Question 1

Which statement is not correct about "joint arrangements"?

Accepted Answer

A) Joint arrangements usually have a limited life and a defined set of objectives or activities. 
B) A joint arrangement is the same as a partnership for financial accounting purposes. 
C) Unanimous consent for all decisions is required of all parties. 
D) There is a contractually agreed sharing of control over economic activities. 
A) Joint arrangements usually have a limited life and a defined set of objectives or activities. 
B) A joint arrangement is the same as a partnership for financial accounting purposes. 
C) Unanimous consent for all decisions is required of all parties. 
D) There is a contractually agreed sharing of control over economic activities.

Question 2

Classify each of the following items into one of the seven categories of financial assets relevant for financial reporting purposes. Select the category that best suits the situation given.
 $\begin{array}{|l|lcc|}
\hline& \text {Financial asset category relevant for}\
&\text { financial reporting purposes}\
\hline \text {Purchase of 1000 shares of Hobster Corp, a} &  \
\text { public company with 10 million shares}\
\text { outstanding.}\
\hline \text {Investment in $ 60 \% $ of the outstanding shares of}&\ 
\text {HKY Inc. An agreement with the company's}&\
 \text {founder specifies that he retains the right to make}\ 
\text { all operating decisions for $ \mathrm{HK} $.}\
\hline \text {BEECorp. buys $ 15 \% $ of the outstanding shares of}\ 
\text {CEE Corp. After the purchase, BEE appoints its}\\
\text { chief executive officer to the board of directors of}\
\text { CEE.}\ 
\hline \text {Investment in 8,000 shares of CIBC. Management}\
 \text {believes that shares are currently underpriced.}\
\hline
\end{array}$

Accepted Answer

None

Question 3

During 2019, Farrah Ltd. purchased 4,000 shares of Rose of Sharon Corp. for $41 per share ($164,000 total). The company designated half of the shares at fair value through profit or loss and irrevocably elected to classify the remaining half of its investment at fair value through OCI. Farrah held these shares until September 2021, when it sold them for $52 per share. During these three years, Rose of Sharon paid dividends of $1 per share on July 31 each year. On Farrah's fiscal year-end (December 31), shares of Rose of Sharon closed at $51, $36, and $56 in 2019, 2020, and 2021, respectively.
Required:
Determine the amounts to be reported on Farrah's balance sheet and statement of comprehensive income with respect to the company's investment in Rose of Sharon Corp for 2019, 2020 and 2021.

Accepted Answer

None

Question 4

Fisher Corporation has the following investments at December 31, 2020:
$$\begin{array} { | l | r | r | r | r | } 
\hline & \text { Historical cost } & \begin{array} { r } 
\text { Fair value } \
\text { Sept 30, 2019 }
\end{array} & \begin{array} { r } 
\text { Fair value } \
\text { Sept 30,2020 }
\end{array} & \begin{array} { r } 
\text { Fair value } \
\text { Dec 31, }
\end{array} \
\hline \text { Shares of ABC } & 25,000 & 15,000 & 25,000 & 30,000 \
\hline \begin{array} { l } 
\text { Bonds of Brooke } \
\text { (purchased at par value) }
\end{array} & 10,000 & 12,000 & 11,000 & 12,500 \
\hline \begin{array} { l } 
\text { Shares of CooksTown } \
\text { Fisher holds 35\% of the } \
\text { outstanding voting shares of }
\end{array} & & & & \
\text { CooksTown) } & 12,000&18,000 &16,000 &16,000 \
\hline \text { Shares of Davenport } & 18,000 & 20,000 & 19,000 & 19,000 \
\hline
\end{array}$$
-Refer to the above table. 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, 2020?

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 5

Starts has a 60% joint operation interest in Fish. Based on the following information, what amount will be presented for current liabilities on Starts' proportionately consolidated balance sheet? $$\begin{array} { | l | r | r | } 
\hline & \text { Starts } & \text { Fish } \
\hline \text { Current assets } & \$ 500 & \$ 550 \
\hline \text { Long-term assets } & 300 & 50 \
\hline \text { Investment in investee } & 200 & 0 \
\hline \text { Current liabilities } & 350 & 200 \
\hline \text { Long-term liabilities } & 450 & 300 \
\hline \text { Equity } & 200 & 100 \
\hline
\end{array}$$

Accepted Answer

A) $550 
B) $470 
C) $350 
D) $200 
A) $550 
B) $470 
C) $350 
D) $200

Question 6

Fisher Corporation has the following investments at September 30, 2020: $\begin{array}{|l|r|r|r|} 
\hline & \text { Historical cost } & \begin{array}{r}
\text { Fair value } \
\text { Sept } 30,2019
\end{array} & \begin{array}{r}
\text { Fair value } \
\text { Sept 30, 2020 }
\end{array} \
\hline \text { Shares of ABC } & \$ 25,000 & \$ 15,000 & \$ 25,000 \
\hline \text { Bonds of Brooke } & 10,000 & 12,000 & 11,000 \
\hline \text { Shares of CooksTown } & 12,000 & 18,000 & 16,000 \
\hline \text { Shares of Davenport } & 18,000 & 20,000 & 19,000\
\hline 
\end{array}$
 What method of accounting will Fisher use to account for its investment in ABC, if this investment is held for trading purposes?

