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Test Bank For Modern Advanced Accounting in Canada Canadian 7th Edition Hilton Herauf 1259066487 9781259066481
Test Bank For Modern Advanced Accounting in Canada Canadian 7th Edition Hilton Herauf 1259066487 9781259066481
Test Bank For Modern Advanced Accounting in Canada Canadian 7th Edition Hilton Herauf 1259066487 9781259066481
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canadian-7th-edition-hilton-herauf-1259066487-9781259066481/
02
Student:
C. C Unrealized gains and losses on equity investments may be included in Other Comprehensive
Income only if a decision to do so is made when the investment is acquired.
D. Other Comprehensive Income is included in Retained Earnings.
3. Under which of the following scenarios would a Foreign Currency translation definitely NOT
be required?
A. The investee is located in a different country.
B. The investee prepares its financial statements in a foreign currency.
C. The investing company has borrowings denominated in a foreign currency.
D. The investee prepares its financial statements using the same currency as the investing company.
4. Reporting in accordance with the Accounting Standards for Private Enterprises is permitted in certain
instances for:
A. privately held companies.
B. publicly held companies.
C. all Canadian companies.
D. Canadian companies consolidating its foreign subsidiaries.
5. Which of the following types of share investment does NOT qualify as a strategic investment?
A. Significant influence investments.
B. Joint Control investments.
C. Investments without significant influence.
D. Controlled investments.
6. What percentage of ownership is used as a guideline to determine that significant influence exists
under IAS 28?
A. 20% or more.
B. Less than 20%.
C. Between 20% and 50%.
D. 25% or more.
7. Gains and losses on fair-value-through-profit-or-loss securities:
A. are included in net income, regardless of whether they are realized or not.
B. are included in net income only when the investment has become permanently impaired.
C. are included in net income only when realized.
D. are never recorded until the securities are sold.
8. Which of the following methods uses procedures closest to those used in preparing consolidated financial
statements?
A. Fair Value Through Profit or Loss.
B. The Cost Method.
C. Fair Value Through Other Comprehensive Income.
D. The Equity Method.
9. A significant influence investment is one that:
A.allows the investor to exercise significant influence over the strategic operating and financing policies
of the Associate.
B. allows the investor to exercise significant influence over only the financing policies of the Associate.
C. allows the investor to exercise significant influence over only the operating policies of the Associate.
D. allows the investor to exercise significant influence over the strategic and operating policies of the
Associate.
10. Which of the following is NOT a possible indicator of significant influence?
A. The investor has the ability to elect members to the Board of Directors.
B. The investor has the right to participate in the policymaking process.
C. The investor has engaged in numerous intercompany transactions with the Associate.
D. The Associate's new CEO was previously CEO of the investor company.
11. What is the dominant factor used to distinguish portfolio investments from significant influence
investments?
A. Use of the Cost Method to account for and report the investment.
B. Use of the Equity Method to account for and report the investment.
C. The investor's intention to establish or maintain a long term relationship with the investee.
D. The percentage of equity held by the investor.
12. Which of the following statements is CORRECT?
A. Control is only possible if the Investor owns more than 50% of the voting shares of the Associate.
B. An ownership interest between 20% and 50% always implies significant influence.
C. An ownership interest between 0 and 10% can never imply significant influence.
D. Significant influence is still possible if the Investor owns less than 20% of the voting shares of the
Associate.
13. The difference between the investor's cost and the investor's percentage of the carrying value of the
net identifiable assets of the associate is known as:
A. goodwill.
B. the Acquisition Differential.
C. the Fair Value Increment.
D. the Excess Book Value.
14. Any unallocated positive acquisition differential is normally:
A. pro-rated across the Associate's identifiable net assets.
B. charged to Retained Earnings.
C. recorded as Goodwill.
D. expensed during the year following the acquisition.
15. When using the cost method of accounting, which method should be used to determine the carrying value
of shares sold when a portion of the shares making up an investment is sold?
A. Average cost.
B. Specific cost.
C. Last in, first out.
D. First in, first out.
16. When are gains on intercompany transfers of assets between an investor and a significant influence
investment recognized as part of the investment income accounted for by the parent under the equity
method?
A. In the period when the intercompany transfer takes place.
B. In the period(s) when the assets are sold to third parties or consumed.
C. They are never recognized.
D. They are recognized only when the investment is sold.
17. How are realized gains from the sale of investments accounted for at fair value through Other
Comprehensive Income accounted for under IFRS 9?
A. They are transferred to net income in the period of the sale.
B. They remain in Accumulated Other Comprehensive Income.
C. They are transferred to Retained Earnings without going through net income.
D. They are transferred to Contributed Surplus.
18. When reporting under the Accounting Standards for Private Enterprises which method must be used
to report investments where the investor has significant influence over the investee?
A. It must use the cost method to report all such investments.
B. It must use the equity method to report all such investments.
C. It may use either the cost or equity method but must account for all such investments by the same
method.
D. It may use the cost method for some such investments and the equity method for other
such investments.
19. On January 1, 2010, X Inc. purchased 12% of the voting shares of Y Inc. for $100,000. The investment
is reported at cost. X does not have significant influence over Y. Y's net income and declared dividends
for the following three years are as follows:
Which of the following journal entries would have to be made to record X's purchase of Y's shares?
A.
B.
C.
D. No entry required.
20. On January 1, 2010, X Inc. purchased 12% of the voting shares of Y Inc. for $100,000. The investment
is reported at cost. X does not have significant influence over Y. Y's net income and declared dividends
for the following three years are as follows:
Which of the following journal entries would have to be made to record X's share of Y's net income for
2010?
A.
B.
C.
D. No entry required.
21. On January 1, 2010, X Inc. purchased 12% of the voting shares of Y Inc. for $100,000. The investment
is reported at cost. X does not have significant influence over Y. Y's net income and declared dividends
for the following three years are as follows:
Which of the following journal entries would have to be made to record X's share of Y's dividends paid
for 2010?
A.
B.
C.
D. No entry required.
22. On January 1, 2010, X Inc. purchased 12% of the voting shares of Y Inc. for $100,000. The investment
is reported at cost. X does not have significant influence over Y. Y's net income and declared dividends
for the following three years are as follows:
Which of the following journal entries would have to be made to record X's share of Y's dividends paid
for 2011?
A.
B.
C.
D. No entry required.
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