Sum Inve Theory

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Share in losses of associate

Use the following information for the next four questions:
SKEPTICAL Co. owns 20% of the ordinary shares of QUESTIONING, Inc. The
records of SKEPTICAL as of December 31, 20x1 show the following information
before any necessary year-end adjustments.
Investment in associate ₱ 800,000

Trade accounts receivable – QUESTIONING 1,200,000
Investment in preference shares – QUESTIONING 400,000
Advances to associate – QUESTIONING 200,000
Loans receivable, secured - QUESTIONING 480,000
QUESTIONING reported losses of ₱5,600,000, ₱2,000,000 and ₱400,000 in 20x1,

20x2 and 20x3, respectively. In 20x3, SKEPTICAL incurred constructive
obligation in favor of QUESTIONING in the amount of ₱480,000 and made
₱320,000 payments on behalf of QUESTIONING. In 20x4, QUESTIONING reported
profit of ₱4,000,000.
32. How much is the share in the loss of the associate in 20x1?
a. 1,120,000 b. 320,000 c. 800,000 d. 280,000
a. 0 b. 320,000 c. 400,000 d. 280,000
a. 0 b. 480,000 c. 320,000 d. 800,000
35. How much is the share in the profit of the associate in 20x4?
a. 600,000 b. 820,000 c. 1,200,000 d. 200,000
The answers and solutions to the computational problems above

(Multiple choice – Computational (SET B) can be found in the
accompanying Teacher’s Manual.
Chapter 12: Theory of Accounts Reviewer

Scope and applicability
1. PAS 28 applies to which of the following?
a. investments in associates held by a venture capital organization or mutual
fund measured at fair value through profit or loss
b. a 20% investment in preference shares
c. an interest in a partnership which gives the investor significant influence
over the partnership
d. a 60% investment in ordinary shares of another entity
2. An entity shall apply PAS 28

a. to investments which give the entity significant influence over the
investee
b. to account for investments in associates in the entity’s separate financial
statements
c. even when significant influence is lost
d. any of these
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3. When investments in equity securities represent 20% to 50% interest in the

voting rights of the investee, which of the following standards most likely
would be applied?
a. PFRS 9 b. PAS 31 c. PFRS 3 d. PAS 28
4. When equity investments results to joint control, which standard shall be

applied?
5. When equity investments results to control, which standard shall be applied?

6. In the consolidated financial statements, to which of the following financial

instruments is PFRS 9 Financial Instrument applicable?
a. investment in ordinary shares representing 51% interest
b. investment in ordinary shares representing 20% interest
c. interest in a joint venture
d. investment in preference shares representing 100% interest
7. Which of the following statements is correct?

a. According to PAS 28 Investments in Associates, a partnership cannot be an
associate.
b. Goodwill included in the carrying amount of an investment in an associate
is tested for impairment separately.
c. Only investments in ordinary shares can be classified as Investment in
Associate.
d. Only investments which give the investor voting rights can be classified as
Investment in Associate.
8. If ABC Corporation owns a controlling interest of 51% of the equity shares in

XYZ Co., ABC Corporation is a
a. Parent company to XYZ Co. c. Subsidiary company to XYZ Co.
b. Associate company to XYZ Co. d. Fellow subsidiary to XYZ Co.
9. It is an entity, including an unincorporated entity such as a partnership, over

which the investor has significant influence and that is neither a subsidiary
nor an interest in a joint venture.
a. association c. joint venture
b. subsidiary d. associate
10. It is the power to participate in the financial and operating policy decisions of
the investee but is not control or joint control over those policies.
a. significant influenza c. significant influence
b. control d. joint control
11. It is an entity, including an unincorporated entity such as a partnership, that

is controlled by another entity (known as the parent).
a. subsidy b. associate c. joint venture d. subsidiary
12. It is the power to govern the financial and operating policies of an entity so as
to obtain benefits from its activities.
a. control b. joint control c. significant influence d. telekineses
13. It is a contractual arrangement whereby two or more parties undertake an

economic activity that is subject to joint control.
a. partners b. joint control c. joint venture d. marriage

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14. It is the contractually agreed sharing of control over an economic activity, and
exists only when the strategic financial and operating decisions relating to the
activity require the unanimous consent of the parties sharing control
(venturers).
a. control b. joint venture c. joint control d. wedding vow
15. A controlling company having subsidiaries which activities were confined

primarily to their management is:
a. an affiliate c. a majority interest
b. subsidiary d. a holding company
(Adapted)
16. PAS 28 does not require the equity method to be applied to which of the
following instance(s)?
I. When an associate is acquired and held with a view to its disposal within
twelve months of acquisition. There must be evidence that the investment
is acquired with the intention to dispose of it and that management is
actively seeking a buyer. The words ‘in the near future’ were replaced
with the words ‘within twelve months’. When such an associate is not
disposed of within twelve months it must be accounted for using the
equity method as from the date of acquisition, except in narrowly
specified circumstances under PFRS 5.
II. An investor continues to have significant influence over an associate;
however, the associate is operating under severe long-term restrictions
that significantly impair its ability to transfer funds to the investor.
III. An investor holds 10% interest in an investee; however, the interest held
gives the investor significant influence over the investee.
IV. An investor presents separate financial statement in accordance with PAS
27.
a. I and IV b. I, III, IV c. I, II, III, IV d. none
Significant influence
17. According to PAS 28 Investments in associates, which of the following
statements best describes the term 'significant influence'?
a. The holding of a significant proportion of the share capital in another
entity
b. The contractually agreed sharing of control over an economic entity
c. The power to participate in the financial and operating policy decisions of
an entity
d. The mutual sharing in the risks and benefits of a combined entity
(ACCA)
18. Significant influence is presumed to exist

a. if an investor holds, directly or indirectly (e.g. through subsidiaries), 25%
or more of the voting power of the investee.
b. if an investor holds, directly or indirectly (e.g. through subsidiaries), 51%
c. if an investor holds, directly or indirectly (e.g. through subsidiaries), 100%
d. if an investor holds, directly or indirectly (e.g. through subsidiaries), 20%
19. Which of the following may provide evidence of significant influence even if
the percentage of ownership interest is less than 20%?

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I. Representation on the board of directors or equivalent governing body of

the investee.
II. Participation in policy-making processes, including participation in
decisions about dividends or other distributions.
III. Material transactions between the investor and the investee
IV. Interchange of managerial personnel.
V. Provision of essential technical information.
a. I, II b. I, II, III c. I, II, IV d. any of these
20. In which of the following does X have significant influence?

a. X owns 30% of the voting shares of ABC Co., the other 60% is held by Y
and all seats on the board of directors are appointed by Y.
b. X owns 30% of the preference shares of Z Co.
c. X owns 15% of the voting shares of ABC Co., all other shares are held in
very small blocks and therefore X has representatives in the board of
directors.
d. X owns 80% of Y, and Y owns 40% of Z. In Y’s separate financial
statements, the investment in Z is classified as “held for sale” in
accordance with PFRS 5.
21. In assessing whether significant influence exists, an investor shall consider

any potential voting rights held only if
a. it intends to exercise the potential voting rights
b. the potential voting rights are currently exercisable
c. a and b
d. they are not considered
22. When computing for its share in the associate’s profit or loss, an investor shall
use
a. its present ownership interest
b. its present ownership interest adjusted for the effect of any potential
voting rights
c. the potential voting rights percentage
d. the effective interest rate
23. According to PAS 28, significant influence is the investor’s participation in the
financial and operating policy decisions of the investee but not control of
these decisions. Which of the following may an investor be unable to exercise
significant influence?
a. participation in policy making process
b. material intercompany transactions
c. majority ownership of the investee concentrated among a small group of
shareholders who operate the investee without regard to the views of the
investor
d. technological dependency
(Adapted)
24. Under PAS 28, these refer to instruments, which if exercised, give the entity
additional voting power or reduce another party’s voting power over the
financial and operating policies of another entity.
a. share rights c. convertible securities
b. share options d. potential voting rights
25. When assessing the existence of significant influence, which of the following
shall be considered by the investor?
a. potential voting rights that are not exercisable immediately

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b. share options giving the investor the right to purchase preference shares
of the investee
c. stock rights which are exercisable immediately but the entity’s
management does not intend to exercise.
d. potential voting rights that will be received in the following accounting
period
26. Potential voting rights include all of the following except

a. share warrants and share options c. convertible preference shares
b. redeemable preference shares d. convertible bonds
Equity method
27. Investments accounted for under the equity method are initially recognized at
a. cost
b. fair value
c. fair value plus direct acquisition cost
d. cost plus or minus share in profit or loss of associate
28. Which of the following does not correctly relate to the application of the
equity method?
a. the investor recognizes its proportionate share in the profit or loss, other
comprehensive income, and discontinued operations of the associate
b. dividends received are accounted for as reduction in the investment
balance
c. share dividends are not accounted for
d. the investor accounts only its proportionate share in the profit or loss of
the associate but not in other comprehensive income and discontinued
operations.
29. Under the equity method, which of the following does not decrease the
investment account?
a. share in associate’s loss
b. amortization of undervaluation of asset
c. amortization of overvaluation of asset
d. share in dividends declared by the associate
30. For investments in associates, the investor shall not

