Investment Quiz: 20 Questions Part 6

19 Questions | Total Attempts: 590

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Investment Quizzes & Trivia

Timed-quiz. Good luck!


Questions and Answers
  • 1. 
    The following information relates to noncurrent investments that Hall Company placed in trust as required by the underwriter of its bonds:Bond sinking fund balance, January 1, 2009                                         4,500,0002009 additional investment                                                                      900,000Dividends on investments                                                                        150,000Interest revenue                                                                                       300,000Administration costs                                                                                   50,000Carrying amount of bonds payable                                                        8,000,000What amount should Hall report in its December 31, 2009 balance sheet related to its noncurrent investment for bond sinking fund requirements?
    • A. 

      5,400,000

    • B. 

      5,750,000

    • C. 

      5,800,000

    • D. 

      5,850,000

  • 2. 
    On January 1, 2009, Bell Company adopted a plan to accumulate funds for a new plant building to be erected beginning July 1, 2014, at an estimated cost of P6,000,000. Bell intends to make five equal annual deposits in a fund that will earn interest at 8% compounded annually. The first deposit is made on July 1, 2009. Present value and future amount factors are as follows:Present value of 1 at 8% for 5 periods                                                        0.68Present value of 1 at 8% for 6 periods                                                        0.63Future amount of ordinary annuity of 1 at 8% for 5 periods                       5.87Future amount of annuity in advance of 1 at 8% for 5 periods                   6.34Bell should make five annual deposits (rounded) of:
    • A. 

      756,000

    • B. 

      816,000

    • C. 

      946,400

    • D. 

      1,022,150

  • 3. 
    On January 1, 2009, Man Company adopted plan to accumulate P5,000,000 by January 1, 2014. Man plans to make 5 equal annual deposits tha will earn interest at 9% compounded annually. Man made the first deposit on December 31, 2009. The future value of ordinary annuity of 1 at 9% for 5 periods is 6.52. What amount must be deposited annually at the compound interest to accumulate the desired amount of P5,000,000?
    • A. 

      609,756

    • B. 

      664,894

    • C. 

      766,871

    • D. 

      836,120

  • 4. 
    Cebuana Company made an investment of P5,000,000 at 10% per annum compounded annually for 6 years. What is the amount of the investment on the date of maturity? Round off future value factor to two decimal places.
    • A. 

      5,500,000

    • B. 

      8,050,000

    • C. 

      8,850,000

    • D. 

      9,750,000

  • 5. 
    Mac Company made investment for 5 years at 12% per annum compounded semiannually to equal P7,160,000 on the date of maturity. What amount must be deposited now at the compound interest to provide the desired sum? Round off future value factor to two decimal places.
    • A. 

      3,768,420

    • B. 

      4,000,000

    • C. 

      4,068,180

    • D. 

      4,236,680

  • 6. 
    Bulk Company purchased a P1,000,000 ordinary life insurance policy on its president. The policy year and Bulk's accounting year coincide. Additional data are available for the year ended December 31, 2009:Cash surrender value, 1/1                                                           43,500Cash surrender value, 12/31                                                        54,000Annual advance premium paid 1/1                                             20,000Dividend received 7/1                                                                   3,000Bulk Company is the beneficiary under the life insurance policy. How much should Bulk report as life insurance expense for 2009?
    • A. 

      6,500

    • B. 

      9,500

    • C. 

      17,000

    • D. 

      20,000

  • 7. 
    Crane Company purchased a P1,000,000 life insurance policy on its president, of which Crane is the beneficiary. Information regarding the policy for the year ended December 31, 2009, follows:Cash surrender value, 1/1                                                               87,000Cash surrender value, 12/31                                                          108,000Annual advance premium paid 1/1                                                 40,000During 2009, dividend of P6,000 was applied to increase the cash surrender value of the policy. What amount should Crane report as life insurance expense for 2009?  
    • A. 

      13,000

    • B. 

      19,000

    • C. 

      25,000

    • D. 

      40,000

  • 8. 
    Silvana Company insured the life of its president for P2,000,000, the company being the beneficiary of an ordinary life insurance policy. The annual premium is P80,000 and the policy is dated January 1, 2006. The cash surrender values are:December 31, 2008                                                      15,000December 31, 2009                                                      19,000The company follows the calendar year as its fiscal period. The president dies on October 1, 2009 and the policy is settled on December 31, 2009.Silvana Company should report gain on life insurance settlement in its 2009 income statement at:
    • A. 

      1,961,000

    • B. 

      1,962,000

    • C. 

      1,981,000

    • D. 

