MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.1)Which of the following types of share investment does NOT qualify as a strategic investment?A)Controlled investments.B)Joint Control investments.C)Investments without significant influence.D)Significant influence investments.

Answer:C

2)A significant influence investment is one that:

A)allows the investor to exercise significant influence over the strategic and operating policies of the Associate.B)allows the investor to exercise significant influence over the strategic operating and 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 only the financing policies of the Associate.

Answer:B

3)What is the dominant factor used to distinguish portfolio investments from significant influence investments?A)The percentage of equity held by the investor.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 operating relationship with the investee.D)Use of the Cost Method to account for and report the investment.

Answer:C

4)Which of the following statements is TRUE under IFRS 9?A)Other Comprehensive Income (OCI) is included in Retained Earnings.B)Unrealized gains and losses on equity investments may be included in Other Comprehensive Income (OCI) only if a decision to do so is made when the investment is acquired.C)All unrealized gains and losses on equity investments flow through Other Comprehensive Income (OCI).D)Unrealized gains and losses on fair value through profit and loss (FVTPL) securities are included in Other Comprehensive Income.

Answer:B

5)Gains and losses on fair value through profit or loss (FVTPL) securities:

A)are included in net income only when realized.B)are never recorded until the securities are sold.C)are included in net income, regardless of whether they are realized or not.D)are included in net income only when the investment has become permanently impaired.

Answer:C

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6)How are realized gains from the sale of investments accounted for at fair value through Other Comprehensive Income (FVTOCI) accounted for under IFRS 9?A)They are transferred to Retained Earnings without going through net income.B)They are transferred to net income in the period of the sale.C)They remain in Accumulated Other Comprehensive Income.D)They are transferred to Contributed Surplus.

Answer:A

7)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)Specific cost. B)Last in, first out.C)Average cost. D)First in, first out.

Answer:C

8)What percentage of ownership is used as a guideline to determine that significant influence exists under IAS 28 Investments in Associates and Joint Ventures?A)20% or more.B)Between 20% and 50%.C)25% or more.D)Less than 20%.

Answer:B

9)Which of the following methods uses procedures closest to those used in preparing consolidated financial statements?A)Fair value through profit or loss (FVTPL).B)The equity method.C)Fair value through other comprehensive income.D)The cost method.

Answer:B

10)Which of the following is NOT a possible indicator of significant influence?A)The Associate's new CEO was previously CEO of the investor company.B)The investor has the ability to elect members to the Board of Directors.C)The investor has engaged in numerous intercompany transactions with the Associate.D)The investor has the right to participate in the policy-making process.

Answer:A

11)Which of the following statements is CORRECT?A)An ownership interest between 0 and 10% can never imply significant influence.B)An ownership interest between 20% and 50% always implies significant influence.C)Significant influence is still possible if the Investor owns less than 20% of the voting shares of the Associate.D)Control is only possible if the Investor owns more than 50% of the voting shares of the Associate.

Answer:C

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12)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)the Acquisition Differential. B)Goodwill.C)the Excess Book Value.D)the Fair Value Increment.

Answer:A

13)Any unallocated positive acquisition differential is normally:

A)expensed during the year following the acquisition.B)charged to Retained Earnings.C)pro-rated across the Associate's identifiable net assets.D)recorded as Goodwill.

Answer:D

14)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)They are never recognized.B)In the period(s) when the assets are sold to third parties or consumed.C)In the period when the intercompany transfer takes place.D)They are recognized only when the investment is sold.

Answer:B

15)The ________ investment must be shown as a current asset, whereas the other investments could be current or non-current, depending on management's intention.A)FVTPLB)cost method C)FVTOCID)equity method

Answer:A

16)When analyzing and interpreting financial statements, although the reporting methods show different values for liquidity, solvency, and profitability, the real economic situation is ________ for the four different methods.A)completely different B)exactly the same C)almost similar except for the fair value methods D)almost similar except for the equity method

Answer:B

17)Reportingin accordance with the Accounting Standards for Private Enterprises (ASPE) is permitted

in certain instances for:

A)all Canadian companies.B)privately held companies.C)publicly held companies.D)Canadian companies consolidating their foreign subsidiaries.

Answer:B

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18)When reporting under the Accounting Standards for Private Enterprises (ASPE) which method must be used to report investments where the investor has significant influence over the investee?A)It may use the cost method for some such investments and the equity method for other such investments.B)It must use the cost method to report all such investments.C)It must use the equity method to report all such investments.D)It may use the cost method, equity method, or at fair value but must account for all such investments by the same method.

Answer:D

On January 1, 2016, 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:

Net IncomeDividends

2016$50,000$20,000

2017$70,000$80,000

2018$30,000$60,000

19)Which of the following journal entries would have to be made to record X's purchase of Y's shares?A) Debit Credit Investment in Y$12,000 Cash$12,000 B) Debit Credit Investment in Y$112,000 Cash$112,000 C) Debit Credit Investment in Y$100,000 Cash$100,000 D)No entry required.

Answer:C

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