a. recognize a share in the associate’s other comprehensive income
b. recognize a share in the associate’s discontinued operations
c. recognize a share in the associate’s profit or loss
d. recognize a share in the associate’s revenue, expenses and profit before
tax
31. When computing for its share in the associate’s profit or loss, the investor
should
I. deduct one year dividends on cumulative preference shares of the
associate held by other parties and classified as equity, whether declared
or not.
II. deduct one year dividends on noncumulative preference shares of the
or not.
III. deduct all dividends in arrears on cumulative preference shares of the
or not.
IV. deduct dividends on noncumulative preference shares of the associate
held by other parties and classified as equity only when declared.
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V. not deduct from profit or loss any dividends on ordinary shares before
computing for the share in the associate’s profit or loss.
a. I, IV, V b. I, IV c. II, III, V d. II, III
32. The equity method causes the balance in the investment account to
approximate:
a. original cost of the investment
b. market value of the investment
c. original cost of the investment minus any dividends declared and paid by
the other company
d. original cost of the investment plus a proportionate share of subsequent
undistributed earnings of the investee company.
(Adapted)
33. How is goodwill arising on the acquisition of an associate dealt with in the
financial statements?
a. It is amortized.
b. It is impairment tested individually.
c. It is written off against profit or loss.
d. Goodwill is not recognized separately within the carrying amount of the
investment.
(Adapted)
34. If the excess of the acquisition cost of an investment accounted for under
equity method over the book value of net assets acquired is attributable to an
undervalued depreciable asset and an unidentifiable asset, which of the
following statements is correct
a. The carrying amount of the investment is increased by the proportionate
share in the profits earned by the investee and decreased by the
depreciation of the interest in the undervaluation and unaffected by the
separate impairment of the unidentifiable asset
b. The carrying amount of the investment is increased by the depreciation of
the interest in the undervaluation and amortization of the unidentifiable
asset
c. The carrying amount of the investment is decreased by the depreciation of
the interest in the undervaluation and decreased by the separate
impairment on the unidentifiable asset.
d. Investment income is decreased by the depreciation of the interest in the
undervaluation and amortization of the unidentifiable asset
35. The equity method is most likely not applicable to which of the following?
a. ownership interest of 2%, 2 out of 7 of the BOD of the associate is
appointed by the investor
b. ownership interest of 40%
c. ownership interest of 20% but the associate is operating under severe
long-term restrictions that significantly impair its ability to transfer funds
to the investor
d. ownership interest of 25% acquired with an exclusive view of subsequent
disposal within 12months and accounted for under PFRS 5
36. The equity method should be applied in which of the following?

a. The investment is classified as held for sale under PFRS 5
b. The parent is exempted from presenting consolidated financial
statements.
c. The investor is an unlisted subsidiary whose parent allows it not to apply
equity method
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d. The investor previously held only 10% interest but subsequently acquires
additional 10% interest in the associate.
37. Which of the following computations may properly result to the correct
balance of an investment in associate account at year-end?
a. Beginning balance of investment plus share in associate’s profit minus
share in dividends declared by associate, and minus amortization of share
in undervaluation of associate’s asset
b. Beginning balance of investment plus share in associate’s profit minus
share in dividends declared by associate, and plus amortization of share in
undervaluation of associate’s asset
c. Beginning balance of investment plus share in associate’s profit plus share
in dividends declared by associate, and minus amortization of share in
d. Beginning balance of investment plus share in associate’s profit minus
share in dividends declared by associate, minus amortization of share in
undervaluation of associate’s asset, and minus separate impairment loss
on goodwill included in the carrying amount of the investment
38. Which of the following computations may properly result to the correct
amount of share in associate’s profit or loss for the period?
a. Share in profit of associate minus amortization of share in the
overvaluation of associate’s asset
b. Share in profit of associate minus amortization of share in the
c. Share in profit of associate minus amortization of share in the
undervaluation of associate’s asset minus share in dividends declared by
associate
d. Share in profit of associate minus amortization of share in the
undervaluation of associate’s asset minus separate impairment loss on
goodwill included in the carrying amount of the investment
39. Which of the following may represent the net change in the investment in
associate account during a period?
a. Share in profit of associate minus share in dividends plus increase in the
investment in associate account
b. Share in profit of associate minus share in dividends minus increase in the
investment in associate account
c. Share in profit of associate minus share in dividends
d. Share in profit of associate plus share in dividends
40. Dividends received from an investment in an associate,

a. if in the form of cash dividends, is credited to investment income
b. if in the form of share dividends, is debited to investment income
c. if in the form of cash dividends, is credited to investment account only if
the cash dividends are declared from pre-acquisition retained earnings.
d. if in the form of share dividends, is recorded through memo entry only
41. The excess of purchase cost of an investment in associate over the fair value
of the interest acquired represents
a. goodwill that should not be amortized but tested for impairment at least
annually
b. negative goodwill that should be recognized in the investor’s profit or loss
in the year of acquisition.
c. negative goodwill that should be deferred and amortized
d. goodwill that is not required to be accounted for separately
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42. The excess of the fair value of the interest acquired over the purchase cost of
an investment in associate represents
a. goodwill that should not be amortized but tested for impairment at least
annually
b. negative goodwill that should be recognized in the investor’s profit or loss
in the year of acquisition.
c. negative goodwill that should be deferred and amortized
d. goodwill that is not required to be accounted for separately
43. Equity method shall cease to be applied only when the investor loses
significant influence over the associate. Which of the following is not true?
a. The loss of significant influence can occur with or without a change in the
percentage of ownership.
b. An entity loses significant influence over an investee when it loses the
power to participate in the financial and operating policy decisions of that
investee.
c. There is a presumption of loss of significant influence if the ownership
interest falls below 20%.
d. There is a presumption of loss of significant influence when the associate
is operating under severe long-term restrictions that significantly impair
its ability to transfer funds to the investor.
44. Significant influence may be lost in any of the following, except

a. When an associate becomes subject to the control of a government, court,
administrator or regulator.
b. The investor is precluded, as a result of a contractual agreement, from
participating in the financial and operating policy decisions of the
investee.
c. The investor sells half of its 30% interest in an associate
d. The investor sells half of its 20% interest in an associate but retains the
voting rights on the investment sold through proxy agreement
45. Significant influence may be lost in any of the following, except

a. The investor loses its right to appoint board of directors in the associate
b. The investor purchases additional 31% interest in the associate
c. The associate is operating under severe long-term restrictions that
significantly impair its ability to transfer funds to the investor.
d. The investor retains its 20% interest in the associate but grants its voting
rights to an unrelated party.
46. On the loss of significant influence, the investor shall do any of the following,
except
a. measure at fair value any investment retained in the former associate.
b. recognize gain or loss for the difference between the net disposal
proceeds received and the carrying amount of the investment sold
c. recognize gain or loss for the difference between the fair value of the
interest retained and the carrying amount of the previous interest held
d. account for the discontinuance of equity method retrospectively.
47. If an investor loses significant influence over an associate,

a. all cumulative gain or loss previously recognized in other comprehensive
income is reclassified to profit or loss.
b. any cumulative gain or loss previously recognized in other comprehensive
income is reclassified directly in equity or to profit or loss, subject to the
requirements of PAS 1.
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c. no adjustment to the investment account is necessary

d. the investment should be reclassified and any gain or loss on
reclassification is recognized in equity.
48. If an investor’s ownership interest in an associate is reduced but significant

influence is not lost,
a. the investor should cease applying the equity method and use PFRS 9 if
ownership interest is reduced below 20% or PFRS 3 and PAS 27 if
ownership interest is increased above 50%.
b. the investor shall reclassify to profit or loss or directly in equity only a
proportionate amount of the gain or loss previously recognized in other
comprehensive income.
c. the investor continues to use the equity method and since significant
influence is not lost, no adjustment is needed
d. do nothing
49. If there is any excess of the investor’s share of the net fair value of the
associate’s identifiable assets and contingent liabilities over the cost of the
investment, that is, negative goodwill, how should that excess be treated?
a. It should be included in the carrying amount of the investment.
b. It should be written off against retained earnings.
c. It should be included as income in the determination of the investor’s
share of the associate’s profit or loss for the period.
d. It should be disclosed separately as part of the investor’s equity.
(Adapted)
50. The investor’s interest on the undervaluation of depreciable assets of the

associate is
a. amortized using the effective rate and deducted to investment income
recognized for the period
b. depreciated and deducted from the carrying amount of the investment
c. amortized using the effective rate and added to the carrying amount of the
investment and deducted to investment income
d. depreciated and deducted from the carrying amount of the investment
and investment income recognized for the period
51. When the equity method is used to account for the investment in an associate,
the recording of the receipt of a cash distribution from the investee will result
in
a. The recognition of investment income.
b. A reduction in the investment balance.
c. An Increase in a liability account.
d. An increase in special equity account.
52. Stock dividends on common stock should be recorded at their fair market
value by the investor when the related investment is accounted for under
which of the following methods?
Cost Equity
a. Yes Yes
b. Yes No
c. No Yes
d. No No
(AICPA)
53. Which of the following statements is in accordance with the provisions of PAS
28?
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I. The income or loss on the investment in associate is computed on the net

income after tax of the associate.
II. The income or loss on the investment in associate is presented in the
statement of profit or loss and other comprehensive income after the line
item “Income Tax Expense” but before discontinued operations.
a. I b. II c. I and II d. Neither I nor II
54. On January 1, 20x1, Adjacent Inc. purchased 10% of Juxtaposition Co.’s

