APPLES APPLES APPLES PDF

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INVESTMENT PROPERTY AND OTHER NON-CURRENT FINANCIAL ASSETS**Included Investment related problems/questionsTheories: It is defined as property (land or building or part of building or both) by an owner or finance lessee to earn rentals or for capital appreciation or both. a. Investment property b. Ow...

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INVESTMENT PROPERTY AND OTHER NON-CURRENT FINANCIAL ASSETS **Included Investment related problems/questions Theories: 1. It is defined as property (land or building or part of building or both) by an owner or finance lessee to earn rentals or for capital appreciation or both. a. Investment property b. Owner-occupied property

c. Mining property d. Rental property

2. Investment property includes all of the following except a. Land held for long-term capital appreciation b. Land held for currently undetermined use c. Building owned by the reporting entity or held by a finance lessee leased out under one or more operating leases. d. Property held for sale in the ordinary course of business or in the process of construction for such sale. e. 3. An owner-occupied property is held by an owner or finance lessee I. For use in the production of goods or services II. For administration purposes f. a. I only b. II only

c. Both I and II d. Neither I and II

e. 4. If an entity owns and manages a hotel, services provided to guests are significant component of the arrangement as a whole. In such case, the hotel is classified as a. Investment property b. Owner-occupied property c. Partly investment property and partly owner-occupied property d. Neither investment property nor owner-occupied property f. 5. Which of the following is an investment property? a. Property being constructed or developed on behalf of third parties. b. Property that is being constructed and developed as investment property. c. Property held for future development and subsequent use as owner-occupied property. d. Owner-occupied property awaiting disposal. g. 6. Which statement is correct if the property is partly investment and partly owner-occupied? I. If the investment and owner-occupied portions could be sold or leased out separately, the portions shall be accounted for separately as investment property and owner-occupied property. II. If the investment and owner-occupied portions could not be sold or leased out separately, the property is investment property if only an insignificant portion is held for manufacturing or administrative purposes. h. a. I only b. II only

c. Both I and II d. Neither I and II

e. 7. Which statement is correct concerning property leased to affiliate?

I. II.

From the perspective of the individual entity that owns it, the property leased to an affiliate is considered an investment property. From the perspective of the affiliates as a group and for purposes of consolidated financial statements, the property is treated as owner-occupied property. a. b. Both I and II c. Neither I and II

d. I only e. II only

f. 8. An investment property is recognized when I. It is probable that the future economic benefits that are associated with the investment property will flow in the entity. II. The cost of investment property can be measured reliably. a. b. Both I and II c. Neither I and II

d. I only e. II only

f. 9. Which of the statement is incorrect concerning initial measurement of an investment property? a. The investment property shall be measured initially at fair value. b. The cost of the purchased investment property includes its purchase price and any directly attributable expenditure. c. The initial cost of a property interest held under a lease and classified as an investment property shall be the lower of the fair value of the property and the present value of the minimum lease payments. d. If payment for an investment property is deferred, its cost is the cash price equivalent. e. 10. Directly attributable expenditures related to investment property include a. Professional fees for legal services, property transfer taxes and other transaction costs. b. Start up costs. c. Initial operating losses incurred before the investment property achieves the planned level occupancy. d. Abnormal amounts of wasted material, labor and other resources incurred constructing or developing the property. e. 11. Subsequent to initial recognition, the investment property shall be measured at a. Fair value b. Cost less any accumulated depreciation and any accumulated impairment losses c. Revalued amount d. Either fair value or cost less any accumulated depreciation and any accumulated impairment losses e. 12. What is the best evidence of fair cvalue of an investment property? a. Current price in an active market for similar property in the same location and condition b. Current price in an active market for property of different nature, condition and location adjusted to reflect those differences. c. Recent price of similar property in less active market. d. Discounted cash flow projection based on reliable estimate of future cash flows. e. 13. Which statement is incorrect in determining the fair value of an investment property?

a. An entity shall determine the fair value of investment property by deducting transaction cost that may be incurred upon disposal. b. The fair value of investment property shall reflect market conditions at the end of the reporting period. c. If an office is leased on a furnished basis, the fair value of the office generally includes the fair value of the furniture because the rental income relates to the furniture office d. The fair value of the investment property excludes prepaid or accrued operating lease income. e. 14. Which statement is correct if there is inability to determine the fair value of an investment property reliably? I. PAS 40 mandates that the entity shall measure such investment property using the cost model until the disposal of the investment property. II. The residual value of such investment property shall be assumed zero under such exceptional circumstance only. a. b. I only c. II only

d. Both I and II e. Neither I and II

f. 15. When the entity uses the cost model, transfer between investment property, owner-occupied property and inventory shall be accounted for at a. Fair value b. Carrying amount

