Multiple Choice Questions 1. ABC Company uses the equity method to account for its 40% interest in

Question:

Multiple Choice Questions
1. ABC Company uses the equity method to account for its 40% interest in the voting stock of XYZ Company. ABC paid $5,000,000 for the investment at the beginning of the current year, and XYZ's total book value at the time was $6,000,000. The discrepancy between acquisition cost and share of book value acquired was attributed to goodwill. XYZ reported income of $600,000 and paid dividends of $200,000 during the year. ABC will report its investment in XYZ on its end-of-year at what amount?
a. $4,920,000
b. $5,240,000
c. $5,000,000
d. $5,160,000
2. Under current standards, when is an impairment loss reported on a significant influence investment in the slock of another company, following U.S. GAAP and IFRS?

3. Under IFRS 9, effective in 2015 with early adoption allowed, companies that invest in equity securities can generally choose from which of the following options for reporting their investment?
a. FV-NI only
b. FV-NI or FV-OCI
c. Amortized cost or FV-NI
d. Amortized cost or FV-OCI

4. Following IFRS, when should a company use the equity method to report an intercorporate investment?
a. The company significantly influences the decisions of the investee.
b. The investee is the company's major supplier.
c. The company owns 20 - 50% of the investee's voting stock.
d. The company is holding the investment in its long-term portfolio.

Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...