Exam 7: Financial Assets

Which of the following is correct about joint operations?

For financial reporting purposes,financial assets can be put into one of seven categories: subsidiaries,joint ventures,associates,at fair value through profit or loss,at fair value through OCI,amortized cost,and joint operations.For each of the following items,identify the possible categories into which it can be placed.More than one category is possible for an item.

Amacon Corporation has the following investments at December 31,2016: If Amacon classifies its investment in DEF at fair value through profit or loss,what amount will be reported in other comprehensive income at December 31,2016?

What is a "joint arrangement"?

Invest Up Hardware operates a chain of hardware stores.Recent operations have been stable and profitable,resulting in a significant amount of cash inflows.During the past fiscal year ended December 31,the company made a number of investments,as described below. a.Invest Up bought 30,000 shares of Machine Mart,a supplier of equipment for construction and renovations.With in-depth knowledge of the hardware retailing business,Invest Up's management believes that Machine Mart's shares are undervalued and that the company could make a quick profit selling the shares within the next 12 months.Invest Up purchased the shares at $18 each,and received $0.30 per share dividends during the year.The shares traded at $29 at the fiscal year-end. b.The company purchased 12,000 units of a mutual fund which cost $28 each.Management had no specific trading intentions for this investment;rather,it was a means of parking excess cash.At the end of the year,the units had a quoted market value of $24. c.At the beginning of the year,Invest Up bought 25% of the common shares in Builder Bee,one of its smaller suppliers,for $6 million.These shares had a fair value of $6.6 million at the end of the year.During the year,Builder Bee reported net income of $1,500,000 and paid total dividends of $10,000 Required: Determine how Invest Up should report the above investments in its financial statements.Include both the effects on the balance sheet and the statement of comprehensive income.

Simply purchases a $200,000 face value bond which matures in two years.The coupon rate is 6% and the market rate is 5%.How much premium or discount will be amortized in the first year,if any?

Victoria purchases a hotel with 100 similar rooms.To help finance this purchase,Victoria sells these rooms to individual investors for $200,000 each.An investor who owns a single room receives 55% of 1% of the revenue of the hotel (i.e. ,0.55%),while the hotel retains the other 0.45%.An investor who wishes to liquidate his/her investment may sell his/her room back to Victoria for the original $200,000,but cannot otherwise sell the room to other parties. Identify all the financial assets involved in the above situation.

What factor is important in classifying an investment at fair value through profit or loss?

Describe the single most important characteristic of a financial asset that distinguishes it from a real asset.

Based on the following information,what amount will be presented for current assets on the consolidated balance sheet of Investor for its wholly owned subsidiary?

Amacon Corporation has the following investments at December 31,2016: If Amacon classifies its investment in DEF at fair value through OCI,what amount will be reported in other comprehensive income at December 31,2016?

Which statement is correct about non-strategic financial assets?

Fisher Corporation has the following investments at September 30,2016: What method of accounting will Fisher use to account for its investment in ABC,if this investment is held for trading purposes?

Which statement is correct about subsidiaries?

Kings has a 40% joint operation interest in Fisher.Based on the following information,what amount will be presented for "revenues" on Kings' proportionately consolidated income statement?

Which item is an example of a real asset?

On January 25,2016,Harper Ltd.purchased 2,500 common shares of RBC (Royal Bank of Canada)for $10 each.During the remainder of 2016,Harper received $2.75 per share in dividends and RBC's earnings per share were $5.25.The closing price of the shares on the fiscal year-end date of December 31,2016 was $14. Required: Assume that Harper classified the investment at fair value through profit or loss. a.At what value should the company report the RBC shares on its December 31,2016 balance sheet? b.How much income should the company report in relation to these shares? c.How much other comprehensive income (OCl)should Harper report in relation to these shares?

What is a "subsidiary"?

Mirvish Limited invests in short term investments.The following information is available about its investments at December 31,2016: If Mirvish accounts for these at fair value through OCI investments,what entry is necessary for fiscal 2016?

Satellite Corporation has the following investments at December 31,2016: If Satellite irrevocably elected to classify its investment in Davenport at fair value through OCI,what amount will be reported for the investment at September 30,2016?