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

Fiesta Corp. purchases a $100,000 face value bond which matures in two years. The coupon rate is 6% and the market rate is 7%. How much premium or discount will be amortized in the first year?

Accepted Answer

A) $873.44 
B) $1,808.00 
C) $6,000.00 
D) $6,873.44 
A) $873.44 
B) $1,808.00 
C) $6,000.00 
D) $6,873.44

Question 3

Use the following chart to explain the difference in accounting between IAS 39 and IFRS 9 for non-strategic financial assets

Accepted Answer

The answer of Use the following chart to explain the...

Question 4

Other comprehensive income includes which of the following?

Accepted Answer

A) Unrealized holding losses on available-for-sale investments. 
B) Unrealized holding losses on held-to-maturity investments. 
C) Unrealized holding gains on held-for-trading investments. 
D) Only realized gains and losses on investments. 
A) Unrealized holding losses on available-for-sale investments. 
B) Unrealized holding losses on held-to-maturity investments. 
C) Unrealized holding gains on held-for-trading investments. 
D) Only realized gains and losses on investments.

Question 5

What should a debt instrument be classified as when there is no intention to trade it?

Accepted Answer

A) Held to maturity. 
B) Available for sale. 
C) Loans and receivables. 
D) Held for trading. 
A) Held to maturity. 
B) Available for sale. 
C) Loans and receivables. 
D) Held for trading.

Question 6

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 7

Explain the nature of and the impact on the balance sheet and the income statement of held-to maturity securities, and loans and receivables.

Accepted Answer

Held-to-maturity financial assets are de

Question 8

On January 1, 2013, a company pays $100,000 to purchase 100 Government of Canada bonds that have a maturity date of December 31, 2017 and an interest rate of 5%. At December 31, 2013, the bonds had a quoted price of $1,022 per bond. Assume that 45 of these bonds are sold on June 30, 2014 for $1,100 per bond plus accrued interest. Determine the gain or loss that would be recorded in 2014 assuming:
a. Intention to trade
b. Intention to hold

Accepted Answer

Gain/loss
Proceeds including interest =

Question 9

On January 1, 2012, CC Company acquired 60,000 shares, representing 20% of the outstanding shares of VV Limited, at $25 per share. On July 31, 2012, VV declared and paid a dividend of $3 per share. VV's net income for 2012 was $1,000,000. On December 31, 2012, 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 2012 if the investment is considered to be (a)available for sale, (b)held for trading, or (c)an associate.

Accepted Answer

The answer of On January 1, 2012, CC Company acquired...

Question 10

Which item is an example of real property?

Accepted Answer

A) Land. 
B) Equipment. 
C) Inventory. 
D) Accounts receivable. 
A) Land. 
B) Equipment. 
C) Inventory. 
D) Accounts receivable.

Question 11

On January 1, 2012, the Polka Dot Company acquired a $20 million face value bond that has an 11% coupon rate (paying interest annually on December 31). The bond matures on December 31, 2017. On January 1, 2012 the market yield for bonds of equivalent risk and maturity was 9%.
Required:
a. How much did Polka Dot pay for this bond on January 1, 2012?
b. On December 31, 2012, the market yield for bonds of equivalent risk and maturity is 10%. What would be the market value of this bond on December 31, 2012 immediately after the coupon payment?
c. On December 31, 2013, the market yield for bonds of equivalent risk and maturity is 11%. What would be the market value of this bond on December 31, 2013 immediately after the coupon payment?
d. Assume each of three scenarios: the bond is to be (i)held to maturity, (ii)available for sale, or (iii)held for trading:
•How much would the balance sheet value of this bond be on December 31, 2012 and December 31, 2013?
•How much income would be reported in 2012 and 2013 for this bond?
•How much would other comprehensive income (OCI)and accumulated OCI be for fiscal years 2012 and 2013?

Accepted Answer

a. Amount required to purchase bonds $21

Question 12

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

Accepted Answer

a. This is a premium bond beca

Question 13

Star Corp. purchases a $100,000 face value bond which matures in two years. The coupon rate is 6% and the market rate is 5%. How much is the premium or discount (rounded)?

