Question 1

If an investor's ownership interest in a significant influence investment increases or decreases, how are changes from accounting at fair value to the use of the Equity Method (or vice-versa) to be handled?

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Question 2

Which of the following journal entries would have to be made to record X's share of Y's dividends paid for 2018?

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Question 3

Which of the following journal entries would have to be made to record X's purchase of Y's shares?

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Question 4

What would be the carrying value of X's Investment in Y at the end of 2018?

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Question 5

How does the accounting for Other Comprehensive Income differ between the International Financial Reporting Standards (IFRS) and the Accounting Standards for Private Enterprises (ASPE)?

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Question 6

If the Investor sells part of its stake in an Associate, accounted for using the equity method, which method is used to calculate the gain or loss on the sale of these shares?

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Question 7

If Posthorn Corporation accounts for its investment in Stamp Company at fair value through profit or loss, what entry will the company make to record the revaluation of the investment at December 31, 2016?

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Question 8

Which of the following journal entries would have to be made to record X's share of Y's dividends paid for 2016?

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Question 9

Which of the following journal entries would have to be made to record X's share of Y's dividends paid for 2016?

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Question 10

Which of the following journal entries would have to be made to record X's share of Y's dividends paid for 2018?

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Question 11

Under which method of accounting for investments are investments required to be included in current assets?

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Question 12

When an investment is accounted for using the Equity Method, how are the investor's share of the investee's income from non-operating sources (such as gains or losses from discontinued operations) to be accounted for by the investor?

Accepted Answer

When using the Equity Method, gains or losses from non-operating sources of the investee (such as gains or losses from discontinued operations) are shown separately on the investor's Income statement, net of tax, below income from operations. The investor's pro rata share of these after-tax gains and losses are added to or deducted from the Investment account. This method ensures that the investor's share of the investee's overall performance is accurately reflected on the investor's financial statements, while also keeping the non-operating gains or losses separate for disclosure purposes.

Question 13

Which of the following journal entries would have to be made to record X's share of Y's dividends paid for 2017?

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Question 14

If Posthorn Corporation accounts for its investment in Stamp Company at fair value through profit or loss, what will the balance in the Investment in Stamp Company be at December 31, 2016?

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Question 15

What would be the carrying value of X's Investment in Y at the end of 2018?

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Question 16

Which of the following journal entries would have to be made to record X's share of Y's net income for 2016?

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Question 17

If an investor is reporting in compliance with the International Financial Reporting Standards and has an investment with significant influence over the investee, what are the reporting requirements for the investor if the investment is in shares which are actively traded on an exchange?

Accepted Answer

According to IFRS, investments in shares which are actively traded on an exchange and have significant influence over the investee should be reported using the equity method along with the fair value being disclosed in the notes to the financial statements. Therefore, option C is the correct reporting requirement for the investor.

Question 18

If Posthorn Corporation accounts for its investment in Stamp Company at fair value through profit or loss, what entry will the company make to record the dividends received from Stamp Company for 2016?

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Question 19

If an investment accounted for using the equity method suffers an impairment loss and the value in use of the investment subsequently recovers, what accounting entry should be made?

Accepted Answer

When an investment accounted for using the equity method suffers an impairment loss, it is written down to its new lower carrying amount. If the value in use of the investment subsequently recovers, the carrying amount of the investment can be increased, but only up to the amount of the impairment loss that was recorded at the time of impairment. This is because the impairment loss represents a permanent reduction in the value of the investment, and any subsequent increase in value can only offset the previous impairment loss to the extent that it was recognized at the time. Therefore, choice B is correct.

Question 20

Which of the following journal entries would have to be made to record X's share of Y's dividends paid for 2017?

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Quiz 2: Investments in Equity Securities

If an investor's ownership interest in a significant influence investment increases or decreases, how are changes from accounting at fair value to the use of the Equity Method (or vice-versa) to be handled?

Which of the following journal entries would have to be made to record X's share of Y's dividends paid for 2018?

Which of the following journal entries would have to be made to record X's purchase of Y's shares?

What would be the carrying value of X's Investment in Y at the end of 2018?

How does the accounting for Other Comprehensive Income differ between the International Financial Reporting Standards (IFRS) and the Accounting Standards for Private Enterprises (ASPE) ?

If the Investor sells part of its stake in an Associate, accounted for using the equity method, which method is used to calculate the gain or loss on the sale of these shares?

If Posthorn Corporation accounts for its investment in Stamp Company at fair value through profit or loss, what entry will the company make to record the revaluation of the investment at December 31, 2016?

Which of the following journal entries would have to be made to record X's share of Y's dividends paid for 2016?

Which of the following journal entries would have to be made to record X's share of Y's dividends paid for 2016?

Which of the following journal entries would have to be made to record X's share of Y's dividends paid for 2018?

Under which method of accounting for investments are investments required to be included in current assets?

When an investment is accounted for using the Equity Method, how are the investor's share of the investee's income from non-operating sources (such as gains or losses from discontinued operations) to be accounted for by the investor?

Which of the following journal entries would have to be made to record X's share of Y's dividends paid for 2017?

If Posthorn Corporation accounts for its investment in Stamp Company at fair value through profit or loss, what will the balance in the Investment in Stamp Company be at December 31, 2016?

What would be the carrying value of X's Investment in Y at the end of 2018?

Which of the following journal entries would have to be made to record X's share of Y's net income for 2016?

If an investor is reporting in compliance with the International Financial Reporting Standards and has an investment with significant influence over the investee, what are the reporting requirements for the investor if the investment is in shares which are actively traded on an exchange?

If Posthorn Corporation accounts for its investment in Stamp Company at fair value through profit or loss, what entry will the company make to record the dividends received from Stamp Company for 2016?

If an investment accounted for using the equity method suffers an impairment loss and the value in use of the investment subsequently recovers, what accounting entry should be made?

Which of the following journal entries would have to be made to record X's share of Y's dividends paid for 2017?