1. Which of the following may be classified as "other long-term investments?" a. Shares of stocks purchased as long-term investment. b. Bonds acquired to be held as a long-term investment. c. Treasury shares acquired at a deep discount and expected to be reissued at a future date that exceeds 12 months from the reporting date. d. Shares of stocks and bonds purchased using funds earmarked for the retirement of a bond issuance. 2. Witt Corp. has outstanding at December 31, 2004, two long-term borrowings with annual sinking fund requirements and maturities as follows: Sinking fund requirements Maturities 2003 1,000,000 - 2004 1,500,000 2,000,000 2005 1,500,000 2,000,000 2006 2,000,000 2,500,000 2007 2,000,000 3,000,000 8,000,000 9,500,000 In the notes to its December 31, 2004 balance sheet, how should Witt report the above data? a. No disclosure is required. b. Only sinking fund payments totaling 8,000,000 for the next five years detailed by year need be disclosed. c. Only maturities totaling 9,500,000 for the next five years detailed by year need to be disclosed. d. The combined aggregate of 17,500,000 of maturities and sinking fund requirements detailed by year should be disclosed. 3. On March 1, 2001, a company established a sinking fund in connection with an issue of bonds due in 2013. At December 31, 2003, the independent trustee held cash in the sinking fund account representing the annual deposits to the fund and the interest earned on those deposits. How should the sinking fund be reported in the company's balance sheet at December 31, 2003? a. The cash in the sinking fund should appear as a current asset. b. Only the accumulated deposits should appear as a noncurrent asset. c. The entire balance in the sinking fund account should appear as a current asset. d. The entire balance in the sinking fund account should appear as a noncurrent asset. 4. An issuer of bonds uses a sinking fund for the retirement of the bonds. Cash was transferred to the sinking fund and subsequently used to purchase investments. The sinking fund I. is increased by the income earned on the investments. II. is not affected by the income earned on the investments. III. decreased when the investments are purchased. a. I only. b. I and III. c. II and III. d. III only. 5. An increase in the cash surrender value is accounted for as a. income recognized in profit or loss. b. income recognized in other comprehensive income. c. reduction to insurance expense. d. none of these. 17. On January 1, 20x1, Allan Co. purchased 400,000 bonds for 392,000. The bonds mature on January 1, 20x5 and pay 12% annual interest beginning January 1, 20x2. Transaction costs are negligible. The bonds were classified as held for trading securities. On December 31, 20x1, the bonds are selling at a yield rate of 10%. How much is the unrealized gain (loss) recognized on December 31, 20x1? a. 27,986 b. 31,298 c. 28,964 d. 33,359 18. On January 1, 20x1, Rizzi Co. purchased 12,000 shares of Andre, Inc. for 400,000. Commission paid to broker amounted to 20,000. Management made an irrevocable choice to subsequently measure the shares at fair value through other comprehensive income. On December 31, 20x1, the shares were quoted at 40 per share. On January 3, 20x2, all of the shares were sold at 60 per share. Commission paid on the sale amounted to 24,000. How much is the unrealized gain (loss) recognized in profit or loss on December 31, 20x1? a. (60,000) b. 60,000 c. (80,000) d. 0 Use the following information for the next two questions: Karen Co. purchased the following equity securities on January 1, 20x1 for a total amount of 360,000. Cost Alaska Co. preference shares 200,000 Valdez Co. ordinary shares 160,000 Totals 360,000 The shares did not qualify for recognition as held for trading. Accordingly, they were classified as investment in equity securities measured at fair value through other comprehensive income. On December 31, 20x1, the portfolio of Karen Co. comprised the following. Fair value - 12/31/x1 Alaska Co. preference shares 240,000 Valdez Co. ordinary shares 60,000 Total 300,000 On December 31, 20x2, the portfolio of Karen Co. comprised the following: Fair value - 12/31/x2 Alaska Co. preference shares 220,000 Valdez Co. ordinary shares 180,000 Total 400,000 On February 2, 20x3, all of the Alaska Co. preference shares were sold for 160,000 net of transaction costs. 19. How much is the unrealized gain (loss) recognized in other comprehensive income on December 31, 20x1? a. 60,000 b. (60,000) c. 100,000 d. 0 20. How much is the cumulative unrealized gain (loss) that is presented as a separate component in equity as of December 31, 20x2? a. 40,000 b. (40,000) c. 100,000 d. 0