Fayerman: Advanced Accounting, Ce Chapter 1: Accounting for Investments Testbank
corporate, and governmental settings.### 1. **Introduction to Ethical and Legal
Issues**Ethics and law both serve as foundational principles that guide behavior and
decision-making. Ethics refers to a system of moral principles or values that govern the
conduct of individuals and groups. These principles often help people determine what is
"right" or "wrong" in different situations. Law, on the other hand, is a system of rules that
are created and enforced by institutions to regulate behavior, ensure order, and resolve
disputes.Ethical dilemmas often arise when an individual or organization faces a situation
in which different moral principles conflict, or where there is no clear "right" answer.
Legal issues, meanwhile, come into play when actions conflict with established laws or legal
norms. The challenge arises in balancing
Test Bank For
Accounting for Investments - Advanced Accounting
Chapter 1
True or False
1) If a company makes a non-strategic investment it is considered a financial asset.
Answer: True
Difficulty: Easy
Learning Objective: Identify and account for non-strategic investments in equity.
Section Reference: Non-Strategic Investments in Equity
Feedback: Review section ―Criteria‖
2) When a company has control over another company, a parent-subsidiary relationship is
said to exist.
Answer: True
Difficulty: Easy
Learning Objective: Identify and account for parent-subsidiary relationships.
Section Reference: Strategic Investments - Parent-Subsidiary Relationships
Feedback: Review section ―Identifying Parent-Subsidiary Relationships‖
3) An associate is an entity, including an unincorporated company such as a partnership,
over which the investor has significant influence and that is also a subsidiary or a joint
venture.
1
, Fayerman: Advanced Accounting, Ce Chapter 1: Accounting for Investments Testbank
Answer: False
Difficulty: Medium
Learning Objective: Identify and account for associates.
Section Reference: Strategic Investments - Associates
Feedback: Review section ―Identifying Associates‖
4) Under the equity method, the investment account is updated for the investor’s share of
profit and distributions.
Answer: True
Difficulty: Medium
Learning Objective: Identify and account for associates.
Section Reference: Strategic Investments - Associates
Feedback: Review section ―Equity Method of Accounting‖
corporate, and governmental settings.### 1. **Introduction to Ethical and Legal Issues**Ethics
and law both serve as foundational principles that guide behavior and decision-making. Ethics
refers to a system of moral principles or values that govern the conduct of individuals and
groups. These principles often help people determine what is "right" or "wrong" in different
situations. Law, on the other hand, is a system of rules that are created and enforced by
institutions to regulate behavior, ensure order, and resolve disputes.Ethical dilemmas often arise
when an individual or organization faces a situation in which different moral principles conflict,
or where there is no clear "right" answer. Legal issues, meanwhile, come into play when actions
conflict with established laws or legal norms. The challenge arises in balancing
5) A company is a party to a joint venture when it does not have the rights to the assets or
the obligations for the liabilities.
Answer: True
Difficulty: Easy
Learning Objective: Identify and account for joint arrangements.
Section Reference: Strategic Investments – Joint Arrangements
Feedback: Review section ―Identifying Joint Arrangements‖
6) If Darlington Inc. owns 30% of a jointly controlled operation, it would reflect 100% of
each asset, liability, income or expense that is part of the joint operation on its own
financial statements.
Answer: False
Difficulty: Moderate
Learning Objective: Identify and account for joint arrangements.
Section Reference: Strategic Investments – Joint Arrangements
Feedback: Review section ―Accounting and Reporting for Joint Arrangements‖
2
corporate, and governmental settings.### 1. **Introduction to Ethical and Legal
Issues**Ethics and law both serve as foundational principles that guide behavior and
decision-making. Ethics refers to a system of moral principles or values that govern the
conduct of individuals and groups. These principles often help people determine what is
"right" or "wrong" in different situations. Law, on the other hand, is a system of rules that
are created and enforced by institutions to regulate behavior, ensure order, and resolve
disputes.Ethical dilemmas often arise when an individual or organization faces a situation
in which different moral principles conflict, or where there is no clear "right" answer.
Legal issues, meanwhile, come into play when actions conflict with established laws or legal
norms. The challenge arises in balancing
Test Bank For
Accounting for Investments - Advanced Accounting
Chapter 1
True or False
1) If a company makes a non-strategic investment it is considered a financial asset.
Answer: True
Difficulty: Easy
Learning Objective: Identify and account for non-strategic investments in equity.
Section Reference: Non-Strategic Investments in Equity
Feedback: Review section ―Criteria‖
2) When a company has control over another company, a parent-subsidiary relationship is
said to exist.
Answer: True
Difficulty: Easy
Learning Objective: Identify and account for parent-subsidiary relationships.
Section Reference: Strategic Investments - Parent-Subsidiary Relationships
Feedback: Review section ―Identifying Parent-Subsidiary Relationships‖
3) An associate is an entity, including an unincorporated company such as a partnership,
over which the investor has significant influence and that is also a subsidiary or a joint
venture.
1
, Fayerman: Advanced Accounting, Ce Chapter 1: Accounting for Investments Testbank
Answer: False
Difficulty: Medium
Learning Objective: Identify and account for associates.
Section Reference: Strategic Investments - Associates
Feedback: Review section ―Identifying Associates‖
4) Under the equity method, the investment account is updated for the investor’s share of
profit and distributions.
Answer: True
Difficulty: Medium
Learning Objective: Identify and account for associates.
Section Reference: Strategic Investments - Associates
Feedback: Review section ―Equity Method of Accounting‖
corporate, and governmental settings.### 1. **Introduction to Ethical and Legal Issues**Ethics
and law both serve as foundational principles that guide behavior and decision-making. Ethics
refers to a system of moral principles or values that govern the conduct of individuals and
groups. These principles often help people determine what is "right" or "wrong" in different
situations. Law, on the other hand, is a system of rules that are created and enforced by
institutions to regulate behavior, ensure order, and resolve disputes.Ethical dilemmas often arise
when an individual or organization faces a situation in which different moral principles conflict,
or where there is no clear "right" answer. Legal issues, meanwhile, come into play when actions
conflict with established laws or legal norms. The challenge arises in balancing
5) A company is a party to a joint venture when it does not have the rights to the assets or
the obligations for the liabilities.
Answer: True
Difficulty: Easy
Learning Objective: Identify and account for joint arrangements.
Section Reference: Strategic Investments – Joint Arrangements
Feedback: Review section ―Identifying Joint Arrangements‖
6) If Darlington Inc. owns 30% of a jointly controlled operation, it would reflect 100% of
each asset, liability, income or expense that is part of the joint operation on its own
financial statements.
Answer: False
Difficulty: Moderate
Learning Objective: Identify and account for joint arrangements.
Section Reference: Strategic Investments – Joint Arrangements
Feedback: Review section ―Accounting and Reporting for Joint Arrangements‖
2
