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In early 2017,Kalkay Inc.found itself with idle cash that it decided to invest in the shares of another business.The following events transpired in 2017 and 2018: 2017 Jan 23 Kalkay Inc. purchased 2,000 shares in Tiodnaci Corporation at 16.25 per share and paid a brokerage fee of $650 \$ 650 . This investment was classified as a short-term investment Nov, 15 A dividend of $1.25 \$ 1.25 per share was received on the Tiodnaci Corporation shares. Dec. 31 This is the end of the fiscal year for Kalkay Inc. On this date the Tiodnaci Corporation shares were worth 18.50 per share. 2018 Jan. 27 Kalkay Inc, sold 500 Tiodnaci Corporation shares for 18.00 per share. Mar 30 A dividend of $2 \$ 2 per share was received on the Tiodnaci Corporation shares, Jun. 30 Kalkay Inc. sold all of the remaining Tiodnaci Corporation shares for 21.00 per share Prepare journal entries for the above transactions.

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Amortization of a discount on a bond investment will decrease the amount of interest revenue recorded by the investor.

A) True
B) False

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The maximum amount received at the maturity of the bond will be the face value.

A) True
B) False

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LTI Corp.purchased 500 shares as a short-term investment for $5,100 on January 4,2017.The company received a 100% stock dividend on November 30,2017.The market value of one share on December 31,2017 was $6.30.The cost per share as at December 31,2017,would be:


A) $10.20
B) $6.30
C) $5.10
D) $3.15

E) A) and D)
F) A) and C)

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Table 16-1 On January 2, 2017, Logan Corporation purchased 2,000 common shares in Downright Corporation for $55 per share and paid a $500 brokerage commission for the purchase. Logan intends to hold this investment for less than a year and classifies it as a Short-Term Investment. The market value of the shares at December 31, 2017, is $58 per share. -Refer to Table 16-1.The entry to record the acquisition of these shares includes:


A) a credit to Short-Term Investments for $109,500
B) a debit to Short-Term Investments for $110,000
C) a debit to Short-Term Investments for $110,500
D) a debit to Short-Term Investments for $116,000

E) A) and D)
F) B) and D)

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The equity method of recording an investment in an investee exists to avoid the manipulation of the investor's income through influencing the dividend policy of its investee.

A) True
B) False

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Most companies report non-controlling interest on a consolidated balance sheet:


A) as an item between liabilities and shareholders' equity
B) as a current asset
C) as an intangible asset
D) Non-controlling interest is eliminated and does not appear on a consolidated balance sheet.

E) A) and B)
F) B) and C)

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Mars Co.acquired 60% of the voting common shares of Venus Corporation on December 31,2017.During the year ended December 31,2017,Mars Co.and Venus Corporation reported net income of $120,000 and $80,000 from their own operations,respectively. a_How much income will be reported on the consolidated income statement for  the year ended December 31, 2017? \text { the year ended December 31, 2017? } b_What does non-controlling interest represent and where is it presented on a  consolidated balance sheet? \text { consolidated balance sheet? }

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a_$120,000 + ($80,000 × 0.60_= $120,000 ...

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Table 16-10 On September 1, 2017, Jacob Ltd. purchased 100,000 common shares for a 20% interest in BlueSky Drilling Corporation for $15 per share, and paid a $7,000 brokerage commission for the purchase. Jacob Ltd. intends to hold this investment for several years and does not have significant influence over BlueSky Drilling. The market value of the BlueSky Drilling shares at December 31, 2017, is $19 per share. On February 15, 2018 BlueSky Drilling distributed a total dividend to its' shareholders of $50,000. Jacob Ltd. sold one-half of the shares on June 30, 2018 for $16 per share. -Refer to Table 16-10.Which of the following is the correct journal entry to record the purchase?


