Exam 7: Financial Assets

On January 1,2016,CC Company acquired 60,000 shares of RR Limited at $5 per share,representing 20% of RR's outstanding voting shares.On July 31,2016,RR declared and paid a dividend of $1 per share.RR's net income for 2016 was $2,800,000.On December 31,2016,the shares of RR were trading on the Toronto Stock Exchange at $16 per share. Required: Provide the journal entries on CC's books relating to its investment in RR,assuming that CC classifies RR as an associate.

Star Corp.purchases a $100,000 face value bond which matures in two years.The coupon rate is 6% and the market rate is 7%.At what amount will the bond be recorded (rounded)?

Philips has a 50% joint operation interest in Josef.Based on the following information,what amount will be presented for net income on Philips' proportionately consolidated income statement?

Which statement is not correct about "associates"?

Other comprehensive income includes which of the following?

Explain the nature of and the appropriate accounting treatment for at fair value through profit or loss securities and at fair value through OCI securities.

What is the meaning of "joint control"?

Which statement is correct about an associate?

On January 1,2017,Ella Ltd.purchased 25% of the common shares of JB Inc.for $2,200,000.In 2017,JB reported net income of $280,000 and paid dividends of $100,000. Required: a.Which of the following conditions must be met for Ella to use the equity method to report its investment in JB? i.Ella owns at least 20% of the voting shares of JB. ii.Ella has control over JB. iii.Ella has a significant interest in JB. iv.Ella is able to exercise significant influence over JB. b.How much income would be reported by Ella in 2017 related to its investment in JB under the equity method?

Safe Investment Company (SIC)began operations on January 1,2016.It acquired the following investments: SIC earned interest of $12,000 during 2016.Dividends of $16,000 were declared on the shares it owned during 2016.Of that amount,$9,000 was received in December 2016 and $7,000 was received in January 2017 (note that the ex-dividend date for these shares was prior to the end of the year).At what value would SIC's bonds (which were purchased at par)be recorded at in the balance sheet on December 31,2016?

On January 1,2017,a company paid $100,000 to purchase 100 Government of Canada bonds that mature on December 31,2021 and pay interest at 5%.At December 31,2017,the bonds had a quoted price of $1,022 per bond. Fill in the attached table assuming a.Classified at fair value through profit or loss b.Classified at fair value through other comprehensive income c.Classified at amortized cost

Which statement is correct about debt instruments?

Classify each of the following items into one of the seven categories of financial assets relevant for financial reporting purposes.Select the category that best suits the situation given.

McGyer Limited invests its excess cash in short term investments.The following information is available about its investments at December 31,2016: If McGyer accounts for these at fair value through profit or loss investments,what is the amount of gain/loss to be recorded in fiscal 2016?

Explain the difference between a joint arrangement,joint control,joint operation and a joint venture.

On January 1,2017,a company pays $100,000 to purchase 100 Government of Canada bonds that have a maturity date of December 31,2021 and an interest rate of 5%.At December 31,2017,the bonds had a quoted price of $1,022 per bond.Assume that 45 of these bonds are sold on June 30,2018 for $1,100 per bond plus accrued interest.Determine the gain or loss that would be recorded in 2018 assuming: a.Classified at fair value through profit or loss b.Classified at amortized cost

On January 1,2016,CC Company acquired 60,000 shares,representing 20% of the outstanding shares of VV Limited,at $25 per share.On July 31,2016,VV declared and paid a dividend of $3 per share.VV's net income for 2016 was $1,000,000.On December 31,2016,the shares of VV were trading on the Toronto Stock Exchange at $31 per share. Required: CC is not sure how to report its investment in VV shares.Using the format provided,indicate the amounts that would appear on the balance sheet and the statement of comprehensive income for 2016 if the investment is considered to be (a)at fair value through OCI, (b)at fair value through profit or loss,or (c)an associate.

Accounting standards provide for a variety of different measurement bases for different types of financial assets.IFRS has several measurement bases,namely: • consolidation • fair value with changes through income • proportionate consolidation • fair value with changes through other comprehensive income • equity method • amortized cost Required: a.Explain why reporting entities should,on the one hand,use consolidation,proportionate consolidation,and the equity method for investments in subsidiaries,joint ventures,and associates,but on the other hand,use the fair value method for equity investments that are at fair value through profit or loss or at fair value through OCI. b.Explain,for investments in debt securities,why measurement at amortized cost is more appropriate for debt investments for which the business model is to collect contractual cash flows,but one of the fair value methods is more appropriate for investments for which the business model includes an intent to profit from changes in value of the investment. c.Explain why it is appropriate for changes in fair value to flow through income when the investment is classified as at fair value through profit or loss,but the same changes in fair value flow through other comprehensive income when the investment is classified as at fair value through OCI.

Which item is an example of real property?

Which of the following statements is TRUE about the equity method of accounting?