Advanced Accounting: Chapter 1 Quiz Flashcards


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The study of accounting principles as it relates to business combinations, segment and interim reporting, legal reorganizations, liquidations, and partnerships.
updated 10 years ago by GreenHero64
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1

On January 1, 2016, a company's balance sheet reports its investments in financial instruments as follows:

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Assets

Investment in trading securities: $170,000

Investment in AFS securities: 90,000

Investment in HTM securities: 228,299

Equity

Accumulated other comprehensive income:

Unrealized gains (losses) on AFS securities: $5,000

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Additional information:

a. The HTM securities are $220,000 face value debt securities purchased on January 1, 2014, at a yield of 4%. The securities have a 4-year total life and pay interest annually on December 31, at a coupon rate of 6%.

b. The trading securities on hand on January 1 were sold in 2016 for $190,000.

c. More trading securities were purchased for $110,000. They are still on hand at December 31, 2016, and have a fair value of $115,000.

d. AFS securities, originally purchased for $28,000 with a carrying value of $26,000 as of January 1, 2016, were sold for $32,000.

e. AFS securities on hand at December 31, 2016, have a fair value of $83,000

The total gain on trading securities reported on the 2016 income statement is...

$25,000

$190,000 – $170,000 = $20,000

$115,000 – $110,000 = 5,000

Total gain $25,000

2

On January 1, 2016, a company's balance sheet reports its investments in financial instruments as follows:

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Assets

Investment in trading securities: $165,000

Investment in AFS securities: 95,000

Investment in HTM securities: 217,922

Equity

Accumulated other comprehensive income:

Unrealized gains (losses) on AFS securities: $4,500

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Additional information:

a. The HTM securities are $210,000 face value debt securities purchased on January 1, 2014, at a yield of 4%. The securities have a 4-year total life and pay interest annually on December 31, at a coupon rate of 6%.

b. The trading securities on hand on January 1 were sold in 2016 for $185,000.

c. More trading securities were purchased for $105,000. They are still on hand at December 31, 2016, and have a fair value of $120,000.

d. AFS securities, originally purchased for $27,000 with a carrying value of $24,000 as of January 1, 2016, were sold for $32,000.

e. AFS securities on hand at December 31, 2016, have a fair value of $85,000

The gain on AFS securities reported on the 2016 income statement is...

$5,000

$40,000 – $35,000 = $5,000

3

On January 1, 2016, a company's balance sheet reports its investments in financial instruments as follows:

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Assets

Investment in trading securities: $175,000

Investment in AFS securities: 95,000

Investment in HTM securities: 213,961

Equity

Accumulated other comprehensive income:

Unrealized gains (losses) on AFS securities: $5,500

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Additional information:

a. The HTM securities are $210,000 face value debt securities purchased on January 1, 2014, at a yield of 4%. The securities have a 4-year total life and pay interest annually on December 31, at a coupon rate of 5%.

b. The trading securities on hand on January 1 were sold in 2016 for $210,000.

c. More trading securities were purchased for $115,000. They are still on hand at December 31, 2016, and have a fair value of $130,000.

d. AFS securities, originally purchased for $25,000 with a carrying value of $24,000 as of January 1, 2016, were sold for $30,000.

e. AFS securities on hand at December 31, 2016, have a fair value of $79,000

Investment in HTM securities reported on the December 31, 2016 balance sheet is...

$212,019

$213,961 – [(6% x $210,000) – (4% x $213,961)] = $212,019

4

Under current standards, when is an impairment loss reported on a significant influence investment in the stock of another company, following U.S. GAAP and IFRS?

U.S. GAAP

Other than temporary impairment

IFRS

Book value > higher of market value or value-in-use

5

Fizzy Cola acquires Juicee Ltd. for $30,000,000 in cash, and accounts for its investment as a merger. Juicee's balance sheet at the date of acquisition is as follows:

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Current assets $200,000 Liabilities $3,000,000

Property, net 4,100,000 Equity 1,300,000

Total $4,300,000 Total $4,300,000

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The fair value of Juicee's current assets is $100,000 less than book value. The fair value of its property is $1,500,000 less than book value. The book value of its liabilities approximates fair value. There are no unreported assets or liabilities.

How much goodwill does Fizzy report for this acquisition?

$30,300,000

Current assets 100,000

Property 2,600,000

Goodwill 30,300,000

Liabilities 3,000,000

Cash 30,000,000