Chap012

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Unformatted text preview: Chapter 12 Investments True/False Questions 1. Securities classified as held to maturity could be reported as either current or long-term on a classified balance sheet, depending upon their maturity dates. Answer: True Learning Objective: 1 Level of Learning: 1 2. Both debt and equity securities can be categorized as trading securities. Answer: True Learning Objective: 3 Level of Learning: 1 3. Both trading securities and securities available for sale are reported at their fair values. Answer: True Learning Objective: 3 Level of Learning: 1 4. When a creditor's receivable becomes impaired due to a troubled debt restructuring, the receivable is remeasured based on the discounted present value of currently expected cash flows at the loan's original effective rate. Answer: True Learning Objective: Appendix Level of Learning: 1 5. All securities considered available for sale should be reported as current assets in a classified balance sheet. Answer: False Learning Objective: 2 Level of Learning: 1 6. Purchases and sales of securities are always reported as investing activities on a statement of cash flows. Answer: False Learning Objective: 2 Level of Learning: 1 7. All investments in debt securities whose fair values are not readily determinable are carried at historical cost. Answer: False Learning Objective: 1 Level of Learning: 1 8. Net unrealized holding gains (losses) are reported on the income statement for trading securities. Answer: True Learning Objective: 3 Level of Learning: 1 9. Routine transfers of debt and equity investments among the trading, available for sale, and held to maturity portfolios need not be disclosed in the financial statements. Answer: False Learning Objective: 3 Level of Learning: 2 10. The equity method is in many ways a partial consolidation. Answer: True Learning Objective: 5 Level of Learning: 1 Spiceland/Sepe/Tomassini, Intermediate Accounting, Fourth Edition 199 Chapter 12 Investments 11. Under the equity method of accounting for a stock investment, cash dividends received are considered a reduction of the investee's net assets. Answer: True Learning Objective: 5 Level of Learning: 1 12. When an equity method investment is sold, a gain or loss is recognized for the difference between its selling price and its cost. Answer: False Learning Objective: 5 Level of Learning: 1 Matching Pair Questions Use the following to answer questions 13-22: 13.22. Indicate (by letter) the level of stock ownership that most frequently relates to each concept listed below. Level of Stock Ownership: A. Less than 20% B. 20% - 50% C. More than 50% Accounting/Reporting Concept: 13. ____ The investor can significantly influence the investee's operating and financial policies. ...
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