      2,000,000

  • 9. 
    Gallery Company ventured into construction of a condominium in Ortigas which is rated as the largest state-of-the-art structure. The entity's board of directors decided that instead of selling the condominium, the entity would hold this property for purposes of earning rentals by letting out space to business executives in the area. The construction of the condominium was completed and the property was placed in service on January 1, 2009. The cost of the construction was P50 million. The useful life of the condominium is 25 years and its residual value is P5 million. An independent  valuation expert provided the following fair value at each subsequent year-end: December 31, 2009                                            55 million December 31, 2010                                            53 million December 31, 2011                                            60 millionUnder the fair value model, Gallery Company should recognize gain from change in fair value in 2009 at:
    • A. 

      0

    • B. 

      3,000,000

    • C. 

      5,000,000

    • D. 

      7,000,000

  • 10. 
    Elven Company and its subsidiaries own the following properties that are accounted for in accordance with international accounting standards:Land held by Elven for undetermined use                                                5,000,000A vacant building owned by Elven and to be     leased out under an operating lease                                                   3,000,000Property held by a subsidiary of Elven, a real     estate firm, in the ordinary course of business                                    2,000,000Property held by Elven for use in production                                           4,000,000Building owned by a subsidiary of Elven and     for which the subsidiary provides security     and maintenance services to the lessees                                            1,500,000Land leased by Elven to a subsidiary under an     operating lease.                                                                                  2,500,000Property under construction for use as an investment     property                                                                                               6,000,000Land held for future factory site                                                               3,500,000Machinery leased out by Elven to an unrelated      party under and operating lease                                                         1,000,000What will be the total investment property to be shown in the consolidated balance sheet of the parent and its subsidiaries?
    • A. 

      9,500,000

    • B. 

      10,500,000

    • C. 

      12,000,000

    • D. 

      15,500,000

  • 11. 
    On January 1, 2009, Passer Company entered into a two-year P3,000,000 variable interest rate loan at the prevailing rate of 12%. In 2010, the interest rate is equal to the prevailing interest rate at the beginning of the year.The principal loan is payable on December 31, 2010 and the interest is payable on December 31 of each year. On January 1 , 2009, Passer Company entered into a "receive variable, pay fixed" interest swap agreement with a speculator bank designated as a cash flow hedge.The prevailing interest rate on January 1, 2010 is 14% and the present value of 1 at 14% for one period is .877. How much should be reported as " interest rate swap receivable" on December 31, 2009?
    • A. 

      0

    • B. 

      30,000

    • C. 

      52,620

    • D. 

      60,000

  • 12. 
    Cavite Company received a two-year variable interest rate loan of P5,000,000 on January 1, 2009. The interest on the loan is payable on December 31 of each year and the principal is to be repaid on December 31, 2010. On January 1, 2009, Cavite Company entered into a "receive variable, pay fixed" interest rate swap agreement with a speculator bank designated as a cash flow hedge.The interest rate for 2009 is the prevailing interest rate of 10% and the rate in 2010 is equal to the prevailing rate on January 1, 2010. The market rate of interest on January 1, 2010 is 7% and the present value of 1 at 7% for one period is .935. How much should be reported by Cavite Company on December 31, 2009 as "interest rate swap payable"?
    • A. 

      0

    • B. 

      100,000

    • C. 

      140,250

    • D. 

      150,000

  • 13. 
    On January 1, 2009, Tall Company received a 5-year variable interest rate loan of P6,000,000 with interest payment at the end of each year and the principal to be repaid on December 31, 2013. The interest rate for 2009 is 8% and the rate in each succeeding year is equal to market interest rate on January 1 of each year.On January 1, 2009, Tall Company entered into an interest rate swap agreement with a financial institution to the effect that Tall will receive a swap payment if the interest on January 1 is more than 8% and will make a swap payment if the interest is less than 8%. The swap payments are made at the end of the year. This interest rate swap agreement is designated as a cash low hedge.On January 1, 2010, the market rate of interest is 9%. The present value of an ordinary annuity of 1 at 9% for four periods is 3.24. On December 31, 2009, Tall Company shall report "interest rate swap receivable" at:
    • A. 

      120,000

    • B. 

      194,400

    • C. 

      240,000

    • D. 

      300,000

  • 14. 
    On January 1, 2009, Tree Company borrowed P5,000,000 from a bank at a variable rate of interest for 4 years. Interest will be paid annually to the bank on December 31 and the principal is due on December 31, 2012. Under the agreement, the market rate of interest every January 1 resets the variable rate for that period and the amount of interest to be paid on December 31. In conjunction with the loan, Tree Company entered into a "receive variable, pay fixed" interest rate swap agreement with another bank speculator.The interest rate swap agreement was designated as a cash flow hedge. The market rates of interest are:January 1, 2009                                                    10%January 1, 2010                                                    14%January 1, 2011                                                    12%January 1, 2012                                                    11%The present value of an ordinary annuity of 1 is as follows:At 14% for three periods                                      2.32At 12% for two periods                                        1.69At 11% for one period                                          0.90What is the derivative asset or liability on December 31, 2009?
    • A. 

      464,000 asset

    • B. 

      464,000 liability

    • C. 

      600,000 asset

    • D. 

