Q1. Cosmo Inc. (Cosmo) invests in two portfolios – Portfolio 1 and Portfolio 2. Portfolio 1 contains securities with an overall intent to profit within a month or two. Portfolio 2 contains equity securities with a moderate amount of acquisition and disposition activity. Which of the following treatments of Cosmo’s reporting of the minority passive investments in Portfolios 1 and 2, respectively, is most accurate? Portfolio 1 Portfolio 2 A)Unrealized amounts reported on income statement. Assets reported at fair value. B)Unrealized amounts reported on balance sheet. Assets reported at fair value. C)Unrealized amounts reported on income statement. Assets reported at cost.
Q2. You are evaluating two firms, A and B, which have passive intercorporate investments. In each case the ownership levels are less than 20%, and they have no significant influence over the firms in which they have invested. However, Firm A has invested via a negotiated transaction in shares that are not publicly traded, and for which no liquid secondary market exists. Firm B has purchased shares that are publicly traded, and has identified these as trading securities. Which of the following statements most accurately describes the correct method of accounting for these securities under both U.S. GAAP and IAS rules? A) Firm A should account for its investment using the market method, while firm B should account for its investment using the cost method. B) Firm A should account for its investment using the cost method, while firm B should account for its investment using the market method. C) Firm A should account for its investment using the cost method, and firm B should account for its investment using the cost method.
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发表于 2009-1-5 11:55
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