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. If an available-for-sale investment is sold for...

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. If an available-for-sale investment is sold for which there are unrealized gains in accumulated other comprehensive income (AOCI), a reclassification adjustment affects other comprehensive income (OCI) in the period of sale by A. reducing OCI for the amount of unrealized gains in AOCI. B. increasing OCI for the amount of unrealized gains in AOCI. C. no effect on OCI, as OCI only includes the effects of unrealized gains and losses. D. no effect on OCI, as the realized gain is included in AOCI. If an available-for-sale investment is sold for which there are unrealized losses in accumulated other comprehensive income (AOCI), the total effect on total comprehensive income is A. an increase. B. a decrease. C. no effect. D. can't determine given this information. Sloan Company has owned an investment during 2009 that has increased in fair value. After all closing entries for 2009 are completed, the effect of the increase in fair value on total shareholders' equity would be: A. higher under the available-for-sale approach than under the trading-securities approach. B. lower under the available-for-sale approach than under the trading-securities approach. C. the same amount under the available-for-sale and trading-securities approaches. D. not possible to identify whether the available-for-sale or trading-securities approaches yield higher shareholders' equity given this information.,Dyckman Dealers has an investment in Thomas Corporation that Dyckman accounts for as a trading security. Thomas Corporation shares are publicly traded on the New York Stock Exchange, and the prevailing price on that exchange indicates that Dyckman's investment is worth $20,000. Yet, Dyckman management believes that the stock market is generally overvalued, and their analysis of the Thomas investment suggests to them that it is worth $18,000. Dyckman should carry the Thomas investment on their balance sheet at: A. $20,000. B. $18,000. C. either $18,000 or $20,000, as either are defensible valuations. D. $19,000, the midpoint of Dyckman's range of reasonably likely valuations of Thomas. In the statement of cash flows, inflows and outflows of cash from buying and selling available for sale securities are considered: A. Operating activities. B. Financing activities. C. Investing activities. D. Noncash financing activities. If the fair value of an available-for-sale investment declines for a reason that is viewed as "other than temporary", A. the investment is not written down to fair value. B. the investment is written down to fair value, and the impairment loss is recognized in net income. C. the investment is written down to fair value, and the impairment loss is recognized in accumulated other comprehensive income. D. the investment is treated the same way it would be treated if the decline in fair value was viewed as temporary. On April 1, 2009, BigBen Company acquired 30% of the shares of LittleTick, Inc. BigBen paid $100,000 for the investment, which is $40,000 more than 30% of the book value of LittleTick's identifiable net assets. BigBen attributed $15,000 of the $40,000 difference to inventory that will be sold in the remainder of 2009, and the rest to goodwill. LittleTick recognized a total of $20,000 of net income for 2009, and paid a total of $10,000 of dividends to shareholders. BigBen's investment in LittleTick will affect BigBen's 2009 net income by: A. a loss of $10,500. B. earnings of $4,500. C. earnings of $1,125. D. earnings of $3,450. Gerken Company concluded at the beginning of 2009 that the company's ownership interest in DillCo had increased to the point that it became appropriate to begin using the equity method to account for the investment. The balance in the investment account is $50,000 at the time of the change, and accountants working with company records determined that the balance would have been $75,000 if the account had been adjusted for investee net income and dividends as prescribed by the equity method. After implementing the change to the equity method, if financial statements were prepared, A. net income and retained earnings will be higher by $25,000. B. net income will be unchanged, and retained earnings will be higher by $25,000. C. net income and retained earnings will be higher by $75,000. D. the accounts will be unchanged, because no adjustment is necessary.

 

Paper#9350 | Written in 18-Jul-2015

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