common stock. Adjacent purchased additional shares bringing its ownership
up to 40% of Juxtaposition’s common stock outstanding on August 1, 20x1.
During October 20x1, Juxtaposition declared and paid a cash dividend on all
of its outstanding common stock. Under PAS 28, how much income from the
Juxtaposition investment should Adjacent’s 20x1 income statement report?
a. 10% of Juxtaposition’s income for January 1 to July 31, 20x1, plus 40% of
Juxtaposition’s income for August 1 to December 31, 20x1.
b. 40% of Juxtaposition’s income for August 1 to December 31, 20x1 only.
c. 40% of Juxtaposition’s 20x1 income.
d. Amount equal to dividends received from Juxtaposition.
(AICPA)
55. Which of the following statements are in accordance with PAS 28?
I. When the associate has cumulative preference shares, the investor
computes its share in the profit or loss of the investee after deducting the
preferred dividends, only when such dividends are declared.
II. When the associate has non-cumulative preference shares, the investor
computes its share in the profit or loss of the investee after deducting the
preferred dividends, whether or not such dividends are declared
a. true, true b. true, false c. false, true d. false, false
56. Bell owns 10% of the common stock of War Co. throughout the year. War Co.
has no preferred stock outstanding. Bella’s stock gives him the right to
a. be paid 10% of the firm’s profits in cash each year
b. receive dividends equal to 10% of the par value each year
c. receive dividends equal to 10% of the total dividends paid by the
corporation for the year to common stockholders
d. keep the corporation from issuing any additional stock unless he is willing
to buy 10% of the newly issued shares
(AICPA)
57. Adjustments to the carrying amount of the investment in associate may be

necessary for changes in the investor’s proportionate interest in the investee
arising from changes in the investee’s equity that have not been recognized in
the investee’s profit or loss. Which of the following may not necessitate an
adjustment to the investment in associate account?
a. Changes in revaluation surplus of associate
b. Changes in valuation of the associate’s FVOCI securities
c. Changes in the actuarial gains and losses of the associate not amortized
through the corridor approach
d. Changes in the Allowance for doubtful accounts of the associate
58. Which of the following is correct in relation to accounting for investments in

associates?
I. Theoretically, the total market value of shares held as investment in
associate which have been subjected to a share dividend should be the
same as it was before the dividend.
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II. Share dividends received on an investment in associate is accounted for as

deduction from the investment account.
III. Share dividends received on an investment in associate is generally not
accounted for.
a. I b. II c. I and III d. I, II and III
59. Which of the following statements correctly refers to the provisions of PAS 28
Investments in Associates?
I. If an investor acquires additional shares sufficient to give him significant
influence, a retrospective adjustment should be made on the financial
statements to recognize share in profits and losses of the investee not
previously recognized.
II. No adjustment to the investment account is made when changing from the
fair value method to the equity method.
a. I b. II c. I and II d. Neither I nor II
60. An investor in equity securities received cash dividends in excess of the

investor’s share of investee’s earnings subsequent to the date of the
investment. How will the investor’s investment account be affected by those
dividends for each of the following investments?
FVOCI securities Equity method investment
a. No effect No effect
b. Decrease No effect
c. No effect Decrease
d. Decrease Decrease
(AICPA)
61. The investment in associate is reduced to zero when

a. the investment in associate is partly reclassified to FVPL
b. the share in the losses of the associate exceeds the share in the profits
c. at no instance should the investment be reduced to zero unless the
investment is derecognized through sale or other forms of disposal
d. the share in the losses of the associate exceeds the investor’s interest in
the associate
62. Consider the following statements.

I. In applying Equity Method of accounting for investments in associates,
dividends received from the investee are considered a return of capital
and should be credited to stockholders’ equity of the investor.
II. A subsidiary is an affiliate that is not controlled by an enterprise directly,
or indirectly, through one or more intermediaries.
State whether the foregoing statements are correct.

a. Only I is correct c. Only II is correct
b. I and II are correct d. Neither I nor II is correct
(RPCPA)
63. The following statements relate to equity method. Choose the incorrect
statement.
a. In accounting for investments in common stock under the equity method,
sales of stock of an investee by an investor, should be accounted for as
gains or losses equal to the difference at the time of sales between selling
price and carrying amount of the stock sold.
b. The general rule is that an investor owning 20% or more of the voting
stock of an investee is presumed to have the ability to exercise significant
interest over the investee.
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c. Under the equity method of accounting, the investments in common stock

should be shown as a single amount, and the investor’s share of earnings
or losses from its investment should ordinarily be shown in its income
statement as a single amount including the results of discontinued
operations.
d. The equity method of recording security transactions assumes a close
economic relationship between the investor and the investee. It is used,
when influential interest exists.
(RPCPA)
64. Wrath Co. uses the equity method to account for its January 1, 2003 purchase
of Anger Inc.’s common stock. On January 1, 2003, the fair values of Anger’s
FIFO inventory and land exceeded their carrying amounts. How do these
excesses of fair values over carrying amounts affect Wrath’s reported equity
in Anger’s 2003 earnings?
Inventory excess Land excess
a. Decrease Decrease
b. Decrease No effect
c. Increase Increase
d. Increase No effect
(AICPA)
65. On May 1, 20x1, Upbeat Company acquired 30% of the voting stock of Reggae
Corp. In 20x1, Reggae had net earnings of ₱100,000 and paid dividends of
₱10,000. Upbeat mistakenly measured these transactions using the cost
instead of the equity method of accounting. What effect would this have on
working capital, dividend income, and net earnings, respectively?
a. overstate, overstate, overstate
b. no effect, understate, understate
c. no effect, overstate, understate
d. understate, understate, understate
(RPCPA)
66. Select the incorrect statement.

a. The cost method of accounting for an investment in a subsidiary
recognizes the legal fact that the parent and subsidiary are one economic
unit.
b. The net cumulative unrealized gains and losses on investments in equity
securities classified as FVOCI and are accounted for under the cost method
are usually measured by the difference between cost and current selling
price.
c. Under the equity method of accounting for long-term investments in
equity securities, the investor's investment account is decreased by all
cash dividends received from the investee.
d. The equity method of accounting for long-term investments in equity
securities is based on the presumption that the investor owns a sufficient
number of the outstanding voting shares of another company to exercise
significant influence over the operating and financial policies of the other
company.
67. Which of the following statement is the correct statement?

a. At the acquisition date of a long-term investment, the entry would be the
same whether the investor uses PFRS 9 or the equity method under PAS
28.
b. Under PAS 27, an investment in a subsidiary is shown as an asset, while
under the equity method, it is shown as part of equity.
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c. Long-term investments are classified as long-term only because they are

not readily marketable.
d. Long-term investments in equity securities are written down only when
there has been a material and apparently permanent decline in the market
value of the investment below its cost.
e. Impairment losses on investments in associates are not accounted for
under PAS 28.
68. The following statements relate to the accounting for investments in equity
instruments.
I. Whenever an investment in marketable equity securities does not qualify
for accounting using the equity method, the investor is required to
recognize as dividend income cash dividends received from the investee.
II. The cost measurement for equity investments is permitted in separate
financial statements.
III. An investor may still be able to exercise significant influence over an
investee, even if the investment is less than 20% of the voting stock of the
investee.
IV. No adjustment to the investment account is made when changing from the
equity to the fair value measurement, or vice versa.
a. I, II b. I, II, III c. I, III d. I, II, IV
69. In its financial statements, Musang, Inc. uses the cost measurement of
accounting for its 15% ownership of Kalinga Coffee Co. At December 31, 20x1,
Musang has a receivable from Kalinga Coffee. How should the receivable be
reported in Musang’s December 31, 20x1 statement of financial position?
a. The total receivable should be reported separately.
b. The total receivable should be included as part of the investment in
Kalinga Coffee, without separate disclosure.
c. 85% of the receivable should be reported separately, with the balance
offset against Kalinga Coffee’s payable to Musang.
d. The total receivable should be offset against Kalinga Coffee’s payable to
Musang, without separate disclosure.
(AICPA)
70. When the equity method is used to account for investments in common stock,
which of the following affects the investor’s reported investment income?
Equipment amortization related to purchase Cash dividends from investee
a. Yes Yes
b. No Yes
c. No No
d. Yes No
(AICPA)
71. Google Co. received a cash dividend from a common stock investment. Should
Google report an increase in the investment account if it has classified the
stock as FVOCI or uses the equity method of accounting?
FVOCI Equity
a. No No
b. Yes Yes
c. Yes No
d. No Yes
(AICPA)
18

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72. Bliss Co. uses the equity method to account for its investment in Nirvana, Inc.
common stock. How should Bliss record a 2% stock dividend received from
Nirvana?
a. As dividend revenue at Nirvana's carrying value of the stock.
b. As dividend revenue at the market value of the stock.
c. As a reduction in the total cost of Nirvana stock owned.
d. As a memorandum entry reducing the unit cost of all Nirvana stock
owned.
(AICPA)
73. Which of the following investments in an associate is not within the scope of
PAS 28 Investments in associates?
a. An associate held by a subsidiary and measured at cost
b. An associate held by a venture capital organization and measured at cost
c. An associate held by a venture capital organization and measured at fair
value with changes in fair value recognized in profit or loss
d. An associate held by a subsidiary and measured at fair value with changes
in fair value recognized in profit or loss
(ACCA)
74. Fretboard Company equity accounts for its 40% interest in Fingerboard
Company. Fingerboard's financial statements include the following:
Revenue ₱ 600,000
Cost of sales (250,000)
350,000
Operating expenses (285,000)
65,000
Tax ( 20,000)
₱ 45,000
Are the following statements true or false, according to PAS 28 Investments in

associates?
1) Fretboard's consolidated revenue should include ₱240,000 in respect of
Fingerboard.
2) Fretboard's consolidated profit before tax should include ₱26,000 in respect
of Fingerboard.
Statement (1) Statement (2)
a. False False
b. False True
c. True False
d. True True
(ACCA)
75. An investor must apply the requirements of PAS 36 in determining whether it

