TEST BANK
CHAPTER 1
Intercorporate Investments: An Overview
MULTIPLE CHOICE
1. Topic: Accounting for equity securities with no significant influence
LO 1
A company invests $300,000 in equity securities on November 30, 2019, and classifies them as
investments with no significant influence. At December 31, 2019, the company’s year-end, the
securities have a fair value of $310,000. On February 1, 2020, the company sells the securities
for $295,000.
Which statement is true regarding how this information is reported in the company’s financial
statements?
a. The company’s December 31, 2019 balance sheet reports the securities at $300,000,
and a gain of $10,000 is reported on the 2019 income statement.
b. The company’s December 31, 2019 balance sheet reports the securities at $310,000,
and a loss of $5,000 is reported on the 2020 income statement.
c. The company’s December 31, 2019 balance sheet reports the securities at $310,000,
and a loss of $15,000 is reported on the 2020 income statement.
d. The company’s December 31, 2019 balance sheet reports the securities at $300,000,
and no gain or loss appears on the 2019 income statement.
ANS: c
2. Topic: Accounting for equity securities with no significant influence
LO 1
Which statement is true concerning the reporting for equity investments with no significant
influence?
a. They are reported at fair value, with any changes in value reported in income.
b. They are categorized as either trading or available-for-sale, with unrealized changes in
the value of trading securities reported in income, and unrealized changes in the value
of AFS securities reported in OCI.
c. They are reported at cost, with unrealized changes in value reported in OCI.
d. They are reported at fair value, with unrealized changes in value reported in OCI.
ANS: a
Use the following information on a company’s investments in equity securities with no
significant influence to answer Questions 3 and 4. The company’s accounting year ends
December 31.
Investment
STUVIASAVVY
,Date #yof #y
Acquisition #yCost #y
Fair #yValue #y
12/31/19 #y
Date #y
Sold #y
Selling #y
Price #y
Colt #yCompany #ystock #y9/20/19 #y$38,000 #y$37,000 #y2/10/20 #y$42,000 #y
Dana #yCompany #ystock #y10/2/19 #y14,000 #y14,200 #y1/17/20 #y13,000 #y
3. #yTopic: #yAccounting #yfor #yequity #yinvestments #ywith #yno #ysignificant #yinfluence #y
LO #y1 #y
What #yamount #yis #yreported #yfor #ygain #yor #yloss #yon #ythese #ysecurities #yin #y2019 #yincome? #y
a. #yNo #ygain #yor #yloss #y
b. #y$800 #yloss #y
c. #y$3,000 #ygain #y
d. #y$1,000 #yloss #y
ANS: #yb #y
($37,000 #y– #y$38,000) #y+ #y($14,200 #y– #y$14,000) #y= #y$800 #yloss #y
4. #yTopic: #yAccounting #yfor #yequity #yinvestments #ywith #yno #ysignificant #yinfluence #y
LO #y1 #y
What #yamount #yis #yreported #yfor #ygain #yor #yloss #yon #ythese #ysecurities #yin #y2020 #yincome? #y
a. #yNo #ygain #yor #yloss #y
b. #y$3,000 #ygain #y
c. #y$3,800 #ygain #y
d. #y$4,000 #ygain #y
ANS: #yc #y
($42,000 #y– #y$37,000) #y+ #y($13,000 #y– #y$14,200) #y= #y$3,800 #ygain #y
5. #yTopic: #yAccounting #yfor #yequity #yinvestments #ywith #yno #ysignificant #yinfluence #y
LO #y1 #y
A #ycompany #ybuys #yan #yequity #yinvestment #yfor #y$100 #yin #y2020. #yThe #yinvestment #yhas #yno #ysignificant #y
