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Test Bank for Advanced Accounting 4th Edition by Hamlen ; complete solution
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TESTgBANKgCHAPTER
g1
IntercorporategInvestments:gAngOverview
MULTIPLEgCHOICE
1. Topic:gAccountinggforgequitygsecuritiesdwithgnogsignificantginfluence
gLOg1
Agcompanyginvestsg$300,000gingequitygsecuritiesgongNovemberg30,g2019,gandgclassifiesgthemgasgi
nvestmentsgwithgnogsignificantginfluence.g AtgDecemberg31,g2019,gthegcompany’sgyear-
end,gthegsecuritiesghavegagfairgvaluegofg$310,000.g OngFebruaryg1,g2020,gthegcompanygsellsgthegsg
ecuritiesgforg$295,000.
Whichgstatementgisgtruegregardingghowgthisginformationgisgreportedgingthegcompany’sgfinancialgst
atements?
a. Thegcompany’sgDecemberg31,g2019gbalancegsheetgreportsgthegsecuritiesgatg$300,000
,gandgaggaingofg$10,000gisgreportedgongtheg2019gincomegstatement.
b. Thegcompany’sgDecemberg31,g2019gbalancegsheetgreportsgthegsecuritiesgatg$310,000
,gandgaglossgofg$5,000gisgreportedgongtheg2020gincomegstatement.
c. Thegcompany’sgDecemberg31,g2019gbalancegsheetgreportsgthegsecuritiesgatg$310,000
,gandgaglossgofg$15,000gisgreportedgongtheg2020gincomegstatement.
d. Thegcompany’sgDecemberg31,g2019gbalancegsheetgreportsgthegsecuritiesgatg$300,000
,gandgnoggaingorglossgappearsgongtheg2019gincomegstatement.
ANS: c
2. Topic:gAccountinggforgequitygsecuritiesdwithgnogsignificantginfluence
gLOg1
Whichgstatementgisgtruegconcerninggthegreportinggforgequityginvestmentsgwithgnodsignificantginflu
gence?
a. Theygaregreportedgatgfairgvalue,gwithganygchangesgingvaluegreportedgingincome.
b. Theygaregcategorizedgasgeithergtradinggorgavailable-for-
sale,gwithgunrealizedgchangesgingthegvaluegofgtradinggsecuritiesgreportedgingincome,ga
ngdgunrealizedgchangesgingthegvaluegofgAFSdsecuritiesgreportedgingOCI.
c. Theygaregreportedgatgcost,gwithgunrealizedgchangesgingvaluegreportedgingOCI.
d. Theygaregreportedgatgfairgvalue,gwithgunrealizedgchangesgingvaluegreportedgingOC
I.gANS: a
, Usegthegfollowingginformationgongagcompany’sginvestmentsgingequitygsecuritiesgwithgnogsignifi
gcantginfluencegtoganswergQuestionsg3gandg4.gThegcompany’sgaccountinggyeargendsgDecemberg
3g1.
DatedofdAc FairdValue Date Selling
Investment gquisition Cost d12/31/1 dSol dPrice
9 d
ColtgCompanygstock 9/20/19 $38,000 $37,000 2/10/20 $42,000
DanagCompanygstock 10/2/19 14,000 14,200 1/17/20 13,000
3. Topic:gAccountinggforgequityginvestmentsgwithgnogsignificantginfluenc
egLOg1
Whatgamountgisgreportedgforggaingorglossgongthesegsecuritiesging2019gincome?
a. Noggaingorgloss
b. $800gloss
c. $3,000ggain
d. $1,000gloss
ANS: b
($37,000g–d$38,000)g+g($14,200g–g$14,000)g=g$800gloss
4. Topic:gAccountinggforgequityginvestmentsgwithgnodsignificantginfluence
gLOg1
Whatgamountgisgreportedgforggaingorglossgongthesegsecuritiesging2020gincome?
a. Noggaingorgloss
b. $3,000ggain
c. $3,800ggain
d. $4,000ggain
ANS: c
($42,000g–g$37,000)g+g($13,000g–g$14,200)g=g$3,800ggain
5. Topic:gAccountinggforgequityginvestmentsgwithgnogsignificantginfluenc
egLOg1
Agcompanygbuysdangequityginvestmentgforg$100ging2020.ggTheginvestmentghasgnogsignificantginflu
gence.g Atgthegendgofg2020,gthegcompanygstillgholdsgtheginvestmentgandgitghasgagmarketgvaluegofg
$1
15.g Ing2021,gthegcompanygsellsgtheginvestmentgforg$108.