is necessary to recognize any impairment loss in the investment in an
associate. How is the impairment test carried out?
a. The goodwill is separated from the rest of the investment and is
impairment tested individually.
b. The entire carrying amount of the investment is tested for impairment
under PAS 36 by comparing its recoverable amount with its carrying
amount.
c. The carrying value of the investment should be compared with its market
value.
d. The recoverable amounts of all investments in associates should be
assessed together to determine whether there has been an impairment on
all investments.
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(Adapted)
76. What accounting method should be used for an investment in an associate

where it is operating under severe long-term restrictions - for example where
the government of a company has temporary control over the associate?
a. PFRS 9 should be applied.
b. The equity method should be applied if significant influence can be
exerted.
c. The associate should be shown at cost.
d. Proportionate consolidation should be used.
(Adapted)
77. If the investor ceases to have significant influence over an associate, how
should the investment be treated?
a. It should still be treated using equity accounting.
b. It should be treated in accordance with PFRS 9.
c. The investment should be frozen at the date at which the investor ceases
to have significant influence.
d. The investment should be treated at cost.
(Adapted)
78. When significant influence is achieved from additional purchase of shares

resulting to an increase in ownership interest,
a. the change to equity method is treated retrospectively, “catch up”
adjustments shall be made in order to restate the accounts to what their
balances should be had equity method been used all along.
b. the previous investment is measured at acquisition-date fair value and any
difference between this amount and the previous carrying amount is
recognized immediately in profit or loss.
c. PAS 28 and PFRS 3 requires that the investment account be adjusted for
any share in cash dividends declared by the investee in previous periods
that were recognized as income.
d. the previous investment is measured at acquisition-date fair value and any
difference between this amount and the previous carrying amount is
recognized immediately in profit or loss or other comprehensive income,
as appropriate.
79. Profits and losses resulting from “upstream” and “downstream” transactions
between an investor and an associate are
a. recognized in the investor’s financial statements through proportionate
consolidation, meaning the investor recognizes its share in the sale and
cost of sales recorded by the associate
b. recognized in the investor’s financial statements only to the extent of
unrelated investors’ interests in the associate.
c. recognized in the investor’s financial statements only to the extent of
related investors’ interests in the associate.
d. not recognized in the investor’s financial statements
80. Under PAS 28, profits and losses resulting from ‘upstream’ and ‘downstream’
transactions between an investor and an associate
a. must be eliminated to the extent of the investor’s interest in the associate.
b. must be eliminated to the extent of the unrelated interest over the
associate
c. must be recognized in full after adjustment for the increases or decreases
in beginning inventory
d. not recognized
20

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81. Under PAS 28, adjustments to share in profit or loss of an associate may differ
if the transaction is “downstream” or “upstream.” Which of the following
statements is true?
I. Jack Co. owns 20% interest in Old Man, Inc. During the year Old Man sold
magic beans to Jack. This is an upstream transaction.
II. Goldilocks Co. owns 20% interest in Papa Bear, Inc. During the year
Goldilocks purchased porridge from Papa Bear. This is a downstream
transaction.
a. true, true b. true false c. false, true d. false, false
82. Daddeh Co. owns 20% interest in Bebeh Co. During the year, Daddeh sold
inventory to Bebeh at 20% gross profit. As of year-end Bebeh still holds 100%
of the inventory. How much share in the profit from the transaction will
Daddeh recognize for the year? Assume income tax rate of 30%.
a. 14% b. 80% c. 2.8% d. none
83. Under PAS 28, it refers to the carrying amount of the investment in the
associate under the equity method together with any long-term interests that
in substance, form part of the investor’s net investment in the associates.
a. investment in associate c. interest in ownership
b. interest in the associate d. none
84. Which of the following may not be included in interest in associate when
determining the threshold in recognizing share in losses of associate?
a. investment in preference shares of associate
b. long-term, unsecured, advances to the associate
c. trade receivables from the associate
d. investment in associate
85. Losses recognized under the equity method in excess of the investor’s
investment in ordinary shares are applied to the other components of the
investor’s interest in the associate
a. in the order of their seniority
b. in the reverse order of their seniority
c. in the order of priority in liquidation
d. in no particular order
86. After the investor’s interest in the associate is reduced to zero, additional
losses are provided for, and a liability is recognized, only to the extent that the
investor has incurred
a. legal or constructive obligations
b. made payments on behalf of the associate
c. a or b
d. further losses are not recognized
87. If the associate subsequently reports profits, the investor resumes

recognizing its share of those profits
a. only after its share of the profits equals the share of losses not recognized
b. only after its share of the profits equals the share of losses previously
recognized
c. only if there are no outstanding legal or constructive obligation incurred
on behalf of the associate
d. a or b
88. How is goodwill arising from investments in associates accounted for?
21

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a. Included in the carrying amount of the investment and not amortized but
tested separately for impairment at least annually.
b. Not accounted for separately; however, presented as a separate asset in
the investor’s separate financial statements.
c. Included in the carrying amount of the investment and the entire
investment in associate is tested for impairment under PAS 36.
d. Recognized as a separate asset either in the group financial statements or
in the separate financial statements but not amortized.
Others
89. Investments in associates are normally classified in the statement of financial
position as
a. current assets b. noncurrent assets c. fair value d. equity account
90. The investor’s share in the associate’s revaluation surplus is

a. recognized in the investor’s equity together with the investor’s
revaluation surplus
b. recognized in the investor’s property, plant and equipment with separate
disclosure
c. recognized in the investor’s retained earnings with separate disclosure
d. not recognized
91. What should happen when the financial statements of an associate are not
prepared to the same date as the investor’s accounts?
a. The associate should prepare financial statements for the use of the
investor at the same date as those of the investor.
b. The financial statements of the associate prepared up to a different
accounting date will be used as normal.
c. Any major transactions between the date of the financial statements of the
investor and that of the associate should be accounted for.
d. As long as the gap is not greater than three months, there is no problem.
(Adapted)
92. Preparation of consolidated financial statements is primarily based on the:

a. time period assumption d. cost/benefit constraint
b. full-disclosure principle e. separate entity assumption
c. cost principle
(Adapted)
93. The reporting dates of the investor and its associate should not differ by more
than
a. one month b. two months c. three months d. six months
94. When the accounting policies used by the investor and the associate do not
match
a. PAS 28 requires appropriate adjustments to the associate’s financial
statements to conform them to the investor’s accounting policies for
reporting like transactions and other events in similar circumstances.
b. PAS 28 does not require appropriate adjustments to the associate’s
financial statements to conform them to the investor’s accounting policies
for reporting like transactions and other events in similar circumstances
when it was not practicable to use uniform accounting policies
c. PAS 28 requires the entity to discontinue the use of the equity method
d. In no instance should the accounting policies used by the investor and the
associate be different.
22

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95. When financial statements of an associate used in applying the equity method
are prepared as at the end of the reporting period that is different from that of
the investor,
a. the difference must be no greater than three months
b. the difference must be no greater than twelve months
c. the difference must be compensated by an interim financial statement
d. no difference must exist
96. When an entity elects to prepare separate financial statements, it shall

account for its investment in associates
a. at cost c. using the equity method
b. in accordance with PFRS 9 d. any of these
Chapter 12 - Suggested answers to theory of accounts questions

1. C 16. A 31. A 46. D 61. D 76. B 91. A
2. A 17. C 32. D 47. B 62. D 77. B 92. E
3. D 18. D 33. D 48. B 63. C 78. D 93. C
4. B 19. D 34. A 49. C 64. B 79. B 94. A
5. C 20. C 35. D 50. D 65. C 80. A 95. A
6. D 21. B 36. D 51. B 66. A 81. B 96. D
7. D 22. A 37. A 52. D 67. E 82. D
8. A 23. C 38. B 53. A 68. B 83. B
9. D 24. D 39. C 54. B 69. A 84. C
10. C 25. C 40. D 55. D 70. D 85. B
11. D 26. B 41. D 56. C 71. A 86. C
12. A 27. A 42. B 57. D 72. D 87. A
13. C 28. D 43. D 58. C 73. C 88. C
14. C 29. C 44. D 59. D 74. A 89. B
15. D 30. D 45. C 60. C 75. B 90. A
23

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Chapter 17 Investment
Accountancy (University of the Philippines System)
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CHAPTER 17
INVESTMENTS
TRUE-FALSE—Conceptual
Answer No. Description
F 1. IASB requirements for held-for-collection investments.
T 2. Classification categories for financial assets.
F 3. Definition of amortized cost.
F 4. Reporting debt investments at fair value.
F 5. Calculation of gain on sale of debt investments.
T 6. Reporting unrealized holding gain/loss account.
F 7. Accounting for debt investments using fair value.
T 8. Using amortized cost or fair value method for debt investment.
T 9. Using fair value option.
F 10. Definition of significant influence.
T 11. Reporting Unrealized Holding Gain/Loss—Equity account.
T 12. Examples of significant influence.
T 13. Definition of controlling interest.
T 14. Effect of dividends on investment under equity.
F 15. Reporting revenue under fair value method.
T 16. Definition of controlling interest.
F 17. Calculation of impairment loss.
T 18. Accounting for an impaired investment.
F 19. Transfer between investment classifications.
F *20. Necessary of reclassification adjustment.
MULTIPLE CHOICE—Conceptual
c 21. Identification of financial assets.
b 22. Valuation of debt investments.
c 23. Reporting held-to-collection investments.
c 24. Reporting investments at fair value.
c 25. Financial assets measurement categories.
b 26. IFRS measurement requirements for financial assets.
c 27. Investment accounting approach for held-for-collection investments.
S
a 28. Identifying investments accounted for at amortized cost.
c 29. Definition of amortized cost.
d 30. Calculating gain on sale of debt investment.
b 31. Reporting held for collection investments.
a 32. Recording amortization of bond premium.
d 33. Effective-interest rate method.
c 34. Sale of debt investment prior to maturity.
c 35. Calculating unrealized holding gain or loss.
d 36. Accounting for trading investments.
c 37. Accounting for trading debt investments.
c 38. Reporting trading debt investments.
c 39. Valuation of investments in trading debt investments.
c 40. Differences between amortized cost and fair value methods.

