Question 1

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

Group of answer choices

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

The equity investment is initially recorded at cost.

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.

Question 2

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%

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

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

Investments where a company has holdings of more than 50%

Question 3

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

Group of answer choices

by using the equity method.

by using the effective interest method.

by consolidation.

by using the fair value method.

Question 4

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

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

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

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

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

Question 5

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

Both I and II

II only

Neither I nor II

I only

Question 6

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

Group of answer choices

It is amortized.

It is written off against profit or loss.

Impairment is tested individually.

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

Question 7

Significant influence as defined in PAS 28 is

Group of answer choices

Deemed to exist when the investor is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee.

The power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies.

The power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.

The contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control.

Question 8

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

Group of answer choices

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

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

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.

Question 9

If the investor ceases to have significant influence over an associate, how should the investment be treated?

Group of answer choices

The investment should be frozen at the date at which the investor ceases to have significant influence

It should still be treated using equity accounting

The investment should be treated at cost.

It should be treated in accordance with PFRS 9

Question 10

If there is any excess of the investor's share of the net fair value of the associate's identifiable assets and contingent liabilities over the cost of the investment, that is, negative goodwill, how should that excess be treated?

Group of answer choices

It should be disclosed separately as part of the investor's equity.

It should be included in the carrying amount of the investment.

It should be included as income in the determination of the investor's share of the associate's profit or loss for the period.

It should be written off against retained earnings.

answer only thank you