Accepted Answer

A) Amortized cost. 
B) Equity method. 
C) Fair value through other comprehensive income. 
D) Fair value through profit or loss. 
A) Amortized cost. 
B) Equity method. 
C) Fair value through other comprehensive income. 
D) Fair value through profit or loss.

Question 7

Which statement is correct about an at fair value through OCI investment?

Accepted Answer

A) The investment is reported at historical cost. 
B) Changes in fair value are recorded in OCI. 
C) These investments are acquired exclusively for selling in the near term. 
D) Changes in fair value are recorded in income. 
A) The investment is reported at historical cost. 
B) Changes in fair value are recorded in OCI. 
C) These investments are acquired exclusively for selling in the near term. 
D) Changes in fair value are recorded in income.

Question 8

On January 1, 2019, 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, 2019, 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, 2020 (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, 2019 balance sheet?
b. How much income or loss should Forrest report in 2019 in relation to this bond?
c. How much other comprehensive income (OCI)should Forrest report for 2019 in relation to this bond?
d. How much OCI (loss)should Forrest report for 2020 in relation to this bond?
e. How much is accumulated OCI on the balance sheet at December 31, 2020?

Accepted Answer

a. Forrest should report the at fair val

Question 9

Tingalo Inc. purchased three equity investments during the year ended December 31, 2020.
 $$\begin{array} { | l | r | r | r | } 
\hline & \text { Investment A } & \text { Investment B } & \text { Investment C } \
\hline \text { Balance sheet value, Dec } 31,2020 & \$ 420,000 & \$ 28,000 & \$ 131,000 \
\hline \text { Dividends received } & 10,000 & 4,000 & 9,000 \
\hline \text { Dividend income } & 0 & 4,000 & 9,000 \
\hline \text { Total income (loss) recognized on the } & & & \
\text { investment } & 30,000 & 4,000 & ( 5,000) \
\hline \begin{array} { l } 
\text { Accumulated OCI on unrealized } \
\text { gains/osses }
\end{array} & 0 & 8,000 \text { credit } &0 \
\hline
\end{array}$$ 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.

Accepted Answer

@#IMG-DLM& * The total income (loss)on t

Question 10

What is a financial asset?

Accepted Answer

A) An asset that has a fixed or determinable cash flow. 
B) Assets such as land and buildings that generate future cash flows. 
C) An asset arising from contractual agreements on future cash flows. 
D) An asset that does not generate future cash flows. 
A) An asset that has a fixed or determinable cash flow. 
B) Assets such as land and buildings that generate future cash flows. 
C) An asset arising from contractual agreements on future cash flows. 
D) An asset that does not generate future cash flows.

Question 11

Fisher Corporation has the following investments at September 30, 2020: $$\begin{array} { | l | r | r | r | } 
\hline & \text { Fistorical cost } & \begin{array} { r } 
\text { Fair value } \
\text { Sept } 30,2019
\end{array} & \begin{array} { r } 
\text { Fair value } \
\text { Sept } 30,2020
\end{array} \
\hline \text { Shares of ABC } & \$ 25,000 & \$ 15,000 & \$ 25,000 \
\hline \text { Bonds of Brooke } & 10,000 & 12,000 & 11,000 \
\hline \text { Shares of CooksTown (Fisher } & & & \
\text { holds 35\% of the outstanding } & & & \
\text { voting shares of CooksTown) } & 12,000 & 18,000 & 16,000 \
\hline \text { Shares of Davenport } & 18,000 & 20,000 & 19,000 \
\hline
\end{array}$$
-According to the table above.What method of accounting can Fisher not use to account for its investment in Cookstown?

Accepted Answer

A) Amortized cost. 
B) Equity method. 
C) Fair value through other comprehensive income. 
D) Fair value through profit or loss. 
A) Amortized cost. 
B) Equity method. 
C) Fair value through other comprehensive income. 
D) Fair value through profit or loss.

Question 12

Fiesta Corp. purchases a $500,000 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) $4,367.24 
B) $9,039.40 
C) $30,000.00 
D) $34,367.24 
A) $4,367.24 
B) $9,039.40 
C) $30,000.00 
D) $34,367.24

Question 13

Which statement is correct about non-strategic financial assets?