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MULTIPLE CHOICE—Conceptual (cont.)

c 41. Fair value option.
d 42. Reporting changes in fair value.
a 43. Fair value option.
P
a 44. Identifying non-trading investments.
S
b 45. Passive interest investment.
b 46. Reporting unrealized holding gains or losses.
b 47. Conditions for using the equity method.
d 48. Ownership interest required for using the consolidation method.
d 49. Reason equity investments are held.
a 50. Non-trading equity investments.
S
a 51. Fair value vs. equity method.
P
c 52. Fair value vs. equity method.
a 53. Recording of dividends received under the equity method.
d 54. Recognition of earnings of investee using the equity method.
d 55. Effect of using the fair value method in error.
d 56. Accounting for debt investment impairments.
b 57. Calculation of impairment loss.
c 58. Calculation of impairment loss on debt investments.
b 59. Accounting for transfers of debt investments.
b 60. Transfer of investments between categories.
c 61. Definition of “gains trading” or “cherry picking”.
b 62. Accounting for transfers between Categories.
c 63. Reclassification adjustment in comprehensive income.
a *64. Accounting for derivatives.
c *65. Characteristics of a derivative instrument.
b *66. Identifying companies that are arbitrageurs.
c *67. Accounting for fair value hedges.
b *68. Gains/losses on cash flow hedges.
a *69. Identifying an embedded derivative.
P
These questions also appear in the Problem-Solving Survival Guide.
S
These questions also appear in the Study Guide.
*This topic is dealt with in an Appendix to the chapter.
MULTIPLE CHOICE—Computational
b 70. Computing cost of bond investment.
d 71. Calculation of discount amortization.
b 72. Calculation of revenue from held-for-collection investments.
b 73. Carrying value of held-to-maturity investments.
c 74. Carrying value of available-for-sale debt investments.
a 75. Calculation of income from available-for-sale debt investments.
b 76. Calculation of income from held-for-collection investments.
b 77. Determine gain on sale of debt investments.
d 78. Computation of revenue from held-for-collection investment.
a 79. Calculation of discount amortization.
c 80. Calculation of revenue from held-for-collection investments.

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MULTIPLE CHOICE—Computational (cont.)

b 81. Calculation of interest revenue from held-for-collection investment.
c 82. Calculation of unrealized gain/loss.
c 83. Calculation of total income/loss from trading investment.
a 84. Computation of other comprehensive income.
c 85. Computation of gain/loss on sale of bonds.
d 86. Calculation of other comprehensive income.
b 87. Calculation of loss on sale of bonds.
c 88. Fair value for debt investment.
d 89. Calculation of income from trading investment.
a 90. Calculation of income from trading investment.
b 91. Calculation of income from non-trading investment.
d 92. Calculation of loss on sale of trading investment.
b 93. Determination of unrealized loss on trading investment.
c 94. Determination of accumulated other comprehensive income.
b 95. Entry to record unrealized gain on AFS investments.
c 96. Fair value for trading investments.
a 97. Unrealized gain on available-for-sale investments.
a 98. Calculation of gain on sale of equity investment.
b 99. Determination of unrealized loss on AFS investments.
a 100. Calculation of unrealized loss included in comprehensive income.
b 101. Computation of purchase price of equity method investment.
c 102. Computation of revenue from investment.
c 103. Computation of investment account balance.
a 104. Calculation of investment revenue.
c 105. Accounting for equity investments/fair value method.
b 106. Accounting for equity investments/equity method.
b 107. Accounting for equity investments/fair value method.
b 108. Equity method of accounting.
c 109. Fair value method of accounting for equity investment.
c 110. Equity method of accounting for equity investment.
c 111. Balance of investment account using the equity method.
b 112. Investment income recognized under the equity method.
b 114. Balance of investment account using the equity method.
d 115. Investment revenue recognized under the equity method.
a 117. Calculation of purchase price of equity investment.
b 118. Recovery of impairment loss.
b 119. Calculation of impairment loss.
b *120. Other comprehensive income.
MULTIPLE CHOICE—CPA Adapted

d 121. Carrying value of AFS debt investments.
d 122. Unrealized loss on trading and AFS investments.
c 123. Unrealized loss on trading and AFS investments.
d 124. Classification of an equity investment.
c 125. Investment income recognized under the equity method.

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MULTIPLE CHOICE—CPA Adapted (cont.)

b 126. Balance of investment account using the equity method.
c 127. Sale of equity investment.
a 128. Calculate the acquisition price of an equity investment.
EXERCISES
Item Description
E17-129 Debt investments.
E17-130 Debt investment purchased at a premium.
E17-131 Debt investment purchased at a discount.
E17-132 Investment in equity securities.
E17-133 Fair value and equity methods (essay).
E17-134 Fair value and equity methods.
E17-135 Impairment.
E17-136 Comprehensive income calculation.
*E17-137 Fair value hedge.
*E17-138 Cash flow hedge.
PROBLEMS
Item Description
P17-139 Trading equity investments.
P17-140 Trading investments.
P17-141 Non-trading equity investments.
*P17-142 Derivative financial instrument.
*P17-143 Free-standing derivative.
CHAPTER LEARNING OBJECTIVES

1. Describe the accounting framework for financial assets.
2. Understand the accounting for debt investments at amortized cost.
3. Understand the accounting for debt investments at fair value.
4. Describe the accounting for the fair value option.
5. Understand the accounting for equity investments at fair value.
6. Explain the equity method of accounting and compare it to the fair value method for equity
securities.
7. Discuss the accounting for impairments of debt investments.
8. Describe the accounting for transfer of investments between categories.
*9. Explain why companies report reclassification adjustments.

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Investments 17 - 5
*10. Explain who uses derivatives and why.
*11. Understand the basic guidelines for accounting for derivatives.
*12. Describe the accounting for derivative financial instruments.
*13. Explain how to account for a fair value hedge.
*14. Explain how to account for a cash flow hedge.
*15. Identify special reporting issues related to derivative financial instruments that cause
unique accounting problems.
*16. Describe the accounting for variable-interest entities.
SUMMARY OF LEARNING OBJECTIVES BY QUESTIONS
I
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em T
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em Type I tem T ype I te m T
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Learning Objective 1
1. TF 21. MC 23. MC 25. MC 27. MC
2. TF 22. MC 24. MC 26. MC 70. MC
3. TF 29. MC 33. MC 73. MC 77. MC 81. MC 130. E
4. TF 30. MC 34. MC 74. MC 78. MC 82. MC 131. E
5. TF 31. MC 71. MC 75. MC 79. MC 121. MC
S
28. MC 32. MC 72. MC 76. MC 80. MC 129. E
6. TF 8. TF 36. MC 38. MC 40. MC 84. MC 86. MC
7. TF 35. MC 37. MC 39. MC 83. MC 85. MC 87. MC
P
9. TF 41. MC 42. MC 43. MC 44. MC 88. MC
S
10. TF 45. MC 49. MC 91. MC 95. MC 99. MC 124. MC
11. TF 46. MC 50. MC 92. MC 96. MC 100. MC 139. P
12. TF 47. MC 89. MC 93. MC 97. MC 122. MC 140. P
13. TF 48. MC 90. MC 94. MC 98. MC 123. MC 141. P
14. TF 53. MC 103. MC 108. MC 113. MC 125. MC 133. E
15. TF 54. MC 104. MC 109. MC 114. MC 126. MC 134. E
16. TF 55. MC 105. MC 110. MC 115. MC 127. MC 136. E
S
51. MC 101. MC 106. MC 111. MC 116. MC 128. MC
P
52. MC 102. MC 107. MC 112. MC 117. MC 132. E
17. TF 56. MC 58. MC 119. MC 140. P
18. TF 57. MC 118. MC 135. E
Note: TF = True-False E = Exercise

MC = Multiple Choice P = Problem

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Investments 17 - 6
SUMMARY OF LEARNING OBJECTIVES BY QUESTIONS (cont.)
P
19. TF 59. MC 60. MC 61. MC 62. MC
Learning Objective 9*
20. TF 63. MC 120. MC
64. MC
65. MC
66. MC 142. P 143. P
67. MC 137. E
68. MC 138. E
69. MC
Note: TF = True-False E = Exercise

MC = Multiple Choice P = Problem
TRUE-FALSE—Conceptual
1. The IASB requires that investments meeting the business model (held-for-collection) and
contractual cash flow tests be valued at fair value.
2. The IASB requires that companies classify financial assets into two measurement
categories – amortized cost and fair value.
3. Amortized cost is the initial recognition amount of the investment minus cumulative
amortization.
4. Companies measure debt investments at fair value if the objective of the company’s
business model is to hold the financial asset to collect the contractual cash flows.
5. The gain on sale of debt investments is the excess of the selling price over the fair value
of the bonds.
6. The Unrealized Holding Gain or Loss–Income account is reported in the other income and
expense section of the income statement.
7. At each reporting date, companies adjust debt investments’ amortized cost to fair value,
with any unrealized holding gain or loss reported as part of their comprehensive income.

