Chapter 9
Investments
455
Application Questions Group B
AP-1B (
1
)
Betty Company invests in different instruments before the end of 2016. Complete the
following table for each of the investments.
Investments
Non-Strategic
or Strategic
Investment
Classification on
Betty Company’s
Balance Sheet
Accounting
Method
120-day treasury bill purchased on December 31,
2016 that Betty plans to hold for interest revenue until
maturity.
A 3% common shares of a public company purchased
on February 1, 2016 that Betty Company is planning on
selling before the year-end of December 31, 2016.
A one-year bond issued by a private business on
November 1, 2016 that Betty Company is planning to
hold until maturity.
20% of common shares of Tim Company purchased
on November 18, 2016. Currently, the company has
significant influence over the investee.
15% of common shares of Jerry Company purchased
on December 24, 2016, which Betty is planning to sell
within five months to make a profit.
45% of common shares of Sally Company purchased
on December 30, 2016, with which Betty Company is
trying to acquire more shares to establish control over
the investee in the future.
AP-2B (
1
2
)
Quest Company purchases a $350,000, 120-day treasury bill (T-bill) on March 1, 2016 for
$344,167 in cash. The treasury bill pays 5% interest. Quest plans to hold the T-bill until
maturity to earn interest. The company follows IFRS and its year-end is April 30.
Round your answers to the nearest whole dollar.
Required
a) If the accountant of Quest Company decides to use fair value through profit and loss
methods, would you agree with this? Explain.
