111.A company that owns more than 50% of the ordinary shares of another company is known as the
a.charge company.
b.subsidiary company.
c.parent company.
d.management company.
112.If one company owns more than 50% of the ordinary shares of another company,
a.the cost method should be used to account for the investment.
b.a partnership exists.
c.a parent-subsidiary relationship exists.
d.the company whose shares are owned must be liquidated.
113.When a company owns more than 50% of the ordinary shares of another company,
a.affiliated financial statements are prepared.
b.consolidated financial statements are prepared.
c.controlling financial statements are prepared.
d.significant financial statements are prepared.
114.All of the following are true regarding an investing company which holds more than 50% of the ordinary shares of an investee
except
a.the investee is known as an affiliate.
b.the investor has a controlling interest in the investee.
c.the investor is known as the parent company.
d.consolidated financial statements are generally required.
115.At the beginning of 2014, Trichet Inc. purchased a 27% stake in the ordinary shares of Papandreou Company at a cost of €4,000,000. After applying the equity method, the Investment in Papandreou account has a balance of €4,020,000. At December 31, 2014 the fair value of the investment is €4,130,000. Which of the following values is acceptable for Trichet to report for the investment in its December 31, 2014 statement of financial position?
I. €4,000,000
II. €4,020,000
III. €4,130,000
a.I, II, or III.
b.I or II only.
c.II only.
d.II or III only.
116.Held-for-collection securities are valued at
a.original cost.
b.amortized cost.
c.fair value.
d.lower of cost or fair value.
117.Which of the following is not true regarding the Fair Value Adjustment – Trading account?
a.It is a valuation allowance account.
b.It allows the investment account to maintain a record of the investment cost.
c.It should have a credit balance.
d.Its balance is carried forward to future accounting periods.
118.All of the following are not true regarding the Fair Value Adjustment – Trading account
except
a.the account is only adjusted at the end of the accounting period.
b.a debit balance in the account is subtracted from the cost of the investments so that the investments are reported at fair value.
c.the account is adjusted for the difference between the investments’ fair value and cost.
d.if the total cost of the securities is greater than the total fair value, the account will be credited.
119.The fair value adjustment for trading securities
a.is reported as an increase to net income when the fair value of investments is greater than cost.
b.is reported as other comprehensive income.
c.is reported as an unrealized gain or loss on the statement of changes in equity.
d.is only allowed when the fair value of investments is less than cost.
120.The fair value adjustment for non-trading securities
a.is reported as an increase to net income when the fair value of investments is greater than cost.
b.is prohibited because these securities must be reported at cost.
c.is reported as a separate component of equity on the statement of financial position.
d.is only allowed when the fair value of investments is less than cost.