Exam 7: Financial Assets

Copi Corp.purchased a bond with a maturity value of $60,000 payable in five years.These bonds have a 7% coupon rate payable annually.Copi paid $65,195 for these bonds,giving a yield of 5%. Required: Prepare an amortization schedule that shows the amortized cost of this bond at the end of each of five years and the amount of interest income for each of those five years.

Investment Company (IC)began operations on January 1,2016.It acquired the following investments: IC 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).How much would be recorded as accumulated other comprehensive income on IC's balance sheet at December 31,2016?

Explain the nature of and the appropriate accounting treatment for investments subsequently measured at amortized cost.

Identify whether each of the following items is a financial asset:

On January 1,2017,The Freedom Company purchased a $5 million face value bond that pays interest at 7% when the market yield for bonds of equivalent risk and maturity was 5%.Interest is payable annually on December 31.The bond matures on December 31,2022. Required: a.How much did The Freedom Company pay for this bond on January 1,2017? b.On December 31,2017,the market yield for bonds of equivalent risk and maturity is 6%.What would be the market value of this bond on December 31,immediately after the coupon payment on that date? c.On December 31,2018,the market yield for bonds of equivalent risk and maturity is 7%.What would be the market value of this bond on December 31,immediately after the coupon payment on that date? d.For each of three scenarios: (i)amortized cost, (ii)FVOCI,and (iii)FVPL: i What would be the balance sheet value of this bond be on December 31,2017? ii How much income would be reported in profit or loss in 2017 for this bond? iii How much other comprehensive income would be reported in 2017 for this bond? iv How much comprehensive income would be reported in 2017 for this bond?

Explain the difference between a joint arrangement,joint control,joint operation and a joint venture.Explain how each type of investment is accounted for under IFRS.

A bond has a maturity value of $750,000 payable in 3 years.These bonds have a 5% coupon rate payable annually,and the market yield was 2% when the bonds were purchased. Required: a.Is this a discount bond or a premium bond? b.Compute the amount required to purchase this bond at the beginning of the 3-year period

How should derivatives be classified?

Explain why there is no one single measurement basis that is suitable for all financial assets.Does this mean that a company can choose any measurement base for any investment?

On January 1,2015,Anny Marine Supplies purchased a Government of Canada bond at par for $12,000.The bond has an interest rate of 7% and matures in three years.By December 31,2015,market interest rates had increased such that the fair value of the bond decreased to $11,600.The fair value of the bond decreased further to $11,200 on December 31,2016 (two years after purchase). Required: Assume that Anny classifies the investment at amortized cost. a.At what value should Anny report the bond on its December 31,2015 balance sheet? b.How much income or loss should Anny report in 2015 in relation to this bond? c.How much other comprehensive income (OCI)should Anny report in 2015 in relation to this bond?

What should an investment in a debt instrument be classified as when the business model does not include an intent to trade it?

Explain the meaning of and give an example for the following categories of financial instruments: equity,a derivative,or debt.

A bond has a maturity value of $50,000 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. Required: a.Is this a discount bond or a premium bond? b.Calculate the amount required to purchase this bond at the beginning of the 4-year period.

How would a short-term investment in bonds to earn a return on funds that would otherwise be held as cash be classified.

Which financial asset classification best describes the business model that includes acquiring portfolio investments with the intent to trade them for a profit?

Tingalo Inc.purchased three equity investments during the year ended December 31,2016. Required: a.Based on the available information,how did Tingalo classify each financial asset? b.Determine the cost of each of the three investments.If it is not possible to do so with the available information,indicate what additional information would be needed.

Which statement is correct about non-strategic financial assets?