A)  Long-Term Investments 1,500,000 Brokerage Commission Expense 7,000 Cash 1,507,000\begin{array} { | c | r | r | } \hline \text { Long-Term Investments } & 1,500,000 & \\\hline \text { Brokerage Commission Expense } & 7,000 & \\\hline \text { Cash } & & 1,507,000 \\\hline\end{array}
B)  Short-Term Investments 1,500,000 Brokerage Commission Expense 7,000 Cash 1,507,000\begin{array} { | c | r | r | } \hline \text { Short-Term Investments } & 1,500,000 & \\\hline \text { Brokerage Commission Expense } & 7,000 & \\\hline \text { Cash } & & 1,507,000 \\\hline\end{array}
C)  Investment in BlueSky Drilling Common Shares 1,500,000 Brokerage Commission Expense 7,000 Cash 1,507,000\begin{array} { | c | r | r | } \hline \text { Investment in BlueSky Drilling Common Shares } & 1,500,000 & \\\hline \text { Brokerage Commission Expense } & 7,000 & \\\hline \text { Cash } & & 1,507,000 \\\hline\end{array}
D)  Investment in BlueSky Drilling Common Shares 1,500,000 Cash 1,507,000\begin{array} { | c | r | r | } \hline \text { Investment in BlueSky Drilling Common Shares } & 1,500,000 & \\\hline \text { Cash } & & 1,507,000 \\\hline\end{array}

E) A) and C)
F) None of the above

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Table 16-2 Big Corporation paid $95,000 to acquire a 30% investment in the common shares of Little Corporation on January 3, 2017. On December 31, 2017, Little Corporation's net income was $210,000 and Little Corporation paid dividends of $80,000. On December 31, 2018, Little Corporation's net income was $170,000 and Little Corporation paid dividends of $60,000. Big Corporation used the equity-method to account for this investment. -Refer to Table 16-2.Big Corporation's entry to record its share of 2017 income of Little Corporation involves a:


A) debit to Investment in Little Corporation for $95,000
B) credit to Equity-Method Investment Revenue for $24,000
C) credit to Dividend Revenue for $24,000
D) debit to Investment in Little Corporation for $63,000

E) B) and C)
F) All of the above

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Accounting Standards for Private Enterprises (ASPE_allow parent companies to account for their subsidiaries using the equity method or the cost method,if the cost of providing consolidated financial statements is more than the benefit for users.

A) True
B) False

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Short-term investments in bonds are reported on the balance sheet at their historical cost.

A) True
B) False

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Non-controlling interest is that portion of a subsidiary's shares that is owned by shareholders other than the parent company.

A) True
B) False

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An investor company owns 40% of the shares in an investee.If the share investment is being accounted for using the equity method of accounting and the investee earns $250,000 of net income,the investor will make an entry that includes a:


A) credit to Dividend Revenue of $100,000
B) credit to Investment Revenue of $100,000
C) credit to Long-Term Investment for $100,000
D) No journal entry is made to account for the net income of the investee under the equity method.

E) B) and C)
F) C) and D)

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The gain or loss on the sale of an investment accounted for using the equity method is calculated as the difference between the sale proceeds and:


A) the original cost of the investment
B) total shareholders' equity of the investee multiplied by the ownership percentage of the investor
C) the original cost of the investment plus the investor's cumulative share of investee dividends, minus the investor's cumulative share of investee income
D) the carrying amount of the investment

E) C) and D)
F) None of the above

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Table 16-10 On September 1, 2017, Jacob Ltd. purchased 100,000 common shares for a 20% interest in BlueSky Drilling Corporation for $15 per share, and paid a $7,000 brokerage commission for the purchase. Jacob Ltd. intends to hold this investment for several years and does not have significant influence over BlueSky Drilling. The market value of the BlueSky Drilling shares at December 31, 2017, is $19 per share. On February 15, 2018 BlueSky Drilling distributed a total dividend to its' shareholders of $50,000. Jacob Ltd. sold one-half of the shares on June 30, 2018 for $16 per share. -Refer to Table 16-10. Which of the following is the correct journal entry to record the receipt of the dividend on the books of Jacob Ltd.?


