1). Which of the following investments would most likely NOT be valued at fair value on a...
Question:
1). Which of the following investments would most likely NOT be valued at fair value on a company’s books?
a). strategic investments held by companies reporting under IFRS with less than 20% ownership.
b). strategic investments held by companies reporting under IFRS with more than 20% ownership.
c). investments held for trading.
d). debt investment purchased to trade by companies reporting under IFRS in the short-term at gain.
2), A company made an investment in ABC Bonds for the purpose of earning interest. The bonds have an amortized cost of $11,300 and are being sold before maturity for $11,900. The journal entry for the sale will include
a). a credit to Gain on Sale of ABC Bonds for $600.
b). a debit to Loss on Sale of ABC Bonds for $600.
c). a credit to ABC Bonds for $11,900.
d). a debit to Cash for $11,300.
3). Favaro Company purchased 25% of the outstanding common shares (10,000 shares) of ABC Company for $65,000 on August 1. At December 31, Favaro’s year end, ABC’s shares are selling for $7 and ABC reported net income of $160,000. Assuming Favaro accounts for the investment using the equity method, the adjustment to the investment account at year end would be:
a). Debit to Investment in Associate – ABC Company for $40,000.
b).Debit to Investment in Associate – ABC Company for $160,000.
c). Debit to Investment in Associate – ABC Company for $5,000.
d). Debit to Investment in Associate – ABC Company for $17,500.
Auditing and Assurance Services
ISBN: 978-0077862343
6th edition
Authors: Timothy Louwers, Robert Ramsay, David Sinason, Jerry Straws