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Investments 17 - 7
8. Over the life of a debt investment, interest revenue and the gain on sale are the same
using either amortized cost or fair value measurement.
9. The fair value option is generally available only at the time a company first purchases the
financial asset or incurs a financial liability.
10. Equity security holdings between 20 and 50 percent indicates that the investor has a
controlling interest over the investee.
11. The Unrealized Holding Gain/Loss—Equity account is reported as a part of other compre-
hensive income.
12. Non-trading equity investments are recorded at fair value, with unrealized gains and
losses reported in other comprehensive income.
13. An investment of more than 50 percent of the voting stock of an investee should lead to a
presumption of significant influence over an investee.
14. All dividends received by an investor from the investee decrease the investment’s carrying
value under the equity method.
15. Under the fair value method, the investor reports as revenue its share of the net income
reported by the investee.
16. A controlling interest occurs when one corporation acquires a voting interest of more than
50 percent in another corporation.
17. An impairment loss is the difference between an investments cost and the expected future
cash flows.
18. If a company determines that an investment is impaired, it writes down the amortized cost
basis of the individual security to reflect this loss in value.
19. Companies account for transfers between investment classifications retroactively, at the
end of the accounting period after the change in the business model.
*20. A reclassification adjustment is necessary when a company reports realized gains/losses

as part of net income but also unrealized gains/losses as part of other comprehensive
income.
True-False Answers—Conceptual
Item Ans. Item Ans. Item Ans. Item Ans.
1. F 6. T 11. T 16. T
2. T 7. F 12. T 17. F
3. F 8. T 13. F 18. T
4. F 9. T 14. T 19. F
5. F 10. F 15. F *20. F

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MULTIPLE CHOICE—Conceptual
21. Which of the following is not a financial asset?
a. Cash
b. Equity investment
c. Inventory
d. Receivables
22. Debt investments not held for collection are reported at

a. amortized cost.
b. fair value.
c. the lower of amortized cost or fair value.
d. net realizable value.
23. Debt investments that meet the business model and contractual cash flow tests are
reported at
a. net realizable value.
b. fair value.
c. amortized cost.
d. the lower of amortized cost or fair value.
24. Which of the following are reported at fair value?

a. Debt investments.
b. Equity investments.
c. Both debt and equity investments.
d. None of these.
25. The IASB permits which of the following measurement categories for financial assets?
Fair value Amortized cost
a. No No
b. Yes No
c. Yes Yes
d. No Yes
26. IFRS requires companies to measure their financial assets based on all of the following
except
a. The company’s business model for managing its financial assets.
b. Whether the financial asset is a debt or equity investment.
c. The contractual cash flow characteristics of the financial asset.
d. All of the choices are IFRS requirements.
27. Match the investment accounting approach with the correct valuation approach:
Not held-for-collection Held-for-collection
a. Amortized cost Amortized cost
b. Fair value Fair value
c. Fair value Amortized cost
d. Amortized cost Fair value

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S
28. Debt investments that are accounted for and reported at amortized cost, are
a. debt investments which are managed and evaluated based on a documented risk-
management strategy.
b. trading debt investments.
c. held-for-collection debt investments.
d. All of the above are correct.
29. Amortized cost is the initial recognition amount of the investment minus
a. repayments and net of any reduction for uncollectibility.
b. cumulative amortization and net of any reduction for uncollectibility.
c. repayments plus or minus cumulative amortization and net of any reduction for
uncollectibility.
d. repayments plus or minus cumulative amortization.
30. A gain on sale of a debt investment is the excess of the selling price over the bonds
a. market price.
b. fair value.
c. face value.
d. book value.
31. Held-for-collection investments are reported at

a. acquisition cost.
b. amortized cost.
c. maturity value.
d. fair value.
32. A held-for-collection debt investment is purchased at a premium. The entry to record the
amortization of the premium includes a
a. Credit to Debt Investments.
b. Credit to Interest Receivable.
c. Credit to Interest Revenue.
d. none of these.
33. Which of the following is correct about the effective-interest method of amortization?
a. The effective-interest method applied to debt investments is different from that applied
to bonds payable.
b. Amortization of a discount decreases from period to period.
c. Amortization of a premium decreases from period to period.
d. The effective-interest method applies the effective-interest rate to the beginning
carrying amount for each interest period.
34. Which of the following is not generally correct about recording a sale of a debt investment
before maturity date?
a. Accrued interest will be received by the seller even though it is not an interest
payment date.
b. An entry must be made to amortize a discount to the date of sale.
c. The entry to amortize a premium to the date of sale includes a debit to Debt
investments.
d. A gain on the sale is the excess of the selling price over the book value of the bonds.

lOMoARcPSD|12145602
Investments 17 - 10
35. An unrealized holding gain or loss on a trading debt investment is the difference between
the investments
a. fair value and original cost.
b. face value and amortized cost.
c. fair value and amortized cost.
d. face value and original cost.
36. Which of the following is not correct in regard to trading investments?
a. They are held with the intention of selling them in a short period of time.
b. Unrealized holding gains and losses are reported as part of net income.
c. Any discount or premium is not amortized.
d. All of these are correct.
37. In accounting for debt investments that are classified as trading investments,
a. any unrealized gain (loss) is reported as part of equity.
b. a premium is reported separately.
c. the fair value is compared to amortized cost to compute any unrealized gain (loss).
d. no discount or premium amortization is required.
38. Investments in trading debt investments are generally reported at
a. amortized cost.
b. face value.
c. fair value.
d. maturity value.
39. Investments in trading debt investments should be recorded on the date of acquisition at
a. face value.
b. fair value.
c. amortized cost.
d. the lower of face value or amortized cost.
40. Which of the following statements is true regarding the differences between amortized
cost and fair value for bebt investments?
a. When bonds sold at a discount and are accounted for using amortized cost, interest
revenue will be greater than the interest revenue recorded under fair value.
b. When bonds sold at a premium and are accounted for using amortized cost, interest
revenue will be less than the interest revenue recorded under fair value.
c. Under the fair value approach, an unrealized gain or loss is recorded in each year
whereas no unrealized gains or losses are recorded under the amortized cost method.
d. All of the choices are correct.
41. Under IFRS, the fair value option
a. Must be applied to all instruments the company holds.
b. May be selected as a valuation method by the company at any time during the first
2 years of ownership.
c. Reports all gains and losses in income.
42. Under the fair value option, companies report all gains and losses related to changes in
fair value in
a. comprehensive income.
b. income.
c. equity.
d. other comprehensive income.

lOMoARcPSD|12145602
Investments 17 - 11
43. The fair value option allows a company to

a. record income when the fair value of its investment increases.
b. value its debt investments at fair value in some years but not other years.
c. report most financial instruments at fair value by recording gains and losses as a
separate component of stockholders’ equity.
d. All of the above are true of the fair value option.
P
44. Equity inestments acquired by a corporation which are accounted for by recognizing
unrealized holding gains or losses as other comprehensive income and as a separate
component of equity are
a. non-trading where a company has holdings of less than 20%.
b. trading investments where a company has holdings of less than 20%.
c investments where a company has holdings of between 20% and 50%.
d. investments where a company has holdings of more than 50%.
S
45. When a company has acquired a "passive interest" in another corporation, the acquiring
company should account for the investment
a. by using the equity method.
b. by using the fair value method.
c. by using the effective interest method.
d. by consolidation.
46. Unrealized holding gains or losses on trading investments are reported in

a. equity.
b. net income.
c. other comprehensive income.
d. accumulated other comprehensive income.
47. When a company holds between 20% and 50% of the outstanding ordinary shares of an
investee, which of the following statements applies?
a. The investor should always use the equity method to account for its investment.
b. The investor should use the equity method to account for its investment unless circum-
stances indicate that it is unable to exercise "significant influence" over the investee.
c. The investor must use the fair value method unless it can clearly demonstrate the
ability to exercise "significant influence" over the investee.
d. The investor should always use the fair value method to account for its investment.
48. If the investor owns 60% of the investee's outstanding ordinary shares, the investor
should generally account for this investment under the
a. cost method.
b. fair value method.
c. consolidation equity method.
d. consolidation method.
49. Under IFRS, the presumption is that equity investments are

