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Exam 12: Investments

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Question 51

Multiple Choice

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What total unrealized holding gain would Beresford report in its 2013 income statement relative to its investment securities?

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

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Question 52

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In the statement of cash flows, inflows and outflows of cash from buying and selling trading securities typically are considered:

A) Investing activities.
B) Operating activities.
C) Financing activities.
D) Noncash financing activities.

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Question 53

Multiple Choice

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An OTT impairment for an equity investment is recognized in net income if fair value declines below the investment's cost and:

Accumulated Other Comprehensive Income in the shareholders' equity section of the balance sheet reflects changes in the fair value of securities for which type of securities?

What was the after-tax realized gain or loss on the sale of available-for-sale securities in 2013? Assume a 40% tax rate.

Under the equity method of accounting for a stock investment, cash dividends received are considered a reduction of the investee's net assets.

Which category completely excludes equity securities?

Jack Corporation purchased a 20% interest in Jill Corporation for $1,500,000 on January 1, 2013. Jack can significantly influence Jill. On December 10, 2013, 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 2013 relative to its investment in Jill?

Securities classified as held to maturity could be reported as either current or long-term in a classified balance sheet, depending upon their maturity dates.

Unrealized holding gains and losses on securities available for sale would have the following effects on retained earnings:

When available-for-sale securities are sold, the amount of gain or loss realized from the date of purchase is included in before-tax net income.

The following transactions occurred during the year for XYZ Corporation: (a.) During the year, trading securities were purchased for $250,000. (b.) During the year, securities available for sale were purchased for $80,000. (c.) During the year, trading securities that are carried on the balance sheet at their fair value of $125,000 were sold for $125,000 cash. (d.) At the end of the year, the trading securities portfolio has an aggregate market value of $142,000 and an aggregate cost of $150,000. (e.) At the end of the year the securities available for sale portfolio has an aggregate market value of $95,000. Required: Indicate how each of these transactions would affect the statement of cash flows for a corporation. Assume the statement of cash flows is prepared using the indirect method. Each transaction is assumed to be independent of the other transactions.

LaBelle Corporation owns a $6 million whole life insurance policy on the life of its CEO, naming LaBelle as beneficiary. The annual premiums are $95,000 and are payable at the beginning of each year. The cash surrender value of the policy was $56,000 at the beginning of 2013. Required: (1.) Prepare the appropriate 2013 journal entry to record insurance expense and the increase in the investment, assuming the cash surrender value of the policy increased according to the contract to $70,000. (2.) The CEO died at the end of 2013. Prepare the appropriate journal entry.

Consolidated financial statements are prepared when one company has:

Which of the following is not true about the "fair value through other comprehensive income" approach for accounting for investments under IFRS No. 9?

Assume Arctic Cat did not purchase any trading securities during 20X5. Write a journal entry to record any unrealized holding gains or losses on trading securities during 20X5.

From time to time, debt and equity securities must be reclassified when conditions and circumstances surrounding the investment change. Required: Describe the general accounting procedures for reclassifying securities from one category to another-held to maturity, available for sale, or trading.

Prepare journal entries that Fragrance International recorded at June 30, 2013, to (1) record any necessary changes to the fair value adjustment for available-for-sale securities and (2) record any tax effects associated with those changes.

All securities considered available for sale should be reported as current assets in a classified balance sheet.

The Stevens Company purchased a debt investment that meets the characteristics of a simple debt instrument. Stevens is holding the debt for purposes of managing risk. Might Stevens have to recognize an impairment loss on the debt?