A)  Dividends Payable 50,000 Cash 400,000\begin{array} { | l | r | r | } \hline \text { Dividends Payable } & 50,000 & \\\hline \text { Cash } & & 400,000 \\\hline\end{array}
B)  Long-Term Investments 10,000Cr. Dividend Revenue 10,000\begin{array} { | l | r | r | } \hline \text { Long-Term Investments } & 10,000 & \\\hline \mathrm { Cr } \text {. Dividend Revenue } & & 10,000 \\\hline\end{array}
C)  Cash 10,000 Investment in BlueSky Drilling Common  Shares 10,000\begin{array} { | l | r | r | } \hline \text { Cash } & 10,000 & \\\hline \begin{array} { l } \text { Investment in BlueSky Drilling Common } \\\text { Shares }\end{array} & & 10,000 \\\hline\end{array}
D)  Cash 10,000 Dividend Revenue 10,000\begin{array} { | l | r | r | } \hline \text { Cash } & 10,000 & \\\hline \text { Dividend Revenue } & & 10,000 \\\hline\end{array}

E) None of the above
F) B) and C)

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Table 16-11 Parent Corporation paid $110,000 to acquire 60% of the common shares of Subsidiary Inc. on December 31, 2017. At that date, Parent Corporation also had an outstanding note payable to Subsidiary Inc. in the amount of $50,000. Assume that Parent Corporation and Subsidiary Inc. had the following account balances at December 31, 2017 (immediately after the investment) :  Assets:  Parent  Subsidiary  Corporation  Inc.  Cash $75,000$25,000 Note receivable from Parent Corporation 50,000 Inventory 130,00040,000 Investment in Subsidiary Inc. 110,000 Other assets 590,000‾35,000‾ Total $905,000‾$150,00‾\begin{array}{lcc}\text { Assets: } & \text { Parent } & \text { Subsidiary } \\& \text { Corporation } & \text { Inc. }\\\text { Cash } & \$ 75,000 & \$ 25,000 \\\text { Note receivable from Parent Corporation } & & 50,000 \\\text { Inventory } & 130,000 & 40,000 \\\text { Investment in Subsidiary Inc. } & 110,000 & \\\text { Other assets } & \underline{590,000} & \underline{35,000} \\\text { Total } & \underline{\$ 905,000} & \underline{ \$ 150,00}\end{array} Liabilities and shareholders' equity:  Accounts payable $40,000$30,000 Note payable to Subsidiary Inc. 50,000 Common shares 500,000100,000 Retained earnings 315,000‾20,000‾ Total $905,0000‾$150,0000‾\begin{array} { l l l } \text { Accounts payable } & \$ 40,000 & \$ 30,000 \\\text { Note payable to Subsidiary Inc. } & 50,000 & \\\text { Common shares } & 500,000 & 100,000 \\\text { Retained earnings } & \underline{ 3 1 5 , 0 0 0 } & \underline { 2 0 , 0 0 0 } \\\text { Total } & \underline{ \$ 905,0000 }& \underline{ \$ 150,0000}\end{array} -Refer to Table 16-11.What is the value of the Parent Corporation investment account at December 31,2017 if the Subsidiary Inc.had net income of $40,000 and paid a total of $3,000 in dividends in 2015?


A) $132,000
B) $110,000
C) $147,000
D) $150,000

E) All of the above
F) None of the above

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Short-term equity investments with no significant influence are reported at:


A) cost as long-term assets on the balance sheet
B) market value as either current assets or long-term investments on the balance sheet
C) market value as current assets on the balance sheet
D) lower of cost or market as current assets on the balance sheet

E) A) and D)
F) A) and C)

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LTI Corp.purchased 500 shares as a short-term investment for $5,100 on January 4,2017.The company received a 100% stock dividend on November 30,2017.The market value of one share on December 31,2017 was $6.30.The carrying value per share as at December 31,2017,would be:


A) $10.20
B) $6.30
C) $5.10
D) $3.15

E) C) and D)
F) A) and B)

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Table 16-8 On July 15, 2017, Sanders Ltd. purchased 5,000 common shares in Signet Mining Corporation for $32 per share and paid a $800 brokerage commission for the purchase. Sanders intends to hold this investment for less than a year and classifies it as a Short-Term Investment. The market value of the shares at December 31, 2017, is $29 per share. On February 15, 2018 Signet Mining announced a 2 for 1 stock split. Sanders sold one-half of the shares on March 31, 2018 for $15 per share. -Refer to Table 16-8.After the distribution of shares relating to the stock split,the Sanders Ltd.cost per share:


A) increases by 100%
B) decreases by 50%
C) remains the same
D) increases by 150%

E) None of the above
F) All of the above

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