Question 1

Which statement is not correct about non-strategic investments?

Accepted Answer

A) IFRS carries FVOCI investments at fair value. 
B) IFRS records unrealized gains and losses on FVOCI investments to OCI. 
C) ASPE records unrealized gains and losses on FVPL investments to OCI. 
D) ASPE does not have an accounting treatment for FVOCI investments. 
A) IFRS carries FVOCI investments at fair value. 
B) IFRS records unrealized gains and losses on FVOCI investments to OCI. 
C) ASPE records unrealized gains and losses on FVPL investments to OCI. 
D) ASPE does not have an accounting treatment for FVOCI investments.

Question 2

Eastern Company contributes $5 million while Western Company contributes management expertise toward the creation of a joint venture called Ying. Ying purchases a building and obtains a mortgage to finance the purchase. The joint venture renovates the building with the help of contractors, who are paid 25 days after they render their services. After completion of renovations, Ying operates the building as a hotel. It also sells some of the rooms to individual investors. As a part of the purchase of each room, an investor has rights to 30% of the revenue from the hotel room purchased, while Ying retains 70% to cover operating costs.
Identify all the financial assets involved in the above situation.

Accepted Answer

The following are the financial assets i

Question 3

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

Accepted Answer

A) Associate. 
B) Amortized cost. 
C) At fair value through other comprehensive income. 
D) At fair value through profit or loss. 
A) Associate. 
B) Amortized cost. 
C) At fair value through other comprehensive income. 
D) At fair value through profit or loss.

Question 4

Which statement is correct about joint arrangements?

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 of 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 of 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 5

On January 1, 2019, CC Company acquired 60,000 shares, representing 20% of the outstanding shares of VV Limited, at $25 per share. On July 31, 2019, VV declared and paid a dividend of $3 per share. VV's net income for 2019 was $1,000,000. On December 31, 2019, 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 2019 if the investment is considered to be (a)at fair value through OCI, (b)at fair value through profit or loss, or (c)an associate.

Accepted Answer

None

Question 6

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 7

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 8

Bountiful Corporation has the following investment portfolio at December 31, 2019:
   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:
 $$\begin{array}{l}
\begin{array} { | l | l | } 
\hline\text { Balance sheet presentation at December 31, 2019: }&\quad\quad\quad\quad\quad\ 
\hline \text { - Investment in Sherman } & \
\hline \text { - Investment in Fryters } & \
\hline \text { - Investment in Cupid } & \
\hline\
\hline \text { - Income statement for } 2019 & \
\hline \text { - Interest income }&\
\hline \text { - Dividend income } & \
\hline  \text { - Other income }\
\hline \text { - Unhealized gain/(loss) from investments } & \
\hline & \
\hline \text {-Other comprehensive income } & \
\hline \text { Unrealized gain/(loss) from investments } & \
\hline
\end{array}
\end{array}$$

Accepted Answer

a)Accounting classification and treatmen

Question 9

What should an investment in a debt investment be classified as when management has not specifically identified the classification? That is to say, in the absence of an election, what is the default category?

Accepted Answer

A) Associate. 
B) Amortized cost 
C) At fair value through OCI. 
D) At fair value through profit or loss. 
A) Associate. 
B) Amortized cost 
C) At fair value through OCI. 
D) At fair value through profit or loss.

Question 10

Super Control Group has the following investments:
 $\begin{array}{c}
\begin{array}{|l|}
\hline \
\
\
\hline \text {CYZ Corp }\
\
\hline \text {VWX Inc.}\
\
\
\hline \text {ABC InC}\
\
\
\
\hline 
\end{array}
\begin{array}{l|}
\hline \
\
 \text {Transactions}\
\hline \text {- Purchased all of the outstanding shares on }\
\text { Mar 31 for $ \$ 1,500,000 $.}\
\hline \text {- Prirchased $ 80 \% $ for $ \$ 1,000,000 $}\
\text { Acquired joint control over the strategic, }\
\text {operating and investing decisions on January 1.}\
\hline \text {- Purchased $ 25 \% $ of the outstanding shares on}\
\text { June 30 for $ \$ 300,000 $.}\
\text {- Super Control can appoint one member to the}\
\text { Board of Directors.}\
\hline
\end{array}
\begin{array}{r|}
\hline \text {Net income of}\
\text {Investee for}\
\text {calendar 2019}\
\hline \$ 1,000,000 \
\
\hline 200,000\
\
\
\hline 50,000\
\
\
\
\hline 
\end{array}
\begin{array}{r|}
\hline\
 \text {Fair value}\
 \text {at Dec, 31, 2019}\
\hline \$ 1,150,000 \
\
\hline175,000\
\
\
\hline320,000\
\
\
\
\hline
\end{array}
\end{array}$
 a)Explain how these investments will be classified and accounted for.
b)How much income will be recorded in 2019 by Super Group for its investment in VWX?
c)How much income will be recorded in 2019 by Super Group for its investment in ABC?