influence. #yAt #ythe #yend #yof #y2020, #ythe #ycompany #ystill #yholds #ythe #yinvestment #yand #yit #yhas #ya #ymarket #yvalue #y
of #y$115. #yIn #y2021, #ythe #ycompany #ysells #ythe #yinvestment #yfor #y$108. #y
How #yis #ythis #yinformation #yreported #yin #ythe #ycompany’s #y2020 #yand #y2021 #yincome #ystatements? #y
a. #y$15 #ygain #yon #ythe #y2020 #yincome #ystatement; #y$7 #yloss #yon #ythe #y2021 #yincome #ystatement. #y
STUVIASAVVY
,b. #yDoes #ynot #yappear #yon #ythe #y2020 #yincome #ystatement; #y$8 #ygain #yon #ythe #y2021 #yincome #ystatement. #y
c. #yDoes #ynot #yappear #yon #ythe #y2020 #yincome #ystatement; #y$7 #yloss #yon #ythe #y2021 #yincome #ystatement. #y
d. #y$8 #ygain #yon #ythe #y2020 #yincome #ystatement; #ydoes #ynot #yappear #yon #ythe #y2021 #yincome #ystatement. #y
ANS: #ya #y
6. #yTopic: #yAccounting #yfor #yequity #yinvestments #ywith #yno #ysignificant #yinfluence #y
LO #y1 #y
On #yDecember #y20, #y2020, #ya #ycompany #ypays #y$40,000 #yfor #yan #yinvestment #yin #yequity #ysecurities #ywith #yno #y
significant #yinfluence. #yOn #yDecember #y31, #y2020, #ythe #ycompany’s #yyear-end, #ythe #ystock #yhas #ya #ymarket #y
value #yof #y$37,000. #yThe #ycompany #ysells #ythe #ystock #yin #y2021 #yfor #y$44,000. #y
On #yits #yincome #ystatement, #ythe #ycompany #yreports: #y
a. #yA #yloss #yof #y$3,000 #yin #y2020, #yand #ya #ygain #yof #y$7,000 #yin #y2021 #y
b. #yNo #ygain #yor #yloss #yin #y2020, #yand #ya #ygain #yof #y$4,000 #yin #y2021 #y
c. #yA #ygain #yof #y$4,000 #yin #y2020, #yand #yno #ygain #yor #yloss #yin #y2021 #y
d. #yNo #ygain #yor #yloss #yin #y2020, #yand #ya #ygain #yof #y$7,000 #yin #y2021 #y
ANS: #ya #y
7. #yTopic: #yAccounting #yfor #yequity #yinvestments #ywith #yno #ysignificant #yinfluence #y
LO #y1 #y
On #yOctober #y25, #y2020, #ya #ycompany #ypays #y$35,000 #yfor #yan #yinvestment #yin #yequity #ysecurities, #ywith #yno #y
significant #yinfluence. #yOn #yDecember #y31, #y2020, #ythe #ycompany’s #yyear-end, #ythe #ystock #yas #ya #ymarket #yvalue #y
of #y$36,000. #yThe #ycompany #ysells #ythe #ystock #yin #y2021 #yfor #y$32,000. #yHow #yis #ythe #ycompany’s #y2020 #yother #y
comprehensive #yincome #yaffected #yby #ythe #yabove #ytransactions #yin #yeach #yyear? #y
a. #yIncrease #yof #y$1,000 #yin #y2020, #ydecrease #yof #y$1,000 #yin #y2021 #y
b. #yIncrease #yof #y$1,000 #yin #y2020, #ydecrease #yof #y$4,000 #yin #y2021 #y
c. #yNo #yeffect #yin #y2020, #ydecrease #yof #y$3,000 #yin #y2021 #y
d. #yNo #yeffect #yon #yOCI #yin #yeither #yyear. #y
ANS: #yd #y
Use #ythe #yfollowing #yinformation #yon #ya #ycompany’s #yinvestments #yin #ydebt #ysecurities #yto #yanswer #y
Questions #y8 #y- #y11. #yThe #ycompany’s #yaccounting #yyear #yends #yDecember #y31. #y
Investment #y
Date #yof #y
Acquisition #yCost #y
Fair #yValue #y
12/31/19 #y
Date #y
Sold #y
STUVIASAVVY
, Selling #y
Price #y
Colt #yCompany #ybonds #y9/20/19 #y$38,000 #y$37,000 #y2/10/20 #y$42,000 #y
Dana #yCompany #ybonds #y10/2/19 #y14,000 #y14,200 #y1/17/20 #y13,000 #y
8. #yTopic: #yAccounting #yfor #ydebt #yinvestments #yclassified #yas #ytrading #y
LO #y1 #y
