Investment Test Questions

Topics: Bond, Stock, Stock market Pages: 44 (13132 words) Published: February 24, 2015
CHAPTER 17
INVESTMENTS
IFRS questions are available at the end of this chapter.

TRUE-FALSE—Conceptual
Answer
F
T
F
F
T
F
T
F
T
T
F
T
F
T
F
T
F
T
F
T

No.

Description

1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.

Examples of debt securities.
Definition of trading securities.
Available-for-sale unrealized gains/losses.
Classifying held-to-maturity securities.
Fair value changes in AFS securities.
Fair Value Adjustment account.
Accounting for trading securities.
Definition of significant influence.
Reporting Unrealized Holding Gain/Loss—Equity account.
Examples of significant influence.
Definition of controlling interest.
Effect of dividends on investment under equity.
Reporting revenue under fair value method.
Definition of controlling interest.
Using fair value option.
Accounting for changes in fair value.
Temporary declines and write downs.
Necessary of reclassification adjustment.
Transfer of held-to-maturity securities.
Transfers from trading to available-for-sale.

MULTIPLE CHOICE—Conceptual
Answer
c
b
c
c
a
a
c
b
a
d
b
c
d
c
c
d
c
a
c

No.
21.
22.
23.
24.
P
25.
S
26.
S
27.
S
28.
S
29.
30.
31.
32.
33.
34.
35.
36.
37.
38.
39.

Description
Debt securities.
Valuation of debt securities.
Held-to-maturity securities.
Unrealized gain/loss recognition for securities.
Accounting for accrued interest.
Identifying securities accounted for at amortized cost.
Accounting for available-for-sale securities.
Using effective-interest method of amortization.
Identifying available-for-sale securities.
Classification as held-to-maturity.
Reporting held-to-maturity securities.
Acquisition of held-to-maturity securities.
Accounting for trading securities.
Accounting for trading debt securities.
Recording investments in debt securities.
Calculating the issue price of bonds.
Valuation of investments in debt securities.
Recording amortization of bond discount.
Amortization of premium/discount on investment in a debt security.

17 - 2

Test Bank for Intermediate Accounting, Fourteenth Edition

MULTIPLE CHOICE—Conceptual (cont.)
Answer
d
c
c
b
a
c
b
d
a
d
d
d
a
d
c
b
b
d
c
b
a
c
b
d
c
b
a
c
a
d

No.
40.
41.
42.
S
43.
S
44.
P
45.
46.
47.
48.
49.
50.
51.
52.
53.
54.
55.
56.
P
57.
58.
59.
*60.
*61.
*62.
*63.
*64.
*65.
*66.
*67.
*68.
*69.

Description
Effective-interest rate method.
Debt securities purchased between interest dates.
Sale of debt security prior to maturity.
Passive interest investment.
Fair value vs. equity method.
Fair value vs. equity method.
Conditions for using the equity method.
Ownership interest required for using the equity method.
Recording of dividends received under the equity method.
Recognition of earnings of investee using the equity method. Effect of using the fair value method in error.
Determine value of investment.
Fair value option.
Accounting for impairments.
Reclassification adjustment in comprehensive income.
Reclassification of securities.
Reclassification of securities.
Transfer of a debt security.
Definition of “gains trading” or “cherry picking”.
Accounting for transfers between Categories.
Accounting for derivatives.
Characteristics of a derivative instrument.
Identifying companies that are arbitrageurs.
Identifying equity securities.
Accounting for fair value hedges.
Gains/losses on cash flow hedges.
Identifying an embedded derivative.
Requirements for financial instrument disclosures.
Variable-interest entity.
Risk-and-reward model and voting-interest approach.

P

These questions also appear in the Problem-Solving Survival Guide. These questions also appear in the Study Guide.
*This topic is dealt with in an Appendix to the chapter.

S

MULTIPLE CHOICE—Computational
Answer
c
b
d
b
a
c
a
b
c
a
b

No.
70.
71.
72....
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