answer only

Question 1

How is goodwill arising on the acquisition of an associate dealt with in the financial statements?

Group of answer choices

Goodwill is not recognized separately within the carrying amount of the investment.

It is written off against profit or loss.

It is amortized.

Impairment is tested individually.

Question 2

The accounting method applied to investments in associates, known as equity method, is also known as the:

Group of answer choices

Multiple line consolidation method

Entity method of consolidation

Proprietary method of consolidation

One-line consolidation method

Question 3

Equity investments 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 equity are:

Group of answer choices

Investments where a company has holdings of between 20% to 50%

Investments where a company has holdings of more than 50%

Trading investment where a company has holdings of less than 20%

non-trading where a company has holdings of less than 20%.

Question 4

An investor need not use the equity method if all of the following four conditions are met, except:

Group of answer choices

The investor is itself a wholly-owned subsidiary or is a partially-owned subsidiary of another entity and its owners, including those not otherwise entitled to vote, have been informed about, and do not object to, the investor not applying the equity method.

The investor's debt or equity instruments are not traded in a public market.

The investor filed its financial statements with securities commission for the purpose of issuing any class of instruments in a public market.

The ultimate or any intermediate parent of the investor produces consolidated financial statements available for public use that comply with PFRSs.

Question 5

An entity over which the investor has significant influence is called a(an)

Group of answer choices

Associate

Subsidiary

Joint venture

Joint operation

Question 6

For the purposes of equity accounting for an investment in an associate, it is presumed that the investor has significant influence over the entity where the investor holds:

Group of answer choices

50% or more of the voting power of the investee.

Between 5% to 10% of the voting power of the investee

20% or more of the voting power of the investee.

Between 1% to 5% of the voting power of the investee.

Question 7

Which statement is incorrect regarding the application of the equity method of accounting for investments in associates?

Group of answer choices

Distributions received from the investee reduce the carrying amount of the investment.

The investor's share of profit or loss of the investee and of changes in the investee's equity is determined on the basis of total potential ownership interests.

The equity investment is initially recorded at cost.

The equity instrument is decreased by the investor's share of the net loss of the associate.

Question 8

When a company has acquired a "passive interest" in another corporation, the acquiring company should account for the investment:

Group of answer choices

by consolidation.

by using the effective interest method.

by using the equity method.

by using the fair value method.

Question 9

What should happen when the financial statements of an associate are not prepared to the same date as the investor's acounts?

Group of answer choices

The financial statements of the associate prepared up to a different accounting date will be used as normal.

The associate should prepare financial statements for the use of the investor at the same date as those of the investor.

Any major transactions between the date of the financial statements of the investor and that of the associate should be accounted for.

As long as the gap is not greater than three months, there is no problem

Question 10

An investor should use the equity method of accounting for investments in associates under which of the following?

I. An investment in an associate that is acquired and held exclusively with a view to its disposal within 12 months from acquisition

II. A parent that is exempted from preparing consolidated financial statements.

Group of answer choices

II only

I only

Both I and II

Neither I nor II