Exam 4: Statements of Financial Position and Changes in Equity; Disclosure Notes

JMR Ltd.purchased $100,000 of bonds convertible into common shares at a price of $50.The bonds have a maturity date of 20x4.On the maturity date,the market price of the common shares is $55.Assuming that JMR Ltd.is a knowledgeable investor,what will the company do?

Futures contracts are traded on public exchanges while forward contracts are not.

When preferred shares are classified as debt,their dividends are deducted from Retained Earnings,thus bypassing earnings.

When a bond matures,an investor will convert if the market price of the convertible bond is higher than the conversion price of the bond.

If cash payments to investors are dependent on one or more future events,the instrument in question would be considered equity.

DWWR Ltd.issues a $150,000,6%,five-year debenture at par,repayable at maturity in common shares at DWWR's option.Interest is repayable annually in cash.Prepare the journal entry at issuance.

Match the brief description with the terms.

What are hybrid securities?

On January 1^st,20x9,GHI Inc.granted options to its twenty employees allowing for the purchase of 12,000 shares at $5 per share.The options vest evenly over the 3 years following the date of issue.The options are only exercisable as of December 31^st,20x11.The fair value of these options (using an Option Pricing model)is $30,000. Part A: Assume that all options have vested but that none were exercised on December 31^st,20x11.Provide the required journal entry. Part B: Assume that all options have vested and all were exercised on December 31^st,20x11.Provide the required journal entry. Part C: Suppose that some of the options were forfeited by the employees.Actual and estimated forfeiture data are provided in the table below: Provide the required journal entries to record the accrual of compensation expense and the exercise of the options as per IFRS. Part D: Suppose that some of the options were forfeited by the employees.Actual and estimated forfeiture data are provided in the table below:

If a financial instrument is determined to be in substance equity,what are the reporting implications?

On January 1^st,2014 ABC Inc.had invoiced a client in New York for $10,000 US for services rendered that day.ABC did not hedge this receivable.The receivable is due in 60 days.On January 1^st,2014,the spot rate was $1US = $1.02CDN.On January 31^st,2014,the spot rate was $1US = $1.05CDN.What is the effect of the above information on ABC's January financial statements?

What is a "poison pill"?

JMR Ltd.purchased $100,000 of bonds convertible into common shares at a price of $50.The bonds have a maturity date of 20x4.On the maturity date,the market price of the common shares is $45.Assuming that JMR Ltd.is a knowledgeable investor,what will the company do?

Compensatory stock options were granted to executives on January 1,20x3,with a measurement date of June 30,20x4,for services to be rendered during 20x3,20x4,and 20x5.The excess of the market value of the shares over the option price at the measurement date was reasonably estimable at the date of grant.The stock option was exercised on October 31,20x5.Compensation expense should be recognized in the income statement in which of the following years?

If a financial instrument is an equity instrument in substance,but its legal form is debt,any periodic payments made to investors will be accrued on the company's financial statements as interest expense.

The conversion option attached to convertible bonds,which have a floating conversion price per share,has an intrinsic value which is based on the fair market value of the shares at the time.

JMR Ltd.sold $350,000 of 5% (annual interest payments)convertible 5 year bonds at 101.The market interest rate on the sale date was 7%.Each $1,000 bond was convertible into 20 shares of KER Ltd.no-par value common shares on any interest date after the end of the first year from the date of issuance.Using IFRS,prepare the journal entry at issuance using the incremental method.

The accounting classification of a financial instrument is determined by its tax status.

$10,000 (face value)of bonds was sold with a total of 200 detachable stock warrants attached.Each warrant conveys the right to purchase one common share at a specified price during a specified time period.The market immediately valued the warrants at $2 each.The issue sold for 102.The entry to record the bond issuance would include:

Which of the following is an example of a financial asset?