Test Bank for Advanced Accounting, 5th Edition by Susan S. Hamlen

1. Topic: Accounting for equity securities with no significant influence LO 1 A company invests $350,000 in equity securities on November 30, 2023, and classifies them as investments with no significant influence. At December 31, 2023, the company’s year-end, the securities have a fair value of $345,000. On February 1, 2024, the company sells the securities for $360,000. Which statement is true regarding how this information is reported in the company’s financial statements? a. The company’s December 31, 2023 balance sheet reports the securities at $350,000, and a loss of $5,000 is reported on the 2023 income statement. b. The company’s December 31, 2023 balance sheet reports the securities at $345,000, and a gain of $10,000 is reported on the 2024 income statement. c. The company’s December 31, 2023 balance sheet reports the securities at $345,000, and a gain of $15,000 is reported on the 2024 income statement. d. The company’s December 31, 2023 balance sheet reports the securities at $350,000, and no gain or loss appears on the 2023 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