1. Which statement is true concerning the reporting for equity investments with no significant influence?

a. They are reported at fair value, with any changes in value reported in income.

b. They are categorized as either trading or available-for-sale, with unrealized changes in the value of trading securities reported in income, and unrealized changes in the value of AFS securities reported in OCI.

c. They are reported at cost, with unrealized changes in value reported in OCI.

d. They are reported at fair value, with unrealized changes in value reported in OCI.

2. A company paid $100,000 for corporate bonds and classified them as AFS. By year-end, the bonds declined in value to $80,000 due to credit losses. Which statement is true concerning the end-of-year adjustment for this investment?

a. No adjustment is required.

b. The investment account is directly reduced by $20,000 and a $20,000 loss is reported in OCI.

c. The investment account is directly reduced by $20,000 and a $20,000 loss is reported in income.

d. An allowance account is created to reduce the investment by $20,000, and a $20,000 loss is reported in income.

3. Following U.S. GAAP, when should a company use the equity method to report an intercorporate investment?

a. The company significantly influences the decisions of the investee.

b. The investee is the companys major supplier.

c. The company owns 20 50% of the investees voting stock.

d. The company is holding the investment in its long-term portfolio.

4. Company C has a significant influence investment in Company D, and appropriately reports its share of Company Ds reported income as equity in net income. Under what circumstances will Company C adjust Company Ds reported income to determine its share of that income, in the first year the investment is held?

a. Company D declared and paid dividends in excess of its reported net income in the first year.

b. Company Cs acquisition cost was more than its share of Company Ds book value, and the difference is attributable to indefinite life intangibles that are impaired in the first year.

c. Company D reported a loss in the first year.

d. Company Cs acquisition cost was more than its share of Company Ds book value, and the difference is attributable to previously unreported customer lists with a 3-year life.