Exam 7: Financial Assets

Which item is an example of a real asset?

Which statement best describes a held-for-trading instrument?

Which statement is correct about non-strategic financial assets ?

What is the meaning of "significant influence"?

Willow Corp. is a real estate developer with its headquarters in Burlington, Ontario. As a result of recent increases in land prices, Willow has accumulated a substantial amount of excess cash. It is looking to invest in a building supply company, but has not yet found a suitable company. To earn a reasonable return and to minimize risk, Willow invests its excess cash in common shares of large, stable corporations. 1. On Jan 1, 2011, Willow paid $1,080,000 to purchase 120,000 common shares of North Line. 2. On December 27, 2011, North Line declared and paid a dividend of $0.25 per common share. 3. On December 31, 2011, the market value of the common shares was $1,200,000. 4. On June 30, 2012, Willow sold the common shares for $1,620,000. Required: Using the following table, indicate the amounts to be reported in the balance sheet, through profit or loss, and through other comprehensive income for 2011 and 2012 under two scenarios: a. Willow designates the common shares as an available-for-sale (AFS)investment. b. Willow designates the common shares as a held-for-trading (HFT)investment.

Tingalo Inc. purchased three equity investments during the year ended December 31, 2012. 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.

What factor(s)differentiate a held-to-maturity investment from a "loan or receivable"?

Explain the nature of and the appropriate accounting treatment for held-to-maturity securities, and loans and receivables.

Which statement is not correct?

ACE Inc has the following investments at December 31, 2012: If ACE classifies its investment in DEF as held for trading, what amount will be reported in income for the three months ended December 31, 2012?

On January 25, 2012, Mulroney Ltd. purchased 100 common shares of RBC (Royal Bank of Canada)for $40 each. During the remainder of 2012, Mulroney received $2.10 per share in dividends and RBC's earnings per share were $5.50. The closing price of the shares on the fiscal year-end date of December 31, 2012 was $41. Required: Assume that Mulroney classifies the investment as available for sale. a. At what value should Mulroney report the RBC shares on its December 31, 2012 balance sheet? b. How much income should Mulroney report in 2011 in relation to these shares? c. How much other comprehensive income (OCI)should Mulroney report in 2012 in relation to these shares?

Which statement is correct about a held-for-trading investment?

Amacon Corporation has the following investments at December 31, 2012: If Amacon classifies its investment in DEF as available for sale, what amount will be reported in other comprehensive income at December 31, 2012?

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.

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. Fill in the attached table assuming a. No trading intention b. Intention to hold

On January 25, 2012, Harper Ltd. purchased 2,500 common shares of RBC (Royal Bank of Canada)for $10 each. During the remainder of 2012, 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, 2012 was $14. Required: Assume that Harper classified the investment as held for trading. a. At what value should the company report the RBC shares on its December 31, 2012 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?

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 of the following is correct about joint operations?

Satellite Corporation has the following investments at December 31, 2012: If Satellite classifies its investment in Davenport as available for sale, what amount will be reported for the investment at September 30, 2012?

Explain the meaning of the "effective interest method."