ACCT 305 ACCT305 Chapter 12 Quiz Answers

ACCT 305 ACCT305 Chapter 12 Quiz Answers

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DeVry ACCT 305 ACCT/305 ACCT305 Chapter 12 Quiz

  1. On January 1, 2013, Normal Plastics bought 15% of Model, Inc.'s common stock for $900,000. Model's net income for the years ended December 31, 2013, and December 31, 2014, were $600,000 and $1,500,000, respectively. During 2014, Model declared a dividend of $420,000. No dividends were declared in 2013. How much should Normal show on its 2014 income statement from this investment?
  2. Fair value is used as the basis for valuation of a firm's investment securities when:
  3. Unrecognized holding gains and losses are included in an investor's earnings for:
  4. Investment securities are reported on a balance sheet at fair value for:
  5. Which of the following statements is untrue regarding investments in equity securities?
  6. Unrecognized holding gains and losses for securities to be held-to-maturity are:
  7. Unrecognized holding gains and losses for securities available-for-sale are:
  8. Unrecognized holding gains and losses for trading securities are:
  9. On January 12, Henderson Corporation purchased 4 million shares of Honeycutt Corporation common stock for $73 million and classified the securities as available-for-sale. At the close of the same year, the fair value of the securities is $81 million. Henderson Corporation should report:
  10. Evans Company owns 4.5 million shares of stock of Frazier Company classified as available-for-sale. During 2013, the fair value of those shares increased by $9 million. What effect did this increase have on Evans' 2013 financial statements?
  11. Level Company owns bonds of Leader Company classified as held-to-maturity. During 2013, the fair value of those bonds increased by $4 million. Interest was received of $3 million. What effect did the investment have on Level's 2013 financial statements?
  12. If the investment described in the previous question had been classified as available-for-sale, what effect would the investment have on Level's 2013 financial statements?
  13. On January 2, 2013, Garner, Inc. bought 10% of the outstanding common stock of Moody, Inc. for $60 million cash. At the date of acquisition of the stock, Moody's net assets had a book value and fair value of $180 million. Moody's net income for the year ended December 31, 2013, was $30 million. During 2013, Moody declared and paid cash dividends of $6 million. On December 31, 2013, Garner's investment should be reported at:
  14. An OTT impairment for an equity investment is recognized if fair value declines below amortized cost and
  15. Under IFRS No. 9, equity investments can be classified as:
  16. On January 2, 2013, Garner, Inc. bought 30% of the outstanding common stock of Moody, Inc. for $60 million cash. At the date of acquisition of the stock, Moody's net assets had a book value and fair value of $180 million. Moody's net income for the year ended December 31, 2013, was $30 million. During 2013, Moody declared and paid cash dividends of $6 million. On December 31, 2013, Garner's investment account should be reported at:
  17. The equity method is used when an investor can't control, but can exercise significant influence over the operating and financial policies of the investee. We presume, in the absence of evidence to the contrary, that this is so if:
  18. On January 2, 2013, Germane, Inc. bought 30% of the outstanding common stock of Quality, Inc. for $56 million cash. At the date of acquisition of the stock, Quality's net assets had a book value and fair value of $120 million. Quality's net income for the year ended December 31, 2013, was $30 million. During 2013, Quality declared and paid cash dividends of $10 million. On December 31, 2013, Germane's should report investment revenue of:
  19. When applying the equity method, an investor should report dividends from the investee as:
  20. Western Manufacturing Company owns 40% of the outstanding common stock of Eastern Supply Company. During 2013, Western received a $50 million cash dividend from Eastern. What effect did this dividend have on Western's 2013 financial statements?
  21. The accounting for unrealized holding gains and losses will be different if the fair value option is elected for all of the following types of investments except:
  22. The fair value option described by SFAS No. 159
  23. Credit losses are calculated as the difference between the amortized cost of debt and:
  24. Which of the following is NOT a reason why an investor might view a debt impairment as "other than temporary"?
  25. Which of the following is NOT true about recognizing unrealized gains and losses on equity investments?
  26. LB, Inc. holds a loan under which the borrower cannot settle the loan and provide a loss to the lender, unless the lender allows it. The loan was made for the purposes of providing customer financing. How would that loan be accounted for?
  27. Which of the following is NOT a criterion for a debt instrument to be viewed as having a lending or customer financing business purpose?
  28. Which of the following is a characteristic of a debt investment that is viewed as simple (i.e., not complex) with respect to the characteristics test?
  29. Which of the following is NOT a business purpose that determines the accounting approach used to account for "simple" debt?
  30. Under the "3 bucket approach" to impairment recognition, which of the following investments could NOT qualify for impairment recognition in "bucket 3: Individual debt investments suffering credit losses"?
  31. Which of the following is NOT true about how the proposed ASU accounts for impairments?

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