If #ythe #yabove #ydebt #yinvestments #yare #ycategorized #yas #ytrading #ysecurities, #ywhat #yamount #yis #yreported #yfor #y
gain #yor #yloss #yon #ysecurities #yin #y2019 #yincome? #y
a. #yNo #ygain #yor #yloss #y
b. #y$800 #yloss #y
c. #y$3,000 #ygain #y
d. #y$200 #ygain #y
ANS: #yb #y
($37,000 #y- #y$38,000) #y+ #y($14,200 #y- #y$14,000) #y= #y$(800) #yloss #y
9. #yTopic: #yAccounting #yfor #ydebt #yinvestments #yclassified #yas #ytrading #y
LO #y1 #y
If #ythe #yabove #ydebt #yinvestments #yare #ycategorized #yas #ytrading #ysecurities, #ywhat #yamount #yis #yreported #yfor #y
gain #yor #yloss #yon #ysecurities #yin #y2020 #yincome? #y
a. #yNo #ygain #yor #yloss #y
b. #y$3,000 #ygain #y
c. #y$3,800 #ygain #y
d. #y$5,000 #ygain #y
ANS: #yc #y
($42,000 #y- #y$37,000) #y+ #y($13,000 #y- #y$14,200) #y= #y$3,800 #ygain #y
10. #yTopic: #yAccounting #yfor #ydebt #yinvestments #yclassified #yas #yAFS #y
LO #y1 #y
If #ythe #yabove #yinvestments #yare #ycategorized #yas #yavailable-for-sale #ysecurities, #ywhat #yamount #yis #yreported #y
for #ygain #yor #yloss #yon #ysecurities #yin #y2019 #yincome? #y
a. #yNo #ygain #yor #yloss #y
b. #y$800 #yloss #y
c. #y$3,000 #ygain #y
d. #y$200 #ygain #y
ANS: #ya #y
11. #yTopic: #yAccounting #yfor #ydebt #yinvestments #yclassified #yas #yAFS #y
STUVIASAVVY
CHAPTER 1
Intercorporate Investments: An Overview
MULTIPLE CHOICE
1. Topic: Accounting for equity securities with no significant influence
LO 1
A company invests $300,000 in equity securities on November 30, 2019, and classifies them as
investments with no significant influence. At December 31, 2019, the company’s year-end, the
securities have a fair value of $310,000. On February 1, 2020, the company sells the securities
for $295,000.
Which statement is true regarding how this information is reported in the company’s financial
statements?
a. The company’s December 31, 2019 balance sheet reports the securities at $300,000,
and a gain of $10,000 is reported on the 2019 income statement.
b. The company’s December 31, 2019 balance sheet reports the securities at $310,000,
and a loss of $5,000 is reported on the 2020 income statement.
c. The company’s December 31, 2019 balance sheet reports the securities at $310,000,
and a loss of $15,000 is reported on the 2020 income statement.
d. The company’s December 31, 2019 balance sheet reports the securities at $300,000,
and no gain or loss appears on the 2019 income statement.
ANS: c
2. Topic: Accounting for equity securities with no significant influence
LO 1
Which statement is true concerning the reporting for equity investments with no significant
influence?
a. They are reported at fair value, with any changes in value reported in income.
b. They are categorized as either trading or available-for-sale, with unrealized changes in
the value of trading securities reported in income, and unrealized changes in the value
of AFS securities reported in OCI.
c. They are reported at cost, with unrealized changes in value reported in OCI.
d. They are reported at fair value, with unrealized changes in value reported in OCI.
ANS: a
Use the following information on a company’s investments in equity securities with no
significant influence to answer Questions 3 and 4. The company’s accounting year ends
December 31.
