1. When the management of a company invests any excess cash available, they could expect to generate all of the following except:
A. interest income.
B. dividend income.
C. capital gains.
D. sales income.
2. A strategic investment would normally be used for all of the following reasons except:
A. to generate dividends.
B. to eliminate a competitor.
C. to widen the market for their products.
D. to expand their presence in the market.
3. A non-strategic investment would normally be used for all of the following reasons except:
A. to generate dividends.
B. as a stepping stone to a strategic investment.
C. as a place to put excess cash.
D. to counteract cyclicality in the business.
4. When one company controls another company, IFRS requires that their financial statements to be:
A. combined.
B. aggregated.
C. consolidated.
D. segmented.
5. What type of investment is it, if the investor corporation has no ability to influence the investee corporation?
A. Control
B. Significant influence
C. Passive investment
D. Active investment
6. Branch Inc. is a subsidiary of Tree Corporation. What level of influence must Tree Corporation have over Branch Inc.?
A. Control
B. Significant influence
C. Passive investment
D. Active investment
7. Tree Corporation can influence the decisions of Root Ltd., but Root is not a subsidiary of Tree Corporation. What level of influence must Tree Corporation have over Root Ltd.?
A. Control
B. Significant influence
C. Passive investment
D. Active investment
8. Tree Corporation bought shares of Leaf Ltd. in order to earn a return on some excess cash it had on hand. Tree Corporation is not involved in any way in the decision-making of Leaf Ltd. What level of influence must Tree Corporation have over Leaf Ltd.?
A. Control
B. Significant influence
C. Passive investment
D. Active investment
9. Branch Inc. is a subsidiary of Tree Corporation. What method of accounting must Tree Corporation use for Branch Inc.?
A. Consolidation method
B. Equity method
C. Cost method
D. Fair value method
10. For accounting purposes, what determines the method used to account for investments in common shares?
A. The amount the investor paid for the shares.
B. The extent of an investor's influence over the operating and financial affairs of the investee.
C. Whether the investor's acquisition of the shares was through a private placement or through a public exchange.
D. Whether the investing corporation wants to prepare consolidation or individual financial statements.