that Nichols accounts for as a security available for sale.Elliott shares are publicly traded on the New York Stock Exchange,and The Wall Street Journal quotes a price for those shares of $10 a share,but Nichols believes the market has not appreciated the full value of the Elliott shares and that a more accurate price is $12 a share.Nichols should carry the Elliott investment on its balance sheet at:

Use the following to answer questions In its 2016 annual report to shareholders,Kirby Inc.included the following disclosure regarding its available for sale investments in securities: Required: -Prepare the journal entry (in thousands)that Kirby made at the end of 2016 to record the information disclosed above.

On January 1,2016,Rupar Retailers purchased $100,000 of Anand Company bonds at a discount of $5,000.The Anand bonds pay 6% interest but were purchased when the market interest rate was 7% for bonds of similar risk and maturity.The bonds pay interest semiannually on January 1 and July 1 of each year.Rupar accounts for the bonds as a held-to-maturity investment,and uses the effective interest method.In Rupar's December 31,2016 journal entry to record the second period of interest,Rupar would record a credit to interest revenue of:

Assume that Nichols concludes that the Holly bonds are other-than-temporarily impaired because Nichols believes it is more likely than not that it will have to sell the Holly bonds before the bonds have a chance to recover their fair value.Before-tax net income for 2016 will be reduced by:

FKG Inc.carries the following investments on its books at December 31,2015,and December 31,2016.All securities were purchased during 2015. Required: (1. )Prepare the necessary journal entries for FKG on December 31,2015,and December 31,2016. (2. )What net effect would the valuation of these stock investments have on 2015 net income? On 2016 net income?