Question 1

Which statement is correct about a financial instrument?

Accepted Answer

A) An arrangement where one party has the power to participate in the financial and operating policy decisions of another entity. 
B) An arrangement where one entity governs the financial and operating policies about another entity. 
C) A contractual arrangement whereby two or more parties share control over an economic activity and all strategic decisions requires unanimous consent by all parties. 
D) An arrangement that gives rise to a financial asset for one entity and a financial liability or equity instrument for another entity. 
A) An arrangement where one party has the power to participate in the financial and operating policy decisions of another entity. 
B) An arrangement where one entity governs the financial and operating policies about another entity. 
C) A contractual arrangement whereby two or more parties share control over an economic activity and all strategic decisions requires unanimous consent by all parties. 
D) An arrangement that gives rise to a financial asset for one entity and a financial liability or equity instrument for another entity.

Question 2

On January 1,2015,Forrest Marine Supplies purchased a Government of Canada bond at par for $8,000.The bond has an interest rate of 5% and matures in three years.By December 31,2015,market interest rates had increased such that the fair value of the bond decreased to $7,200.The fair value of the bond decreased further to $7,100 on December 31,2016 (two years after purchase).
Required:
Assume that Forrest classifies the investment at fair value through OCI.
a.At what value should Forrest report this bond on its December 31,2015 balance sheet?
b.How much income or loss should Forrest report in 2015 in relation to this bond?
c.How much other comprehensive income (OCI)should Forrest report for 2015 in relation to this bond?
d.How much OCI (loss)should Forrest report for 2016 in relation to this bond?
e.How much is accumulated OCI on the balance sheet at December 31,2016?

Accepted Answer

a.Forrest should report the at fair valu

Question 3

Which statement is not correct about strategic investments?

Accepted Answer

A) Proportionate consolidation is used for joint ventures because of the presence of joint control. 
B) Proportionate share of the investee's assets is included in the joint venturer's balance sheet. 
C) Consolidation effectively results in two legal entities being reported as one economic unit. 
D) The fair value through profit or loss method is used for strategic investments. 
A) Proportionate consolidation is used for joint ventures because of the presence of joint control. 
B) Proportionate share of the investee's assets is included in the joint venturer's balance sheet. 
C) Consolidation effectively results in two legal entities being reported as one economic unit. 
D) The fair value through profit or loss method is used for strategic investments.

Question 4

Fish Corp.purchases a $500,000 face value bond which matures in two years.The coupon rate is 6% and the market rate is 7%.What is the premium or discount?

Accepted Answer

A) $0 premium/discount. 
B) $9,039.40 discount. 
C) $9,039.40 premium. 
D) $500,000 discount. 
A) $0 premium/discount. 
B) $9,039.40 discount. 
C) $9,039.40 premium. 
D) $500,000 discount.

Question 5

Which statement is not correct about the equity method?

Accepted Answer

A) The investment account on the balance sheet equals the original cost plus the investor's share of the investee's post-acquisition changes in net assets. 
B) This method results in reflecting two legal entities as one economic unit for financial reporting purposes. 
C) Income is recognized equal to the investor's share of the investee's net income. 
D) Dividends from the investee are deducted from the investor's investment account. 
A) The investment account on the balance sheet equals the original cost plus the investor's share of the investee's post-acquisition changes in net assets. 
B) This method results in reflecting two legal entities as one economic unit for financial reporting purposes. 
C) Income is recognized equal to the investor's share of the investee's net income. 
D) Dividends from the investee are deducted from the investor's investment account.

Question 6

For each of the following financial asset classifications shown in the left column,identify the combinations of (i)the type of financial instrument in the middle column that can be put into that classification and (ii)the business model that would lead to that classification.

Accepted Answer

The answer of For each of the following financial asset...

Question 7

Which statement is correct about non-strategic investments?

Accepted Answer

A) IFRS carries FVOCI investments at fair value with only unrealized losses going to net income. 
B) ASPE carries FVOCI investments at fair value with only unrealized losses going to net income. 
C) IFRS carries FVOCI investments at fair value with unrealized gains and losses going to OCI. 
D) ASPE carries FVOCI investments at fair value with unrealized gains and losses going to OCI. 
A) IFRS carries FVOCI investments at fair value with only unrealized losses going to net income. 
B) ASPE carries FVOCI investments at fair value with only unrealized losses going to net income. 
C) IFRS carries FVOCI investments at fair value with unrealized gains and losses going to OCI. 
D) ASPE carries FVOCI investments at fair value with unrealized gains and losses going to OCI.