Accepted Answer

A) $1,859 premium 
B) $1,850 discount 
C) $100,000 
D) $101,859 
A) $1,859 premium 
B) $1,850 discount 
C) $100,000 
D) $101,859

Question 14

Explain the nature of and the appropriate accounting treatment for investments in subsidiaries, joint ventures, and associates.

Accepted Answer

When an enterprise has control, joint co

Question 15

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?

Accepted Answer

There is no single measurement basis tha

Question 16

Which statement is correct about non-strategic investments?

Accepted Answer

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

Question 17

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 methods for equity investments that are held for trading or available for sale.
b. Explain, for investments in debt securities, why the amortized cost method is more appropriate for held-to-maturity investments, but one of the fair value methods is more appropriate for held-for-trading or available-for-sale securities.
c. Explain why it is appropriate for changes in fair value to flow through income when the investment is classified as held for trading, but the same changes in fair value flow through other comprehensive income when the investment is classified as available for sale.

Accepted Answer

a. There are three reasons. First, the t

Question 18

Explain the nature of and the impact on the balance sheet and the income statement of held-for-trading securities and available-for-sale securities.

Accepted Answer

Held-for-trading financial assets are th

Question 19

Based on the following information, what amount will be presented for "investment in investee" on the consolidated balance sheet of Spenser for its wholly owned subsidiary?

Accepted Answer

A) $0 
B) $200 
C) $300 
D) $600 
A) $0 
B) $200 
C) $300 
D) $600

Question 20

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.

Which statement is correct about a financial instrument?

Fiesta Corp. purchases a $100,000 face value bond which matures in two years. The coupon rate is 6% and the market rate is 7%. How much premium or discount will be amortized in the first year?

Use the following chart to explain the difference in accounting between IAS 39 and IFRS 9 for non-strategic financial assets

Other comprehensive income includes which of the following?

What should a debt instrument be classified as when there is no intention to trade it?

What is an "associate"?

Explain the nature of and the impact on the balance sheet and the income statement of held-to maturity securities, and loans and receivables.

Which item is an example of real property?

Star Corp. purchases a $100,000 face value bond which matures in two years. The coupon rate is 6% and the market rate is 5%. How much is the premium or discount (rounded)?

Explain the nature of and the appropriate accounting treatment for investments in subsidiaries, joint ventures, and associates.

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?

Which statement is correct about non-strategic investments?

Explain the nature of and the impact on the balance sheet and the income statement of held-for-trading securities and available-for-sale securities.

Based on the following information, what amount will be presented for "investment in investee" on the consolidated balance sheet of Spenser for its wholly owned subsidiary?

Which statement is correct about an equity instrument?

Fundamentals of Financial Accounting Theory

Conceptual Frameworks for Financial Reporting

Accrual Accounting

Revenue 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?

Fiesta Corp. purchases a $100,000 face value bond which matures in two years. The coupon rate is 6% and the market rate is 7%. How much premium or discount will be amortized in the first year?

Use the following chart to explain the difference in accounting between IAS 39 and IFRS 9 for non-strategic financial assets

Other comprehensive income includes which of the following?

What should a debt instrument be classified as when there is no intention to trade it?

What is an "associate"?

Explain the nature of and the impact on the balance sheet and the income statement of held-to maturity securities, and loans and receivables.

Which item is an example of real property?

Star Corp. purchases a $100,000 face value bond which matures in two years. The coupon rate is 6% and the market rate is 5%. How much is the premium or discount (rounded)?

Explain the nature of and the appropriate accounting treatment for investments in subsidiaries, joint ventures, and associates.

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?

Which statement is correct about non-strategic investments?

Explain the nature of and the impact on the balance sheet and the income statement of held-for-trading securities and available-for-sale securities.

Based on the following information, what amount will be presented for "investment in investee" on the consolidated balance sheet of Spenser for its wholly owned subsidiary?

Which statement is correct about an equity instrument?

Fundamentals of Financial Accounting Theory

Conceptual Frameworks for Financial Reporting

Accrual Accounting

Revenue 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