Accepted Answer

A) ASPE refers to the underlying business model when categorizing these investments. 
B) IFRS classifies these investments in accordance with legal substance. 
C) ASPE classifies these investments in accordance with their nature. 
D) The accounting is the same under ASPE and IFRS for these investments. 
A) ASPE refers to the underlying business model when categorizing these investments. 
B) IFRS classifies these investments in accordance with legal substance. 
C) ASPE classifies these investments in accordance with their nature. 
D) The accounting is the same under ASPE and IFRS for these investments.

Question 14

Nevill Corp invests in short term investments. The following information is available about its investments at December 31, 2020: $$\begin{array} { | r | r | r | } 
\hline & \text { Cost } & \text { Market } \
\hline \text { Investment 1 } & \$ 40,000 & \$ 36,000 \
\hline \text { Investment 2 } & 30,000 & 26,000 \
\hline \text { Investment 3 } & 80,000 & 84,000 \
\hline
\end{array}$$ If Nevill accounts for these at fair value through OCI investments, what is the amount of gain/loss to be recorded in fiscal 2020 comprehensive income?

Accepted Answer

A) A loss of $4,000. 
B) A gain of $4,000. 
C) A loss of $8,000. 
D) A gain of $8,000. 
A) A loss of $4,000. 
B) A gain of $4,000. 
C) A loss of $8,000. 
D) A gain of $8,000.

Question 15

On January 1, 2020, a company paid $100,000 to purchase 100 Government of Canada bonds that mature on December 31, 2024 and pay interest rate of 6%. At December 31, 2020, 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
 $$\begin{array} { | l | l | l | } 
\hline & \mathbf { a } & \mathbf { b } \
\hline \text { Financial asset category for the } & & \
\text { balance sheet } & & \
\hline \text { Accounting method that should } & & \
\hline \text { be used } & & \
\hline & & \
\hline \text { Tec } 31,2020 \text { balance sheet value } & & \
\text { for the financial asset } & & \
\hline \text { Interegt income for 2020 } & & \
\hline \text { Inrealized gain or loss on the } & & \
\text { income statement } & & \
\hline \text { Total recognized in the income } & & \
\text { statement } \
\hline \text { Jnrealized gain or loss in DCI } & & \
\hline \text { Total recognized in } \
\text { comprehensive income } & & \
\hline
\end{array}$$

Accepted Answer

The answer of On January 1, 2020, a company paid...

Question 16

Which item is an example of a financial asset?

Accepted Answer

A) Share certificate of a public company. 
B) Land. 
C) Inventory. 
D) Equipment. 
A) Share certificate of a public company. 
B) Land. 
C) Inventory. 
D) Equipment.

Question 17

How does having significant influence over an investee alleviate information asymmetry?

Accepted Answer

The ability to exert significant influen

Question 18

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? $$\begin{array} { | l | r | r | } 
\hline & \text { Investor } & \text { Investee } \
\hline \text { Current assets } & \$ 500 & \$ 550 \
\hline \text { Long-term assets } & 300 & 50 \
\hline \text { Investment in investee } & 200 & 0 \
\hline \text { Current liabilities } & 350 & 200 \
\hline \text { Long-term liabilities } & 450 & 300 \
\hline \text { Equity } & 200 & 100 \
\hline
\end{array}$$

Accepted Answer

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

Question 19

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

Accepted Answer

An amortized cost financial asset is one

Question 20

Identify whether each of the following items is a financial asset:
$$\begin{array} { | l | l | } 
\hline & \text { Financial asset? (Yes/No) } \
\hline \text { US dollars in petty cash } & \
\hline \text { Investment in 5-year bonds } & \
\hline \text { Investment in an option (derivative) } & \
\hline \text { Account receivable due in 30 days } & \
\hline \text { Investment in machinery } & \
\hline
\end{array}$$

Accepted Answer

\[\begin{array} { | l | l | } 
\hline &

Which statement is not correct about "joint arrangements"?

Which statement is correct about an at fair value through OCI investment?

What is a financial asset?

Fiesta Corp. purchases a $500,000 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?

Which statement is correct about non-strategic financial assets?

Which item is an example of a financial asset?

How does having significant influence over an investee alleviate information asymmetry?

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: Financial asset? (Yes/No) US dollars in petty cash Investment in 5-year bonds Investment in an option (derivative) Account receivable due in 30 days Investment in machinery

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 not correct about "joint arrangements"?

Which statement is correct about an at fair value through OCI investment?

What is a financial asset?

Fiesta Corp. purchases a $500,000 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?

Which statement is correct about non-strategic financial assets?

Which item is an example of a financial asset?

How does having significant influence over an investee alleviate information asymmetry?

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: Financial asset? (Yes/No) US dollars in petty cash Investment in 5-year bonds Investment in an option (derivative) Account receivable due in 30 days Investment in machinery

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