Accepted Answer

a)
b)Super will record 80% of the invest

Question 11

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 Fisher classifies its investment in Brooke at amortized cost, what amount will be reported in Fisher's 2020 year-end balance sheet?

Accepted Answer

A) $10,000 
B) $11,000 
C) $12,000 
D) $12,500 
A) $10,000 
B) $11,000 
C) $12,000 
D) $12,500

Question 12

Which item is an example of a real asset?

Accepted Answer

A) Share certificates. 
B) Building. 
C) Bonds. 
D) Accounts receivable. 
A) Share certificates. 
B) Building. 
C) Bonds. 
D) Accounts receivable.

Question 13

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 14

Which statement is correct about an associate?

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 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 financial asset classification best describes the business model that includes acquiring portfolio investments in debt securities with the intent to collect contractual cash flows to which it is entitled and profit from the change in value?

Accepted Answer

A) Associate. 
B) Amortized cost. 
C) At fair value through other comprehensive income. 
D) At fair value through profit or loss. 
A) Associate. 
B) Amortized cost. 
C) At fair value through other comprehensive income. 
D) At fair value through profit or loss.

Question 17

What is a "subsidiary"?

Accepted Answer

A) An entity where unanimous consent is required by the owners. 
B) An entity that is controlled by another entity. 
C) An entity over which the investor has the ability to participate in decisions affecting the entity's operations. 
D) An entity that sells shares to the public. 
A) An entity where unanimous consent is required by the owners. 
B) An entity that is controlled by another entity. 
C) An entity over which the investor has the ability to participate in decisions affecting the entity's operations. 
D) An entity that sells shares to the public.

Question 18

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.
 $\begin{array}{|ll|cc|}
  \hline  & &  \text { Financial asset category relevant for} \
 \text {  } & &\text {  financial reporting purposes }\
 \hline \text { Investment in bonds maturing in 30 years  } &\ 
 \hline  \text {Investment in bonds maturing in two years.  } &\
 \text { Management made the purchase to invest idle } &\
 \text { cash until after two years, when it make a } &\
 \text { major capital expenditure. } &\
 \hline \text {  Investment in 900,000 shares of Hot. Corp. a  } &\
 \text { public company with 2 million shares } &\
 \text { outstanding, } &\
 \hline \text { Purchase of 600 shares of Delicious Treats, a  } &\
 \text { private company with 1,000 shares } &\
 \text { putstanding, } &\
 \hline 
\end{array}$

Accepted Answer

None

Question 19

Simply 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 premium or discount will be amortized in the first year, if any?

Accepted Answer

A) $0.00 
B) $907.05 
C) $5,092.95 
D) $1,859.00 
A) $0.00 
B) $907.05 
C) $5,092.95 
D) $1,859.00

Question 20

Star Corp. purchases a $100,000 face value bond which matures in two years. The coupon rate is 6% and the market rate is 7%. At what amount will the bond be recorded (rounded)?

Accepted Answer

A) $5,093 
B) $98,192 
C) $100,000 
D) $101,703 
A) $5,093 
B) $98,192 
C) $100,000 
D) $101,703

Which statement is not correct about non-strategic investments?

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

Which statement is correct about joint arrangements?

Which item is an example of real property?

What is an "associate"?

What should an investment in a debt investment be classified as when management has not specifically identified the classification? That is to say, in the absence of an election, what is the default category?

Which item is an example of a real asset?

What is the meaning of "significant influence"?

Which statement is correct about an associate?

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 financial asset classification best describes the business model that includes acquiring portfolio investments in debt securities with the intent to collect contractual cash flows to which it is entitled and profit from the change in value?

What is a "subsidiary"?

Simply 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 premium or discount will be amortized in the first year, if any?

Star Corp. purchases a $100,000 face value bond which matures in two years. The coupon rate is 6% and the market rate is 7%. At what amount will the bond be recorded (rounded)?

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 non-strategic investments?

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

Which statement is correct about joint arrangements?

Which item is an example of real property?

What is an "associate"?

What should an investment in a debt investment be classified as when management has not specifically identified the classification? That is to say, in the absence of an election, what is the default category?

Which item is an example of a real asset?

What is the meaning of "significant influence"?

Which statement is correct about an associate?

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 financial asset classification best describes the business model that includes acquiring portfolio investments in debt securities with the intent to collect contractual cash flows to which it is entitled and profit from the change in value?

What is a "subsidiary"?

Simply 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 premium or discount will be amortized in the first year, if any?

Star Corp. purchases a $100,000 face value bond which matures in two years. The coupon rate is 6% and the market rate is 7%. At what amount will the bond be recorded (rounded)?

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