Held-for-trading Held to profit from price changes
a. Yes No
b. No No
c. No Yes
d. Yes Yes

lOMoARcPSD|12145602
Investments 17 - 12
50. Under IFRS,

a. The accounting for non-trading equity investments deviates from the general
provisions for equity investments.
b. Realized gains and losses related to changes in the fair value of non-trading equity
investments are reported as a part of other comprehensive income and as a
component of other accumulated comprehensive income.
c. Dividends received in cash are always reported as income on the income statement.
S
51. Santo Corporation declares and distributes a cash dividend that is a result of current
earnings. How will the receipt of those dividends affect the investment account of the
investor under each of the following accounting methods?
Fair Value Method Equity Method
a. No Effect Decrease
b. Increase Decrease
c. No Effect No Effect
d. Decrease No Effect
P
52. An investor has a long-term investment in ordinary shares. Regular cash dividends
received by the investor are recorded as
Fair Value Method Equity Method
a. Income Income
b. A reduction of the investment A reduction of the investment
c. Income A reduction of the investment
d. A reduction of the investment Income
53. Koehn Corporation accounts for its investment in the ordinary shares of Sells Company
under the equity method. Koehn Corporation should ordinarily record a cash dividend
received from Sells as
a. a reduction of the carrying value of the investment.
b. share premium.
c. an addition to the carrying value of the investment.
d. dividend income.
54. Under the equity method of accounting for investments, an investor recognizes its share
of the earnings in the period in which the
a. investor sells the investment.
b. investee declares a dividend.
c. investee pays a dividend.
d. earnings are reported by the investee in its financial statements.
55. Judd, Inc., owns 35% of Cosby Corporation. During the calendar year 2012, Cosby had
net earnings of $300,000 and paid dividends of $30,000. Judd mistakenly recorded these
transactions using the fair value method rather than the equity method of accounting.
What effect would this have on the investment account, net income, and retained
earnings, respectively?
a. Understate, overstate, overstate
b. Overstate, understate, understate
c. Overstate, overstate, overstate
d. Understate, understate, understate

lOMoARcPSD|12145602
Investments 17 - 13
56. Impairments of debt investments are

a. based on discounted contractual cash flows.
b. recognized as a realized loss if the impairment is judged to be temporary.
c. based on fair value for non-trading investments and on negotiated values for held-for-
collection investments.
d. evaluated at each reporting date for every held-for-collection investment.
57. An impairment loss is the difference between the recorded investment and the
a. expected cash flows .
b. present value of the expected cash flows.
c. contractual cash flows.
d. present value of the contractual cash flows.
58. Under IFRS, a company

a. Should evaluate every investment for impairment.
b. Accounts for an impairment as an unrealized loss, and includes it as a part of other
comprehensive income and as a component of other accumulated comprehensive
income until realized.
c. Calculates the impairment loss on debt investments as the difference between the
carrying amount plus accrued interest and the expected future cash flows discounted
at the investment’s historical effective-interest rate.
59. Royce Company holds a portfolio of debt investments. The debt investments are not held-
for-collection but managed to profit from interest rate changes. As a result, it accounts for
these investments at fair value. As part of its strategic planning process, completed in the
fourth quarter of 2010, Royce management decides to move from its prior strategy—which
requires active management—to a held-for-collection strategy for these debt investments.
The company will account for this change
Method Implementation
a. Retrospectively 2010
b. Prospectively 2011
c. Retrospectively 2011
d. Prospectively 2010
60. Companies account for transfers of investments between categories

a. prospectively, at the end of the period after the change in the business model.
b. prospectively, at the beginning of the period after the change in the business model.
c. retroactively, at the end of the period after the change in the business model.
d. retroactively, at the beginning of the period after the change in the business model.
61. “Gains trading” or “cherry picking” involves

a. moving investments whose value has decreased since acquisition from non-trading to
held-for-collection in order to avoid reporting losses.
b. reporting investments at fair value but liabilities at amortized cost.
c. selling investments whose value has increased since acquisition while holding those
whose value has decreased since acquisition.
d. All of the above are considered methods of “gains trading” or “cherry picking.”

lOMoARcPSD|12145602
Investments 17 - 14
62. Transfers between categories

a. result in companies omitting recognition of fair value in the year of the transfer.
b. are accounted for at fair value for all transfers.
c. are considered unrealized and unrecognized if transferred out of held-to-maturity into
trading.
d. will always result in an impact on net income.
63. A reclassification adjustment is reported in the

a. income statement as an other income or expense.
b. equity section of the statement of financial position.
c. statement of comprehensive income as other comprehensive income.
d. statement of changes in equity.
*64. Companies that attempt to exploit inefficiencies in various derivative markets by

attempting to lock in profits by simultaneously entering into transactions in two or more
markets are called
a. arbitrageurs.
b. gamblers.
c. hedgers.
d. speculators.
*65. All of the following statements regarding accounting for derivatives are correct except that
a. they should be recognized in the financial statements as assets and liabilities.
b. they should be reported at fair value.
c. gains and losses resulting from speculation should be deferred.
d. gains and losses resulting from hedge transactions are reported in different ways,
depending upon the type of hedge.
*66. All of the following are characteristics of a derivative financial instrument except the
instrument
a. has one or more underlyings and an identified payment provision.
b. requires a large investment at the inception of the contract.
c. requires or permits net settlement.
d. All of these are characteristics.
*67. The accounting for fair value hedges records the derivative at its
a. amortized cost.
b. carrying value.
c. fair value.
d. historical cost.
*68. Gains or losses on cash flow hedges are

a. ignored completely.
b. recorded in equity, as part of other comprehensive income.
c. reported directly in net income.
d. reported directly in retained earnings.
*69. An option to convert a convertible bond into ordinay shares is a(n)

a. embedded derivative.
b. host security.
c. hybrid security.
d. fair value hedge.

lOMoARcPSD|12145602
Investments 17 - 15
Multiple Choice Answers—Conceptual

Item Ans Item Ans Item Ans. Item Ans Item Ans Item Ans Item Ans
21. c 28. a 35. c 42. d 49. d 56. d 63. c
22. b 29. c 36. d 43. a 50. a 57. b *64. a
23. c 30. d 37. c 44. a 51. a 58. c *65. c
24. c 31. b 38. c 45. b 52. c 59. b *66. b
25. c 32. a 39. c 46. b 53. a 60. b *67. c
26. b 33. d 40. c 47. b 54. d 61. c *68. b
27. c 34. c 41. c 48. d 55. d 62. b *69. a
MULTIPLE CHOICE—Computational
70. Kern Company purchased bonds with a face amount of $400,000. Kern purchased the
bonds at 102 and paid brokerage costs of $6,000. The amount to record as the cost of this
debt investment is
a. $406,000.
b. $414,000.
c. $408,000.
d. $400,000.
Use the following information for questions 71 and 72.
Patton Company purchased $400,000 of 10% bonds of Scott Co. on January 1, 2011, paying
$376,100. The bonds mature January 1, 2021; interest is payable each July 1 and January 1. The
discount of $23,900 provides an effective yield of 11%. Patton Company uses the effective-
interest method and holds these bonds for collection.
71. On July 1, 2011, Patton Company should increase its Debt Investments account for the
Scott Co. bonds by
a. $2,392.
b. $1,371.
c. $1,196.
d. $686.
72. For the year ended December 31, 2011, Patton Company should report interest revenue
from the Scott Co. bonds of:
a. $42,392.
b. $41,409.
c. $41,368.
d. $40,000.

lOMoARcPSD|11511018
INVESTMENTS CHAPTER 9 ANSWERS FOR QUIZ
Intermediate Accouting 1 (Isabela State University)
Studocu is not sponsored or endorsed by any college or university

lOMoARcPSD|11511018
Page |1
Chapter 9
Investments
: TRUE OR FALSE
1. According to PFRS 9 Financial instruments, investments in stocks are initially recorded at cost and
all commissions, taxes, and other fees are expensed as incurred.
2. Unrealized holding gains and losses on investments in held for trading securities are recognized
in profit or loss.
3. Unrealized gains and losses on investments in equity securities measured at FVOCI are
recognized in the income statement.
4. A debit balance in the “Fair Adjustment – FVOCI” account implies a corresponding owners'
equity account with a credit balance of the same amount.
5. According to PFRS 9, the classification of financial assets for subsequent measurement purposes
is based on management's intentions.
6. The net reported balance in the “investment in equity securities – FVOCI” account is the original
cost plus a credit balance in the fair value adjustment account or minus a debit balance in the fair
value adjustment account.
7. When investments in held for trading securities are sold, the realized gain or loss is the
difference in the fair value since acquisition.
8. Unrealized holding gains on investments measured at fair value through other comprehensive
income are recognized as direct increases to owners' equity, rather than through the statement of
comprehensive income.
9. Increases in the fair value of held for trading securities and investments in equity securities
measured at FVOCI cause the related fair value adjustment account to decrease.
10. Investments in held for trading securities may be classified as current or long-term.
“Go ahead and be lazy; sleep on, but you will go hungry.” (Proverbs 19:15)
- END –
ANSWERS
1. FALSE 6. FALSE
2. TRUE 7. FALSE

lOMoARcPSD|11511018
Page |2
3. FALSE 8. FALSE
4. TRUE 9. FALSE
5. FALSE 10. FALSE

lOMoARcPSD|11511018
Page |3
1. Changes in fair value of this type of securities are accumulated as a separate component in the
stockholders' equity section of the balance sheet.
a. Financial assets measured at amortized cost
b. FVOCI securities
c. Held for trading securities
d. Designated financial assets
2. Which category includes only debt securities?

a. Financial assets measured at amortized cost
b. FVPL assets
c. Held for trading securities
d. FVOCI (election)
3. A correct valuation is
a. investment in equity securities at amortized cost.
b. held for trading securities at amortized cost.
c. debt securities, to be held until maturity to collect cash flows from principal and interests, at
fair value.
d. none of these.
4. Securities which could be classified as financial assets measured at amortized cost are
a. investment in stocks.
b. warrants.
c. municipal bonds.
d. treasury stock.
5. Which of the following is not correct regarding held for trading securities?
a. They are held to be sold in a short period of time.
b. Unrealized holding gains and losses are reported as part of profit or loss.
c. Any discount or premium is not amortized.
d. All of these are correct.
6. A debit balance in the “Fair Value Adjustment - FVOCI Securities” account at the end of a year
should be interpreted as
a. the net unrealized holding gain for that year.
b. the net realized holding gain for that year.
c. the net unrealized holding gain to date.
d. the net realized holding gain to date.
7. A debit balance in the “Fair Value Adjustment - Held for Trading Securities” account at the end
of a year should be interpreted as
a. the net realized holding gain to date.
b. the net unrealized holding gain to date.
c. the net realized holding gain for that year.
d. the net unrealized holding gain for that year.