Investment
STUVIASAVVY
,Date #yof #y
Acquisition #yCost #y
Fair #yValue #y
12/31/19 #y
Date #y
Sold #y
Selling #y
Price #y
Colt #yCompany #ystock #y9/20/19 #y$38,000 #y$37,000 #y2/10/20 #y$42,000 #y
Dana #yCompany #ystock #y10/2/19 #y14,000 #y14,200 #y1/17/20 #y13,000 #y
3. #yTopic: #yAccounting #yfor #yequity #yinvestments #ywith #yno #ysignificant #yinfluence #y
LO #y1 #y
What #yamount #yis #yreported #yfor #ygain #yor #yloss #yon #ythese #ysecurities #yin #y2019 #yincome? #y
a. #yNo #ygain #yor #yloss #y
b. #y$800 #yloss #y
c. #y$3,000 #ygain #y
d. #y$1,000 #yloss #y
ANS: #yb #y
($37,000 #y– #y$38,000) #y+ #y($14,200 #y– #y$14,000) #y= #y$800 #yloss #y
4. #yTopic: #yAccounting #yfor #yequity #yinvestments #ywith #yno #ysignificant #yinfluence #y
LO #y1 #y
What #yamount #yis #yreported #yfor #ygain #yor #yloss #yon #ythese #ysecurities #yin #y2020 #yincome? #y
a. #yNo #ygain #yor #yloss #y
b. #y$3,000 #ygain #y
c. #y$3,800 #ygain #y
d. #y$4,000 #ygain #y
ANS: #yc #y
($42,000 #y– #y$37,000) #y+ #y($13,000 #y– #y$14,200) #y= #y$3,800 #ygain #y
5. #yTopic: #yAccounting #yfor #yequity #yinvestments #ywith #yno #ysignificant #yinfluence #y
LO #y1 #y
A #ycompany #ybuys #yan #yequity #yinvestment #yfor #y$100 #yin #y2020. #yThe #yinvestment #yhas #yno #ysignificant #y
influence. #yAt #ythe #yend #yof #y2020, #ythe #ycompany #ystill #yholds #ythe #yinvestment #yand #yit #yhas #ya #ymarket #yvalue #y
of #y$115. #yIn #y2021, #ythe #ycompany #ysells #ythe #yinvestment #yfor #y$108. #y
How #yis #ythis #yinformation #yreported #yin #ythe #ycompany’s #y2020 #yand #y2021 #yincome #ystatements? #y
a. #y$15 #ygain #yon #ythe #y2020 #yincome #ystatement; #y$7 #yloss #yon #ythe #y2021 #yincome #ystatement. #y
STUVIASAVVY
,b. #yDoes #ynot #yappear #yon #ythe #y2020 #yincome #ystatement; #y$8 #ygain #yon #ythe #y2021 #yincome #ystatement. #y
c. #yDoes #ynot #yappear #yon #ythe #y2020 #yincome #ystatement; #y$7 #yloss #yon #ythe #y2021 #yincome #ystatement. #y
d. #y$8 #ygain #yon #ythe #y2020 #yincome #ystatement; #ydoes #ynot #yappear #yon #ythe #y2021 #yincome #ystatement. #y
ANS: #ya #y
6. #yTopic: #yAccounting #yfor #yequity #yinvestments #ywith #yno #ysignificant #yinfluence #y
LO #y1 #y
On #yDecember #y20, #y2020, #ya #ycompany #ypays #y$40,000 #yfor #yan #yinvestment #yin #yequity #ysecurities #ywith #yno #y
significant #yinfluence. #yOn #yDecember #y31, #y2020, #ythe #ycompany’s #yyear-end, #ythe #ystock #yhas #ya #ymarket #y
value #yof #y$37,000. #yThe #ycompany #ysells #ythe #ystock #yin #y2021 #yfor #y$44,000. #y
On #yits #yincome #ystatement, #ythe #ycompany #yreports: #y
a. #yA #yloss #yof #y$3,000 #yin #y2020, #yand #ya #ygain #yof #y$7,000 #yin #y2021 #y
b. #yNo #ygain #yor #yloss #yin #y2020, #yand #ya #ygain #yof #y$4,000 #yin #y2021 #y
c. #yA #ygain #yof #y$4,000 #yin #y2020, #yand #yno #ygain #yor #yloss #yin #y2021 #y