Question 8

Which statement about investments is not correct?

Accepted Answer

A) An at fair value through profit or loss investment is a non-strategic investment. 
B) An investment in an associate is a strategic investment. 
C) An at fair value through OCI investment is a strategic investment. 
D) An investment for which the business model is to collect the contractual cash flows of principal and interest is a non-strategic investment. 
A) An at fair value through profit or loss investment is a non-strategic investment. 
B) An investment in an associate is a strategic investment. 
C) An at fair value through OCI investment is a strategic investment. 
D) An investment for which the business model is to collect the contractual cash flows of principal and interest is a non-strategic investment.

Question 9

Which statement is correct about an equity instrument?

Accepted Answer

A) A contract whose value changes according to a specified variable,requires little or no initial investment and is settled at a future date. 
B) A contract that gives the holder the residual interest in an entity after deducting all of its liabilities. 
C) Any contract that entitles the holder to joint interest in an entity after deducting all of its liabilities,and is settled at a future date. 
D) Any contract that gives rise to a financial asset for one entity and a financial liability or equity instrument for another entity. 
A) A contract whose value changes according to a specified variable,requires little or no initial investment and is settled at a future date. 
B) A contract that gives the holder the residual interest in an entity after deducting all of its liabilities. 
C) Any contract that entitles the holder to joint interest in an entity after deducting all of its liabilities,and is settled at a future date. 
D) Any contract that gives rise to a financial asset for one entity and a financial liability or equity instrument for another entity.

Question 10

A bond has a maturity value of $300,000 payable in 4 years.These bonds have a 7% coupon rate payable semi-annually,and the market yield was 4% when the bonds were purchased.How much premium or discount will be recorded upon purchase (rounded)?

Accepted Answer

A) $32,668 premium. 
B) $32,668 discount. 
C) $32,965 discount. 
D) $32,965 premium. 
A) $32,668 premium. 
B) $32,668 discount. 
C) $32,965 discount. 
D) $32,965 premium.

Question 11

Which statement is not correct about "control"?

Accepted Answer

A) Control is presumed when an entity has more than 50% of the voting power of the investee. 
B) Having control allows the entity to direct the strategic operations of the investee. 
C) Control is presumed when an entity owns more than 50% of the investee. 
D) Consolidation is used when an entity has control over the investee. 
A) Control is presumed when an entity has more than 50% of the voting power of the investee. 
B) Having control allows the entity to direct the strategic operations of the investee. 
C) Control is presumed when an entity owns more than 50% of the investee. 
D) Consolidation is used when an entity has control over the investee.

Question 12

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

Accepted Answer

A) $100 
B) $300 
C) $600 
D) $700 
A) $100 
B) $300 
C) $600 
D) $700

Question 13

What is an "associate"?

Accepted Answer

A) An entity where unanimous consent over decisions is required by the owners. 
B) An entity where the investor can exercise unilateral control over the decisions of the investee. 
C) An entity where the investor has the ability to participate in decisions affecting the investee. 
D) An entity that cannot sell shares to the public or issue debt in the marketplace. 
A) An entity where unanimous consent over decisions is required by the owners. 
B) An entity where the investor can exercise unilateral control over the decisions of the investee. 
C) An entity where the investor has the ability to participate in decisions affecting the investee. 
D) An entity that cannot sell shares to the public or issue debt in the marketplace.

Question 14

Elyse Inc.made the following investments during its 2016 fiscal year.
a.The company places $3,000 in a 8-month term deposit with its bank.
b.The company purchases from its broker a call option on 2,500 shares of BMO Financial,a publicly traded company,for $5,500,in anticipation of an increase in the stock price.
c.The company buys 30% of the outstanding shares of NEXT Corp.The purchase was made in anticipation of a bid by BEFORE Corp.to purchase all of the shares of NEXT within the next nine months.
d.The company buys $35,000 of shares in a publicly traded corporation with a market capitalization of more than $20 billion.
Required:
Identify how the company should categorize the above financial assets.Briefly explain the reason for the classification.

Accepted Answer

a.Amortized cost-this is a debt instrume

Question 15

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

Accepted Answer

A) $0 
B) $160 
C) $400 
D) $710 
A) $0 
B) $160 
C) $400 
D) $710

Question 16

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 rate of 6%.At December 31,2017,the bonds had a quoted price of $1,015 per bond.
Fill in the attached table assuming
a.Classified at fair value through other comprehensive income
b.Classified at amortized cost

Accepted Answer

The answer of On January 1,2017,a company paid $100,000 to...

Question 17

Which statement is not correct?