lOMoARcPSD|11511018
Page |4
8. Unrealized holding gains or losses which are recognized in profit or loss are from securities
classified as
a. amortized cost.
b. FVOCI.
c. held for trading.
d. designated and held for trading.
9. An unrealized holding gain on a company's FVOCI securities should be reflected in the current
financial statements as
a. an extraordinary item shown as a direct increase to retained earnings.
b. a current gain resulting from holding securities.
c. a note or parenthetical disclosure only.
d. other comprehensive income and included in the equity section of the balance sheet.
10. Changes in fair value of an investment measured at fair value through other comprehensive
income
a. must be recognized in profit or loss.
b. must be recognized directly in equity.
c. may be recognized in profit or loss or directly in equity.
d. must be recognized in other comprehensive income and accumulated in a separate equity
account.
11. At initial recognition, an entity may make an irrevocable election to present in other
comprehensive income subsequent changes in the fair value of an investment in equity securities
within the scope of PFRS 9 that is not held for trading. In accounting for such financial
instruments, all of the following are true except
a. amounts presented in other comprehensive income are not be subsequently transferred to
profit or loss.
b. the entity may transfer any cumulative fair value gains or losses within equity.
c. dividends received on the investments are recognized in profit or loss.
d. cumulative fair value gains or losses are transferred to profit or loss when the financial asset
is derecognized.
12. An entity sells an investment that is measured at FVPL during the year. The realized gain or loss
on the sale is computed as
a. the difference between the sale price and the carrying amount of the investment as at the
date of sale.
b. the difference between the sale price and the original acquisition cost of the investment.
c. the difference between the net proceeds received from the sale and the carrying amount of
the investment as at the date of sale.
d. the difference between the net proceeds received from the sale and the carrying amount of
the investment as at the date of sale adjusted for any accumulated fair value gains or losses
recognized since the investment was acquired.

lOMoARcPSD|11511018
Page |5
13. For which type of investments would unrealized fair value gains and losses be accumulated in
an equity account?
a. Equity method securities
b. FVOCI securities
c. Held for Trading securities
d. Held-to-maturity securities
14. If the combined fair value of held for trading securities at the end of the year is less than the fair
value of the same portfolio of held for trading securities at the beginning of the year, the
difference should be accounted for by
a. reporting an unrealized loss in security investments in the stockholders' equity section
of the balance sheet.
b. reporting an unrealized loss in security investments in profit or loss.
c. a footnote to the financial statements.
d. a debit to Investment in Held for Trading Securities.
15. Information regarding Stone Co.’s portfolio of FVOCI securities is as follows:

Aggregate cost as of 12/31/03 170,000
Unrealized gains as of 12/31/03 4,000
Unrealized losses as of 12/31/03 26,000
Net realized gains during 2003 30,000
At December 31, 2002, Stone reported an unrealized loss of ₱1,500 in other comprehensive income to
reduce these securities to market. Under the accumulated other comprehensive income in
stockholders’ equity section of its December 31, 2003 balance sheet, what amount should Stone
report?
a. 26,000 c. 20,500
b. 22,000 d. 0
16. Caloy Co. bought 1,000 shares from Bayan Co. The shares have no active market, but an identical
or similar asset has an active market. The identical asset, however, has multiple markets. Caloy
determines that the identical asset has the following market values:
Market Market
A B
Quoted price 500 600
Related transaction
25 150
cost
How much is fair valuation of the investment?

a. 500,000 c. 450,000
b. 475,000 d. b or c

lOMoARcPSD|11511018
Page |6
17. On January 1, 20x1, Allan Co. purchased ₱400,000 bonds for ₱392,000. The bonds mature on
January 1, 20x5 and pay 12% annual interest beginning January 1, 20x2. Transaction costs are
negligible. The bonds were classified as held for trading securities. On December 31, 20x1, the
bonds are selling at a yield rate of 10%. How much is the unrealized gain (loss) recognized on
December 31, 20x1?
a. 27,986
b. 31,298
c. 28,964
d. 33,359
18. On January 1, 20x1, Rizzi Co. purchased 12,000 shares of Andre, Inc. for ₱400,000. Commission
paid to broker amounted to ₱20,000. Management made an irrevocable choice to subsequently
measure the shares at fair value through other comprehensive income. On December 31, 20x1,
the shares were quoted at ₱40 per share. On January 3, 20x2, all of the shares were sold at ₱60
per share. Commission paid on the sale amounted to ₱24,000. How much is the unrealized gain
(loss) recognized in profit or loss on December 31, 20x1?
a. (60,000)
b. 60,000
c. (80,000)
d. 0
Use the following information for the next two questions:

Karen Co. purchased the following equity securities on January 1, 20x1 for a total amount of
₱360,000.
Cost
Alaska Co. preference shares ₱200,000
Valdez Co. ordinary shares 160,000
Totals ₱360,000
The shares did not qualify for recognition as held for trading. Accordingly, they were classified as
investment in equity securities measured at fair value through other comprehensive income.
On December 31, 20x1, the portfolio of Karen Co. comprised the following.
Fair value – 12/31/x1
Total ₱300,000
On December 31, 20x2, the portfolio of Karen Co. comprised the following:
Fair value – 12/31/x2
Total ₱400,000

lOMoARcPSD|11511018
Page |7
On February 2, 20x3, all of the Alaska Co. preference shares were sold for ₱160,000 net of transaction
costs.
19. How much is the unrealized gain (loss) recognized in other comprehensive income on December
31, 20x1?
a. 60,000
b. (60,000)
c. 100,000
d. 0
20. How much is the cumulative unrealized gain (loss) that is presented as a separate component in
equity as of December 31, 20x2?
a. 40,000
b. (40,000)
c. 100,000
d. 0
“From the fruit of his mouth a man’s stomach is filled; with the harvest from his lips he is satisfied.” (Proverbs
18:20)
- END –

lOMoARcPSD|11511018
Page |8
SOLUTIONS
1. B
2. A
3. D
4. C
5. D
6. C
7. B
8. D
9. D
10. D
11. D
12. C
13. B
14. B
15. B
Solution:
Unrealized gains as of 12/31/03 4,000
Unrealized losses as of 12/31/03 (26,000)
Accumulated net unrealized losses in equity as of
12/31/03 (22,000)
16. A
Solution:
Market Market
A B
Quoted price 500 600
Related transaction
cost (25) (150)
Net selling price 475 450
The more advantageous market is Market A and the quoted price in this market is ₱500.
17. D [(400,000 x PV of 1 @10%, n=4) + (400,000 x 12% x PV ordinary annuity of 1 @10%, n=4) =
425,359 – 392,000 = 33,359
The fair value of the bonds on Dec. 31, 20x1 is computed as follows:
Present
Future cash flows PV @10%, n=3 PV factors value
Principal 400,000 PV of P1 0.751315 300,526

lOMoARcPSD|11511018
Page |9
Interest (400K x 12%) 48,000 PV of ordinary annuity 2.486852 119,369
Fair value as of December 31, 20x1 419,895
(419,895 – 392,000) = 27,895
18. D – The investment is FVOCI. Any unrealized gain (loss) is recognized in OCI and not P/L.
19. B (300,000 – 360,000) = (60,000)
20. A (400,000 FV 12/31/x2 – 360,000 cost) = 40,000 unrealized gain

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Share in losses of associate

Investment in associate ₱ 800,000

QUESTIONING reported losses of ₱5,600,000, ₱2,000,000 and ₱400,000 in 20x1,

The answers and solutions to the computational problems above

Chapter 12: Theory of Accounts Reviewer

2. An entity shall apply PAS 28

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3. When investments in equity securities represent 20% to 50% interest in the

4. When equity investments results to joint control, which standard shall be

5. When equity investments results to control, which standard shall be applied?

6. In the consolidated financial statements, to which of the following financial

7. Which of the following statements is correct?

8. If ABC Corporation owns a controlling interest of 51% of the equity shares in

9. It is an entity, including an unincorporated entity such as a partnership, over

11. It is an entity, including an unincorporated entity such as a partnership, that

13. It is a contractual arrangement whereby two or more parties undertake an

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15. A controlling company having subsidiaries which activities were confined

18. Significant influence is presumed to exist

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I. Representation on the board of directors or equivalent governing body of

20. In which of the following does X have significant influence?

21. In assessing whether significant influence exists, an investor shall consider

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26. Potential voting rights include all of the following except

30. For investments in associates, the investor shall not

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36. The equity method should be applied in which of the following?

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40. Dividends received from an investment in an associate,

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44. Significant influence may be lost in any of the following, except

45. Significant influence may be lost in any of the following, except

47. If an investor loses significant influence over an associate,

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c. no adjustment to the investment account is necessary

48. If an investor’s ownership interest in an associate is reduced but significant

50. The investor’s interest on the undervaluation of depreciable assets of the

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I. The income or loss on the investment in associate is computed on the net

54. On January 1, 20x1, Adjacent Inc. purchased 10% of Juxtaposition Co.’s

57. Adjustments to the carrying amount of the investment in associate may be

58. Which of the following is correct in relation to accounting for investments in

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II. Share dividends received on an investment in associate is accounted for as

60. An investor in equity securities received cash dividends in excess of the

61. The investment in associate is reduced to zero when

62. Consider the following statements.

State whether the foregoing statements are correct.

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c. Under the equity method of accounting, the investments in common stock

66. Select the incorrect statement.

67. Which of the following statement is the correct statement?

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c. Long-term investments are classified as long-term only because they are

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Are the following statements true or false, according to PAS 28 Investments in