d. #yNo #ygain #yor #yloss #yin #y2020, #yand #ya #ygain #yof #y$7,000 #yin #y2021 #y
ANS: #ya #y
7. #yTopic: #yAccounting #yfor #yequity #yinvestments #ywith #yno #ysignificant #yinfluence #y
LO #y1 #y
On #yOctober #y25, #y2020, #ya #ycompany #ypays #y$35,000 #yfor #yan #yinvestment #yin #yequity #ysecurities, #ywith #yno #y
significant #yinfluence. #yOn #yDecember #y31, #y2020, #ythe #ycompany’s #yyear-end, #ythe #ystock #yas #ya #ymarket #yvalue #y
of #y$36,000. #yThe #ycompany #ysells #ythe #ystock #yin #y2021 #yfor #y$32,000. #yHow #yis #ythe #ycompany’s #y2020 #yother #y
comprehensive #yincome #yaffected #yby #ythe #yabove #ytransactions #yin #yeach #yyear? #y
a. #yIncrease #yof #y$1,000 #yin #y2020, #ydecrease #yof #y$1,000 #yin #y2021 #y
b. #yIncrease #yof #y$1,000 #yin #y2020, #ydecrease #yof #y$4,000 #yin #y2021 #y
c. #yNo #yeffect #yin #y2020, #ydecrease #yof #y$3,000 #yin #y2021 #y
d. #yNo #yeffect #yon #yOCI #yin #yeither #yyear. #y
ANS: #yd #y
Use #ythe #yfollowing #yinformation #yon #ya #ycompany’s #yinvestments #yin #ydebt #ysecurities #yto #yanswer #y
Questions #y8 #y- #y11. #yThe #ycompany’s #yaccounting #yyear #yends #yDecember #y31. #y
Investment #y
Date #yof #y
Acquisition #yCost #y
Fair #yValue #y
12/31/19 #y
Date #y
Sold #y
STUVIASAVVY
, Selling #y
Price #y
Colt #yCompany #ybonds #y9/20/19 #y$38,000 #y$37,000 #y2/10/20 #y$42,000 #y
Dana #yCompany #ybonds #y10/2/19 #y14,000 #y14,200 #y1/17/20 #y13,000 #y
8. #yTopic: #yAccounting #yfor #ydebt #yinvestments #yclassified #yas #ytrading #y
LO #y1 #y
If #ythe #yabove #ydebt #yinvestments #yare #ycategorized #yas #ytrading #ysecurities, #ywhat #yamount #yis #yreported #yfor #y
gain #yor #yloss #yon #ysecurities #yin #y2019 #yincome? #y
a. #yNo #ygain #yor #yloss #y
b. #y$800 #yloss #y
c. #y$3,000 #ygain #y
d. #y$200 #ygain #y
ANS: #yb #y
($37,000 #y- #y$38,000) #y+ #y($14,200 #y- #y$14,000) #y= #y$(800) #yloss #y
9. #yTopic: #yAccounting #yfor #ydebt #yinvestments #yclassified #yas #ytrading #y
LO #y1 #y
If #ythe #yabove #ydebt #yinvestments #yare #ycategorized #yas #ytrading #ysecurities, #ywhat #yamount #yis #yreported #yfor #y
gain #yor #yloss #yon #ysecurities #yin #y2020 #yincome? #y
a. #yNo #ygain #yor #yloss #y
b. #y$3,000 #ygain #y
c. #y$3,800 #ygain #y
d. #y$5,000 #ygain #y
ANS: #yc #y
($42,000 #y- #y$37,000) #y+ #y($13,000 #y- #y$14,200) #y= #y$3,800 #ygain #y
10. #yTopic: #yAccounting #yfor #ydebt #yinvestments #yclassified #yas #yAFS #y
LO #y1 #y
If #ythe #yabove #yinvestments #yare #ycategorized #yas #yavailable-for-sale #ysecurities, #ywhat #yamount #yis #yreported #y
for #ygain #yor #yloss #yon #ysecurities #yin #y2019 #yincome? #y
a. #yNo #ygain #yor #yloss #y
b. #y$800 #yloss #y
c. #y$3,000 #ygain #y
d. #y$200 #ygain #y
ANS: #ya #y
11. #yTopic: #yAccounting #yfor #ydebt #yinvestments #yclassified #yas #yAFS #y
STUVIASAVVY