c. Cost d. Assessed value

e. 16. A transfer from investment property carried at fair value to owner-occupied property shall be accounted for at a. Fair value, which becomes the deemed cost for subsequent accounting b. Carrying amount c. Historical cost d. Fair value less cost to sell e. 17. If owner-occupied property is transferred to investment property that is to be carried at fair value, the difference between the carrying amount of the property and its fair value shall be a. Included in profit or loss b. Included in retained earnings c. Included in equity d. Accounted for as revaluation of property, plant, and equipment e. 18. If an inventory is transferred to investment property that is to be carried at fair value, the remeasurement to fair value is a. Included in profit or loss b. Included in equity c. Included in retained earnings d. Accounted for as revaluation of inventory e. 19. When an investment property under construction is completed and to be carried at fair value, the difference between the carrying amount and fair value shall be a. Included in profit or loss b. Included in retained earnings c. Included in other comprehensive income

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d. Accounted for as revaluation of property, plant and equipment e. Gain or loss from disposal of investment property shall be determined as the difference between the a. Net disposal proceeds and carrying amount of the asset and shall be recognized in profit or loss. b. Net disposal proceeds and carrying amount of the asset and shall be recognized in equity. c. Net disposal proceeds and carrying amount of the asset and shall be recognized in retained earnings. d. Net disposal proceeds and fair value of the asset and shall be recognized in profit or loss. e. A gain arising from a change in the fair value of an investment property for which an entity has opted to use the fair value model is recognized in a. Profit or loss b. General reserve in shareholders’ equity c. Valuation reserve in the shareholders’ equity d. Retained profits e. An investment property shall be measured initially at a. Cost b. Cost less accumulated impairment loss c. Depreciation cost less accumulated impairment losses d. Fair value less accumulated impairment losses e. In case of property held under an operating lease and classified as investment property a. The entity has to account for the investment property under cost model only b. The entity has to use the fair value model only c. The entity has the choice between the cost model and fair value model d. The entity needs only to disclose the fair value and can use the cost model e. Transfer from investment property to property, plant and equipment is appropriate a. When there is change of use. b. Based on the entity’s discretion. c. Only when the entity adopts the fair value model. d. The entity can never transfer property into another classification once it is classified as investment. e. An investment property is derecognized when a. It is disposed to a third party. b. It is permanently withdrawn from use. c. No future economic benefits are expected from its disposal. d. In all of the above cases. e. Which of the following statements best describes owner-occupied property? a. Property held for sale in the ordinary course of business b. Property held for use in the production and supply of goods or services and property held for administrative purposes c. Property held to earn rentals d. Property held for capital appreciation e. Which of the following terms best describes property held to earn rentals or for capital appreciation? a. Freehold property

b. Leasehold property

c.

Owner-occupied property

d. Investment property

e. 28. Which of the following additional disclosures must be made when an entity chooses the cost model as its accounting policy for investment property? a. The fair value of the property b. The present value of the property c. The value in use of the property d. The net realizable value of the property e. 29. PAS 40 gives a choice between two different models as the accounting policy to be used in relation to investment property. Which of the following disclosures shall be made when the fair value model has been adopted? a. Depreciation method used b. The amount of impairment loss recognized c. Useful life or depreciation rate used d. Net gains or losses from fair value adjustments e. 30. The following properties fall under the definition of investment property, except? a. Land held for long-term capital appreciation b. Property occupied by an employee paying market rent c. Land held for a currently undetermined use d. A building owned by an entity and leased out under an operating lease e. (Source: Theory or Accounts 2010 edition; Conrado T Valix, BSC, LLB / Christian Aris M. Valix, BSME, BSA) f. 31. Which of the following is not a debt security? a. b. c. d.

Convertible bonds Commercial paper Loans receivable All of these are debt securities.

a. 32. A correct valuation is a. b. c. d.

Available-for-sale at amortized cost. Held-to-maturity at amortized cost. Held-to-maturity at fair value. None of these.

a. 33. Securities which could be classified as held-to-maturity are a. Redeemable preferred stock. c. Municipal bonds. b. Warrants. d. Treasury stock. 34. 35. Unrealized holding gains or losses which are recognized in income are from securities classified as a. Held-to-maturity. b. Available-for-sale.

c. Trading. d. None of these.

e. 36. When an investor's accounting period ends on a date that does not coincide with an interest receipt date for bonds held as an investment, the investor must

a. Make an adjusting entry to debit Interest Receivable and to credit Interest Revenue for the amount of interest accrued since the last interest receipt date. b. Notify the issuer and request that a special payment be made for the appropriate portion of the interest period. c. Make an adjusting entry to debit Interest Receivable and to credit Interest Revenue for the total amount of interest to be received at the next interest receipt date. d. Do nothing special and ignore the fact that the accounting period does not coincide with the bond's interest period. f. 37. Debt securities that are accounted for at amortized cost, not fair value, are a. b. c. d.

