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If there is a bond premium on a long-term bond investment, the carrying amount of the investment is reduced by the amount of the amortization.

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On September 15, 2022, Alonso Ltd.sells 150 common shares of Bandi Corp., which were being held as a trading investment.The shares were acquired six months ago at $75 a share.Alonso sells the shares for $60 a share.The entry to record the sale is On September 15, 2022, Alonso Ltd.sells 150 common shares of Bandi Corp., which were being held as a trading investment.The shares were acquired six months ago at $75 a share.Alonso sells the shares for $60 a share.The entry to record the sale is

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Laski Corp.holds two trading investments and has decided to use the fair value through profit or loss model.At year end, one has an unrealized gain of $2,000 and the other has an unrealized loss of $4,500.The trading investments would be reported at fair value and Laski Corp.would report a net unrealized loss of


A) $2,500 in the statement of income.
B) $4,500 in the statement of income.
C) $2,500 in the statement of comprehensive income.
D) $4,500 in the statement of comprehensive income.

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Hankers Corporation buys 1,500 shares of Viggo Ltd.'s common shares as a trading investment.The shares are purchased for $45 a share.At year end the shares are trading at $48.The adjusting entry at year end is . Hankers Corporation buys 1,500 shares of Viggo Ltd.'s common shares as a trading investment.The shares are purchased for $45 a share.At year end the shares are trading at $48.The adjusting entry at year end is .

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Short-term investments in bonds are accounted for using the fair value through profit or loss model.

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No unrealized gains and losses are recorded when using the amortized cost model.

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When an investee can be significantly influenced, it is known as a(n)


A) subsidiary.
B) associate.
C) trading investment.
D) parent.

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When investing excess cash for short periods of time,


A) corporations generally invest in equity securities.
B) corporations generally invest in debt securities that have both high liquidity and high risk.
C) corporations generally invest in debt securities that have high risk and low liquidity.
D) corporations generally invest in debt securities that have low risk and high liquidity.

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Dividends received on investments are accounted for in the same way under the fair value through profit or loss model cost and the equity method.

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An advantage of using the fair value through other comprehensive income is that


A) the effect on other comprehensive income is reported in the statement of income.
B) unrealized gains and losses are not used to evaluate management.
C) unrealized losses must be reported on the statement of income, but unrealized gains are reported in other comprehensive income.
D) unrealized gains must be reported on the statement of income, but unrealized losses are reported in other comprehensive income.

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Under the equity method of accounting for investments in common shares, when a dividend is received from the investee,


A) the Dividend Income account is credited.
B) the Investment account is increased.
C) the Investment account is decreased.
D) no entry is necessary.

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All the following investments are generally shown at fair value except


A) short-term debt investments.
B) trading investments.
C) bond investments intended to be held to maturity.
D) shares purchased with the intention of achieving a capital gain on sale.

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The degree of influence determines how a strategic investment is classified.

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Other comprehensive income (loss)


A) has no impact on shareholders' equity.
B) increases (decreases) accumulated other comprehensive income.
C) increases (decreases) retained earnings.
D) increases (decreases) net income.

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Non-strategic investments that are held for the purpose of earning capital gains are called Trading Investments.

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If an investment in an associate is sold at a gain, the gain


A) is reported as operating income.
B) is reported under a special section, "Discontinued Investments," on the statement of income.
C) is reported in the Other Income and Gains section on the statement of income.
D) contributes to gross profit on the statement of income.

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"Other comprehensive income" does not include


A) revaluations of property, plant and equipment.
B) certain translation gains and losses on foreign currency.
C) realized gains and losses on trading investments.
D) unrealized gains and losses for trading investments.

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The ability of an investor to affect the operating and financial activities of another company, even though the investor does not control the company, is known as


A) significant influence.
B) control.
C) a combination.
D) influence and control.

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Unless there is evidence to the contrary, an investor owning at least 20% of the shares of an investee is assumed to have significant influence.

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At acquisition, non-strategic investments are recorded at purchase cost.

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