Accepted Answer

A) At fair value through profit or loss investments are carried at fair value. 
B) At fair value through OCI investments are carried at fair value. 
C) Amortized cost investments are carried at fair value. 
D) Investments in equity instruments cannot be classified at fair value through OCI. 
A) At fair value through profit or loss investments are carried at fair value. 
B) At fair value through OCI investments are carried at fair value. 
C) Amortized cost investments are carried at fair value. 
D) Investments in equity instruments cannot be classified at fair value through OCI.

Question 18

What is the meaning of "significant influence"?

Accepted Answer

A) The power to participate in the financial and operating policy decisions of the investee. 
B) The power to govern the financial and operating policies of an entity. 
C) The power to share in strategic decisions affecting an entity. 
D) The power to sell the shares of an entity. 
A) The power to participate in the financial and operating policy decisions of the investee. 
B) The power to govern the financial and operating policies of an entity. 
C) The power to share in strategic decisions affecting an entity. 
D) The power to sell the shares of an entity.

Question 19

Satellite Corporation has the following investments at December 31,2016:
 
If Satellite classifies its investment in Davenport at fair value through profit or loss,what amount will be reported for the investment at September 30,2016?

Accepted Answer

A) $1,000 
B) $18,000 
C) $19,000 
D) $20,000 
A) $1,000 
B) $18,000 
C) $19,000 
D) $20,000

Question 20

Bountiful Corporation has the following investment portfolio at December 31,2016:
   
Required:
a)Explain how each investment should be classified for financial reporting purposes and the accounting method that should be used.
b)Prepare all of the required journal entries using the recommendations you have provided in (a)above.Round all values to nearest dollar.
c)Fill in the following chart:

Accepted Answer

a)Accounting classification an

Which statement is correct about a financial instrument?

Which statement is not correct about strategic investments?

Fish Corp.purchases a $500,000 face value bond which matures in two years.The coupon rate is 6% and the market rate is 7%.What is the premium or discount?

Which statement is not correct about the equity method?

For each of the following financial asset classifications shown in the left column,identify the combinations of (i)the type of financial instrument in the middle column that can be put into that classification and (ii)the business model that would lead to that classification.

Which statement is correct about non-strategic investments?

Which statement about investments is not correct?

Which statement is correct about an equity instrument?

A bond has a maturity value of $300,000 payable in 4 years.These bonds have a 7% coupon rate payable semi-annually,and the market yield was 4% when the bonds were purchased.How much premium or discount will be recorded upon purchase (rounded)?

Which statement is not correct about "control"?

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

What is an "associate"?

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

Which statement is not correct?

What is the meaning of "significant influence"?

Satellite Corporation has the following investments at December 31,2016: If Satellite classifies its investment in Davenport at fair value through profit or loss,what amount will be reported for the investment at September 30,2016?

Fundamentals of Financial Accounting Theory

Conceptual Frameworks for Financial Reporting

Accrual Accounting

Revenue and Recognition

Cash and Receivables

Inventories

Property, plant and Equipment

Intangible Assets, goodwill, mineral Resources, and Government Grants

Applications of Fair Value to Non-Current Assets

Filters

Exam 7: Financial Assets

Which statement is correct about a financial instrument?

Which statement is not correct about strategic investments?

Fish Corp.purchases a $500,000 face value bond which matures in two years.The coupon rate is 6% and the market rate is 7%.What is the premium or discount?

Which statement is not correct about the equity method?

For each of the following financial asset classifications shown in the left column,identify the combinations of (i)the type of financial instrument in the middle column that can be put into that classification and (ii)the business model that would lead to that classification.

Which statement is correct about non-strategic investments?

Which statement about investments is not correct?

Which statement is correct about an equity instrument?

A bond has a maturity value of $300,000 payable in 4 years.These bonds have a 7% coupon rate payable semi-annually,and the market yield was 4% when the bonds were purchased.How much premium or discount will be recorded upon purchase (rounded)?

Which statement is not correct about "control"?

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

What is an "associate"?

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

Which statement is not correct?

What is the meaning of "significant influence"?

Satellite Corporation has the following investments at December 31,2016: If Satellite classifies its investment in Davenport at fair value through profit or loss,what amount will be reported for the investment at September 30,2016?

Fundamentals of Financial Accounting Theory

Conceptual Frameworks for Financial Reporting

Accrual Accounting

Revenue and Recognition

Cash and Receivables

Inventories

Property, plant and Equipment

Intangible Assets, goodwill, mineral Resources, and Government Grants

Applications of Fair Value to Non-Current Assets

Filters