ACCCOB2_4_Investments2

Investments are reported at fair value when a company has a significant influence over another company in which it invests.

• T

• F

When insignificant influence exists, the investment should be accounted for by the equity method. 

• T

• F

Bond investments are long-term assets that earn interest revenue, while bonds payable are long-term liabilities that incur interest expense. 

• T

• F

For FA-AC debt securities, interest revenue is calculated as the carrying value of the investment in bonds times the stated nominal interest rate. 

• T

• F

Because the carrying value of bonds purchased at a premium increases over time, interest revenue will also increase each annual interest period. 

• T

• F

Which of the following is true with regard to how to account for company A's investment in company B's ordinary shares? 

• The fair value method is used when A owns more than 50% of B

• The equity method is used when A owns from 20% to 50% of B

• The consolidation method is used when A owns less than 20% of B

• Any method can be used

Sports Inc purchased 1,000 shares of stock in The Athlete Store for ₱30 per share. The investment is properly classified as FA-FVPL. By the end of the year, the fair value has increased to ₱32 per share. How would the change in share price affect Sports Inc's net income? 

• Increase by ₱32,000

• Increase by ₱30,000

• Increase by ₱2,000

• No effect

The primary difference in accounting for FA-FVPL equity securities and accounting for FA-FVOCI equity securitie

• Measuring the fair value of the long-term and short-term share portfolio

• Computing the disposal gain or loss.

• Determining where the unrealized holding gain or loss on investments is reported in the financial statements; in current net income in the Statement of Profit or Loss or in the Statement of Comprehensive Income

• Accounting for dividends received

When using the equity method to account for an investment in associate, cash dividends received by the investor from the associate should be recorded

• As a reduction in the Investments account.

• As an increase in the Investments account.

• As dividend income.

• As a contra item to shareholders' equity.

In accounting for investment in associate, an investor recognizes its share of the earnings in the period in which the

• investor sells the investment.

• investee declares a dividend.

• investee pays a dividend.

• earnings are reported by the investee in its financial statements.