Howgisgthisginformationgreportedgingthegcompany’sg2020gandg2021gincomegstatements?
a. $15ggaingongtheg2020gincomegstatement;g$7glossgongtheg2021gincomegstatement.
b. Doesgnotgappeargongtheg2020gincomegstatement;g$8ggaingongtheg2021gincomegstatement.
c. Doesgnotgappeargongtheg2020gincomegstatement;g$7glossgongtheg2021gincomegstatement.
d. $8ggaingongtheg2020gincomegstatement;gdoesgnotgappeargongtheg2021gincomegstatement.
ANS: a
,6. Topic:gAccountinggforgequityginvestmentsgwithgnodsignificantginfluence
LOg1
OngDecemberg20,g2020,gagcompanygpaysg$40,000gforganginvestmentgingequitygsecuritiesgwithgno
significantginfluence.g OngDecemberg31,g2020,gthegcompany’sgyear-
end,gthegstockghasgagmarketgvaluegofg$37,000.g Thegcompanygsellsgthegstockging2021gforg$44,000.
Ongitsgincomegstatement,gthegcompanygreports:
g
a. Aglossgofg$3,000ging2020,gandgaggaingofg$7,000ging2021
b. Noggaingorglossging2020,gandgaggaingofg$4,000ging2021
c. Aggaingofg$4,000ging2020,gandgnoggaingorglossging2021
d. Noggaingorglossging2020,gandgaggaingofg$7,000ging202
1gANS: a
7. Topic:gAccountinggforgequityginvestmentsgwithgnogsignificantginfluenc
egLOg1
OngOctoberg25,g2020,gagcompanygpaysg$35,000gforganginvestmentgingequitygsecurities,gwithgnog
siggnificantginfluence.g OngDecemberg31,g2020,gthegcompany’sgyear-
end,gthegstockgasgagmarketgvaluegofg$36,000.gThegcompanygsellsgthegstockging2021gforg$32,000.g
Hgowgisgthegcompany’sg2020gothergcomprehensivegincomegaffectedgbygthegabovegtransactionsgin
geagchgyear?
a. Increasegofg$1,000ging2020,gdecreasegofg$1,000ging2021
b. Increasegofg$1,000ging2020,gdecreasegofg$4,000ging2021
c. Nogeffectging2020,gdecreasegofg$3,000ging2021
d. NogeffectgongOCIgingeithergyear.
ANS:gggg d
Usegthegfollowingginformationgongagcompany’sginvestmentsgingdebtgsecuritiesgtodanswergQuest
igonsg 8d-g11.ggThegcompany’sgaccountingdyeargendsgDecemberg31.
DatedofgA FairdValue Dateg Sellingg
Investment cquisition Cost g12/31/1 Sold Price
9
ColtgCompanygbonds 9/20/19 $38,000 $37,000 2/10/20 $42,000
DanagCompanygbonds 10/2/19 14,000 14,200 1/17/20 13,000
8. Topic:gAccountingdforgdebtginvestmentsgclassifiedgasgtrading
gLOg1
Ifgthegabovegdebtginvestmentsgaregcategorizedgasgtradinggsecurities,gwhatgamountgisgreportedgfo
rggaingorglossgongsecuritiesging2019gincome?
a. Noggaingorgloss
b. $800gloss
c. $3,000ggain
d. $200ggain
ANS:gggg b
($37,000g-g$38,000)g+g($14,200g-g$14,000)g=g$(800)gloss
, 9. Topic:gAccountinggforgdebtginvestmentsgclassifiedgasgtradin
g
If
LOgthe
g1 gabovegdebtginvestmentsgaregcategorizedgasgtradinggsecurities,gwhatgamountgisgreportedgfor
gaingorglossgongsecuritiesging2020gincome?
a. Noggaingorgloss
b. $3,000ggain
c. $3,800ggain
d. $5,000ggain
ANS: c
($42,000g-g$37,000)g+g($13,000g-g$14,200)g=g$3,800ggain
10. Topic:gAccountinggforgdebtdinvestmentsgclassifiedgasgAFS
gLOg1
Ifgthegaboveginvestmentsgaregcategorizedgasgavailable-for-
salegsecurities,gwhatgamountgisgreportedgforggaingorglossgongsecuritiesging2019gincome?
a. Noggaingorgloss
b. $800gloss
c. $3,000ggain
d. $200ggain
ANS: a
11. Topic:gAccountinggforgdebtdinvestmentsgclassifiedgasgAFS
gLOg1
Ifgthegaboveginvestmentsgaregcategorizedgasgavailable-for-
salegsecurities,gwhatgamountgisgreportedgasggaingorglossgongsecuritiesging2020gincome?
a. $3,000ggain
b. $3,800ggain
c. $2,100ggain
d. $3,100ggain
ANS: a
($42,000g–d$38,000)g+g($13,000g–g$14,000)g=g$3,000ggain
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