      600,000 liability

  • 15. 
    On January 1, 2009, Tree Company borrowed P5,000,000 from a bank at a variable rate of interest for 4 years. Interest will be paid annually to the bank on December 31 and the principal is due on December 31, 2012. Under the agreement, the market rate of interest every January 1 resets the variable rate for that period and the amount of interest to be paid on December 31. In conjunction with the loan, Tree Company entered into a "receive variable, pay fixed" interest rate swap agreement with another bank speculator. The interest rate swap agreement was designated as a cash flow hedge. The market rates of interest are: January 1, 2009                                                    10% January 1, 2010                                                    14% January 1, 2011                                                    12% January 1, 2012                                                    11% The present value of an ordinary annuity of 1 is as follows: At 14% for three periods                                      2.32 At 12% for two periods                                        1.69 At 11% for one period                                          0.90 What is the derivative asset or liability on December 31, 2010?
    • A. 

      200,000 asset

    • B. 

      200,000 liability

    • C. 

      169,000 asset

    • D. 

      169,000 liability

  • 16. 
    On January 1, 2009, Tree Company borrowed P5,000,000 from a bank at a variable rate of interest for 4 years. Interest will be paid annually to the bank on December 31 and the principal is due on December 31, 2012. Under the agreement, the market rate of interest every January 1 resets the variable rate for that period and the amount of interest to be paid on December 31. In conjunction with the loan, Tree Company entered into a "receive variable, pay fixed" interest rate swap agreement with another bank speculator. The interest rate swap agreement was designated as a cash flow hedge. The market rates of interest are: January 1, 2009                                                    10% January 1, 2010                                                    14% January 1, 2011                                                    12% January 1, 2012                                                    11% The present value of an ordinary annuity of 1 is as follows: At 14% for three periods                                      2.32 At 12% for two periods                                        1.69 At 11% for one period                                          0.90 What is the derivative asset or liability on December 31, 2011?
    • A. 

      45,000 asset

    • B. 

      45,000 liability

    • C. 

      50,000 asset

    • D. 

      50,000 liability

  • 17. 
    Vacation Company is a golf course developer that constructs approximately 5 courses each year. On January 1, 2009, Vacation Company has agreed to buy 5,000 trees on January 1, 2010 to be planted in the courses it intends to build. In recent years, the price of trees has fluctuated wildly. On January 1, 2009, Vacation Company entered into a forward contract with a reputable bank. The price is set at P500 per tree.The derivative forward contract provides that if the market price on January 1, 2010 is more than P500, the difference is paid by the bank to Vacation. On the other hand, if the market price is less than P500, Vacation will pay the difference to the bank. This derivative forward contract was designated as a cash flow hedge. The market price on December 31, 2009 and January 1, 2010 is P800. The appropriate discount rate is 8% and the present value of 1 at 8% for one period is .926.On December 31, 2009, Vacation Company shall recognize a derivative asset at:
    • A. 

      694,500

    • B. 

      750,000

    • C. 

      1,389,000

    • D. 

      1,500,000

  • 18. 
    Congo Grill operates a chain of seafood restaurants. On January 1, 2009, Congo Grill determined that it will need to purchase 100,000 kilos of tuna fish on January 1, 2010. Because of the volatile fluctuation in the price of tuna fish, on January 1, 2009, Congo negotiated a forward contract with a reputable financial institution for Congo Grill to purchase 100,000 kilos of tuna fish in January 1, 2010 at a price of P8,000,000 of P80 per kilo. This forward contract was designated as a cash flow hedge.On December 31, 2009 and January 1, 2010, the market price of tuna fish per kilo is P75. The appropriate discount rate is 6% and the present value of 1 at 6% for one period is .943. Congo Grill uses the perpetual system.Congo Grill shall recognize a derivative liability on December 31, 2007 at:
    • A. 

      0

    • B. 

      250,000

    • C. 

      471,500

    • D. 

      500,000

  • 19. 
    Chocolate Company operates a seafood restaurant. On October 1, 2009, Chocolate determined that it will need to purchase 50,000 kilos of deluxe fish on March 1, 2010. Because of the volatile fluctuation in the price of deluxe fish, on October 1, 2009, Chocolate negotiated a forward contract with a reputable bank for Chocolate to purchase 50,000 kilos of deluxe fish on March 1, 2010 at a price of P50 per kilo or P2,500,000. This forward contract was designated as a cash flow hedge.The derivative forward contract provides that if the market price of deluxe fish on March 1, 2010 is more than P50, the difference is paid by the bank to Chocolate. On the other hand, if the market price on March 1, 2010 is less than P50, Chocolate will pay the difference to the bank.On December 31, 2009, the market price per kilo P60 and on March 1, 2010, the market price is .93.What is the fair value of the derivative asset or liability on December 31, 2009?
    • A. 

      500,000 asset

    • B. 

      500,000 liability

    • C. 

      465,000 asset

    • D. 

      465,000 liability