Held-to-maturity debt securities. Trading debt securities. Available-for-sale debt securities. Never-sell debt securities.

e. 38. Debt securities acquired by a corporation which are accounted for by recognizing unrealized holding gains or losses and are included as other comprehensive income and as a separate component of stockholders' equity are a. b. c. d.

Held-to-maturity debt securities. Trading debt securities. Available-for-sale debt securities. Never-sell debt securities.

f. 39. Use of the effective-interest method in amortizing bond premiums and discounts results in a. A greater amount of interest income over the life of the bond issue than would result from use of the straight-line method. b. At varying amount being recorded as interest income from period to period. c. A variable rate of return on the book value of the investment. d. A smaller amount of interest income over the life of the bond issue than would result from use of the straight-line method. g. 40. Equity securities 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 stockholders' equity are a. b. c. d. h. i.

Available-for-sale securities where a company has holdings of less than 20%. Trading securities where a company has holdings of less than 20%. Securities where a company has holdings of between 20% and 50%. Securities where a company has holdings of more than 50%.

41. A requirement for a security to be classified as held-to-maturity is a. Ability to hold the security to maturity. b. Positive intent. e. 42. Held-to-maturity securities are reported at a. b. c. d.

c. The security must be a debt security. d. All of these are required.

Acquisition cost. Acquisition cost plus amortization of a discount. Acquisition cost plus amortization of a premium. Fair value.

f. 43. Watt Co. purchased $300,000 of bonds for $315,000. If Watt intends to hold the securities to maturity, the entry to record the investment includes a. b. c. d.

A debit to Held-to-Maturity Securities at $300,000. A credit to Premium on Investments of $15,000. A debit to Held-to-Maturity Securities at $315,000. None of these.

g. 44. Which of the following is not correct in regard to trading securities? a. b. c. d.

They are held with the intention of selling them in a short period of time. Unrealized holding gains and losses are reported as part of net income. Any discount or premium is not amortized. All of these are correct.

h. 45. In accounting for investments in debt securities that are classified as trading securities, a. b. c. d.

A discount is reported separately. A premium is reported separately. Any discount or premium is not amortized. None of these.

i. 46. Investments in debt securities are generally recorded at a. b. c. d.

Cost including accrued interest. Maturity value. Cost including brokerage and other fees. Maturity value with a separate discount or premium account.

j. 47. Jordan Co. purchased ten-year, 10% bonds that pay interest semiannually. The bonds are sold to yield 8%. One step in calculating the issue price of the bonds is to multiply the principal by the table value for a. b. c. d. k. l.

10 periods and 10% from the present value of 1 table. 10 periods and 8% from the present value of 1 table. 20 periods and 5% from the present value of 1 table. 20 periods and 4% from the present value of 1 table.

48. Investments in debt securities should be recorded on the date of acquisition at a. b. c. d.

lower of cost or market. market value. market value plus brokerage fees and other costs incident to the purchase. face value plus brokerage fees and other costs incident to the purchase.

m. 49. An available-for-sale debt security is purchased at a discount. The entry to record the amortization of the discount includes a a. b. c. d.

Debit to Available-for-Sale Securities. Debit to the discount account. Debit to Interest Revenue. None of these.

n. 50. APB Opinion No. 21 specifies that, regarding the amortization of a premium or discount on a debt security, the a. Effective-interest method of allocation must be used. b. Straight-line method of allocation must be used. c. Effective-interest method of allocation should be used but other methods can be applied if there is no material difference in the results obtained. d. par value method must be used and therefore no allocation is necessary. o. 51. Which of the following is correct about the effective-interest method of amortization? a. The effective interest method applied to investments in debt securities 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 produces a constant rate of return on the book value of the investment from period to period. p. 52. When investments in debt securities are purchased between interest payment dates, preferably the a. b. c. d.

Securities account should include accrued interest. Accrued interest is debited to Interest Expense. Accrued interest is debited to Interest Revenue. Accrued interest is debited to Interest Receivable.

q. 53. Which of the following is not generally correct about recording a sale of a debt security 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 credit to the Premium on Investments in Debt Securities. d. A gain or loss on the sale is not extraordinary. r. s.

54. When a company has acquired a "passive interest" in another corporation, the acquiring company should account for the investment a. b. c. d.

By using the equity method. By using the fair value method. By using the effective interest method. By consolidation.

t. 55. 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? a. b. c. d.

u. Fair Value Method Equity Method No Effect Decrease Increase Decrease No Effect No Effect Decrease No Effect v. 56. An investor has a long-term investment in stocks. Regular cash dividends received by the investor are recorded as

a. b. c. d.

w. Fair Value Method Income A reduction of the investment Income A reduction of the investment

Equity Method Income A reduction of the investment A reduction of the investment Income

x. 57. When a company holds between 20% and 50% of the outstanding stock 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. y. 58. If the parent company owns 90% of the subsidiary company's outstanding common stock, the company shou...