Question 1

*The separate statements of financial position of Platt Company and its wholly owned subsidiary, Speer Company, as of the date of acquisition are shown below:  Instructions
Provide the amount that should appear in the Consolidated Data column for each of the selected accounts. If the account should not appear in the Consolidated Data column, indicate "None." Assume that all accounts have normal balances and that Speer Company shares were acquired for cash at a price equal to its book value.

Accepted Answer

The answer of *The separate statements of financial position of...

Question 2

The Fair Value Adjustment account is a statement of financial position account. Identify the asset account it is related to. Explain how this account is increased and describe the procedure followed when its related asset account is disposed of.

Accepted Answer

The answer of The Fair Value Adjustment account is a...

Question 3

A company that owns more than 50% of the ordinary shares of another company is known as the ______________ company and _____________ financial statements are usually prepared.

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The answer of A company that owns more than 50%...

Question 4

Debt investments are investments in government and _____________ bonds.

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The answer of Debt investments are investments in government and...

Question 5

When an investor owns between 20% and 50% of the ordinary shares of a corporation, it is generally presumed that the investor has _______________ influence over the investee and therefore, the appropriate method of accounting for this type of investment is the _______________ method.

Accepted Answer

The answer of When an investor owns between 20% and...

Question 6

A consolidated statement of financial position reports the financial position of two or more legal entities just as if they were one reporting unit. Explain why all the individual items appearing on the separate statement of financial positions of each of the affiliated companies cannot be added together to arrive at a consolidated total for each item.

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The answer of A consolidated statement of financial position reports...

Question 7

Short-term investments are securities that are _____________ and ______________ to be converted into cash within the next year or operating cycle, whichever is longer.

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The answer of Short-term investments are securities that are _____________...

Question 8

Distinguish between the cost and equity methods of accounting for investments in equity securities.

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Question 9

Cost of debt investments includes the price paid plus ______________

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The answer of Cost of debt investments includes the price...

Question 10

At the end of an accounting period, if the fair value of the trading securities portfolio is less than its cost, then the company should recognize an ______________ which is reported on the _________________.

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The answer of At the end of an accounting period,...

Question 11

Under the cost method, dividends received from an investee company are credited to the_______________ account, whereas under the equity method, dividends received from an investee company are credited to the _______________ account.

Accepted Answer

The answer of Under the cost method, dividends received from...

Question 12

When a year-end adjustment is made to reduce the trading securities portfolio to fair value, what effect, if any, will the adjustment have on the statement of financial position and the income statement?

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The answer of When a year-end adjustment is made to...

Question 13

_______________ securities are held with the intent of selling them sometime in the future.

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Question 14

At the beginning of the year, Grant Corporation acquired 15% of Ernst Company ordinary shares for $300,000. Ernst Company reported net income for the year of $75,000 and paid $25,000 cash dividends during the year. The balance of the Share Investments account on the books of Grant Corporation at the end of the year should be $___________.

Accepted Answer

The answer of At the beginning of the year, Grant...

Question 15

Match the items below by entering the appropriate code letter in the space provided.
A. Non-trading securities F. Consolidated financial statements
B. Subsidiary company G. Controlling interest
C. Equity method H. Fair Value Adjustment
D. Unrealized Gain or Loss-Equity I. Parent company
E. Fair value J. Long-term investments
____ 1. Valuation allowance account.
____ 2. Amount for which a security could be sold.
____ 3. Ownership of more than 50% of another company's ordinary shares.
____ 4. Securities that may be sold in the future.
____ 5. Investments that are not readily marketable and not intended to be converted into cash within the next year.
____ 6. Financial statements that present the total assets and liabilities controlled by the parent and the total revenues and expenses of the subsidiary companies.
____ 7. The Share Investments account is adjusted for net income and dividends received.
____ 8. A company that owns more than 50% of the ordinary shares of another entity.
____ 9. Company whose shares are owned by the parent company.
____ 10. An account that is reported in the equity section.

Accepted Answer

The answer of Match the items below by entering the...

Question 16

An unrealized loss on trading securities is reported under Other ____________________ on the income statement.

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The answer of An unrealized loss on trading securities is...

Question 17

*On January 2, 2014, Pine Company purchased 100% of the outstanding common shares of Seely Company for $520,000. Any excess of cost over the book value of the net assets of Seely company should first be allocated to land $55,000, and Buildings $40,000 and any remainder to Goodwill.
Instructions
(a) Complete the following worksheet below for preparing a consolidated statement of financial position on the date of acquisition. You may add accounts to the worksheet that may be necessary.
(b) Prepare a consolidated statement of financial position Afor Pine Company and Subsidiary on January 2, 2014.

Accepted Answer

The answer of *On January 2, 2014, Pine Company purchased...

Question 18

Fair Value Adjustment is a valuation ______________ account which is ______________ to (from) the cost of the investments.

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The answer of Fair Value Adjustment is a valuation ______________...

Question 19

What purposes are served by reporting Unrealized Gains (Losses)-Equity in the equity section?

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The answer of What purposes are served by reporting Unrealized...

Question 20

An unrealized gain or loss on non-trading securities is reported as a separate component of _________________.

Accepted Answer

The answer of An unrealized gain or loss on non-trading...

Quiz 12: Investments

The Fair Value Adjustment account is a statement of financial position account. Identify the asset account it is related to. Explain how this account is increased and describe the procedure followed when its related asset account is disposed of.

A company that owns more than 50% of the ordinary shares of another company is known as the __ company and _ financial statements are usually prepared.

Debt investments are investments in government and _____________ bonds.

When an investor owns between 20% and 50% of the ordinary shares of a corporation, it is generally presumed that the investor has _ influence over the investee and therefore, the appropriate method of accounting for this type of investment is the _ method.

Short-term investments are securities that are _ and __ to be converted into cash within the next year or operating cycle, whichever is longer.