Question 1

How should derivatives be classified?

Accepted Answer

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

Question 2

Identify whether each of the following items is a financial asset:
$$\begin{array} { | l | l | } 
\hline \text { 3-year bond issued by the reporting entity } & \text { Financial asset? (Yes/No) } \
\hline \text { Finished goods inventory } & \
\hline \text { Prepaid rent } & \
\hline \text { Investment in a joint venture } & \
\hline \text { Investment in shares of another entity } & \
\hline
\end{array}$$

Accepted Answer

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

Question 3

On January 1, 2020, Ella Ltd. purchased 25% of the common shares of JB Inc. for $2,200,000. In 2020, JB reported net income of $280,000 and paid dividends of $100,000.
Required:
a. Which of the following conditions must be met for Ella to use the equity method to report its investment in JB?
i.Ella owns at least 20% of the voting shares of JB.
ii.Ella has control over JB.
iii.Ella has a significant interest in JB.
iv.Ella is able to exercise significant influence over JB.
b. How much income would be reported by Ella in 2020 related to its investment in JB under the equity method?

Accepted Answer

a. iv -Ella is able to exercise signific

Question 4

A bond has a maturity value of $500,000 payable in 3 years. These bonds have a 5% coupon rate payable annually, and the market yield was 2% when the bonds were purchased. How much will be recorded for the bond purchase (rounded)?

Accepted Answer

A) $43,257 
B) $543,257 
C) $500,000 
D) $500,001 
A) $43,257 
B) $543,257 
C) $500,000 
D) $500,001

Question 5

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 at 5%. At December 31, 2020, the bonds had a quoted price of $998 per bond.
Fill in the attached table assuming
a. Classified at fair value through profit or loss
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 6

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 7

Which statement is correct about joint arrangements?

Accepted Answer

A) IFRS distinguishes between joint operations and joint ventures. 
B) IFRS uses the terms joint operations and joint ventures inter-changeably. 
C) IFRS permits either the proportionate consolidation method or equity method. 
D) IFRS permits only the equity method. 
A) IFRS distinguishes between joint operations and joint ventures. 
B) IFRS uses the terms joint operations and joint ventures inter-changeably. 
C) IFRS permits either the proportionate consolidation method or equity method. 
D) IFRS permits only the equity method.

Question 8

Amacon Corporation has the following investments at December 31, 2020: $$\begin{array} { | l | r | r | r | r | } 
\hline & \text { Historical cost } & \begin{array} { c } 
\text { Fair value } \
\text { Sept } 30,2019
\end{array} & \begin{array} { c } 
\text { Fair value } \
\text { Sept 30, 2020 }
\end{array} & \begin{array} { c } 
\text { Fair value } \
\text { Dec } 31,2020
\end{array} \
\hline \text { Shares of DEF } & 25,000 & 15,000 & 27,000 & 30,000 \
\hline \text { Bonds of Brooke } & & & & \
\text { (purchased at par value) } & 10,000 & 12,000 & 11,000 & 12,500  \
\hline \text { Shares of CooksTown } & 12,000 & 18,000 & 16,000 &16,000\
\hline \text { Shares of Daisy } & 18,000 & 16,500 & 19,500 &20,500 \
\hline
\end{array}$$ If Amacon irrevocably elected to classify its investment in DEF at fair value through OCI, what amount will be reported in income for the three months ended December 31, 2020 pertaining to this investment?

Accepted Answer

A) $0 
B) $3,000 loss. 
C) $3,000 gain. 
D) $5,000 gain. 
A) $0 
B) $3,000 loss. 
C) $3,000 gain. 
D) $5,000 gain.

Question 9

Fish Corp. purchases a $100,000 face value bond which matures in one year. The coupon rate is 6% and the market rate is 6%. What is the premium or discount?

Accepted Answer

A) $0 
B) $5,660 
C) $6,000 
D) $94,340 
A) $0 
B) $5,660 
C) $6,000 
D) $94,340

Question 10

Philips has a 50% joint operation interest in Josef. Based on the following information, what amount will be presented for net income on Philips' proportionately consolidated income statement? $$\begin{array} { | l | r | r | } 
\hline & \text { Philips } & \text { Josef } \
\hline \text { Revenue } & 1,000 & 2,000 \
\hline \text { Income from Josef } & 200 & \
\hline \text { Expenses } & 450 & 1,600 \
\hline \text { Net income } & 750 & 400 \
\hline
\end{array}$$

Accepted Answer

A) $200 
B) $550 
C) $750 
D) $1,150 
A) $200 
B) $550 
C) $750 
D) $1,150

Question 11

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? $$\begin{array} { | l | r | r | } 
\hline & \text { Kings } & \text { Fisher } \
\hline \text { Revenue } & \$ 1,000 & \$ 2,000 \
\hline \text { Income from Fisher } & 160 & \
\hline \text { Expenses } & 450 & 1,600 \
\hline \text { Net income } & 710 & 400 \
\hline
\end{array}$$

Accepted Answer

A) $0 
B) $160 
C) $400 
D) $710 
A) $0 
B) $160 
C) $400 
D) $710

Question 12

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 the underlying business model. 
C) IFRS 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 the underlying business model. 
C) IFRS classifies these investments in accordance with their nature. 
D) The accounting is the same under ASPE and IFRS for these investments.

Question 13

Based on the following information, what amount will be presented for current assets on the consolidated balance sheet of Investor 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) $300 
B) $500 
C) $550 
D) $1,050 
A) $300 
B) $500 
C) $550 
D) $1,050

Question 14

For financial reporting purposes, financial assets can be put into one of seven categories: subsidiaries, joint ventures, associates, at fair value through profit or loss, at fair value through OCI, amortized cost, and joint operations. For each of the following items, identify the possible categories into which it can be placed. More than one category is possible for an item.
 $\begin{array}{|l|l|} 
\hline & \text { Financial asset categories } \
\hline \text { Colder Company buys 500 common shares of a } & \
\text {  publicly traded company that has 200 million shares } & \
 \text {  outstanding. }  & \
\hline \text { Bountiful gifts buys 1,000 preferred shares in another} & \
\hline\text {company. The shares do not have voting rights. } &\
\hline\text {Fast cars buys 800,000 common shares in Super }&\
\hline\text {Autos. There are 4,000,000 shares outstanding.}&\
\hline 
\end{array}$

Accepted Answer

None

Question 15

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 because the co

Question 16

Explain the nature of and the appropriate accounting treatment for at fair value through profit or loss securities and at fair value through OCI securities.

Accepted Answer

At fair value through profit or loss fin

Question 17

Victoria purchases a hotel with 100 similar rooms. To help finance this purchase, Victoria sells these rooms to individual investors for $200,000 each. An investor who owns a single room receives 55% of 1% of the revenue of the hotel (i.e., 0.55%), while the hotel retains the other 0.45%. An investor who wishes to liquidate his/her investment may sell his/her room back to Victoria for the original $200,000, but cannot otherwise sell the room to other parties.
Identify all the financial assets involved in the above situation.

Accepted Answer

An investor buying into Victoria's hotel

Question 18

Explain the meaning of the "effective interest method."

Accepted Answer

•A method that uses a discount rate that

Question 19

Explain the difference between a joint arrangement, joint control, joint operation and a joint venture.

Accepted Answer

A joint arrangement is a contractual arr

Question 20

Which statement is not correct about the equity method?

Accepted Answer

A) The investment account on the balance sheet equals the original cost plus the investor's share of the investee's post-acquisition changes in net assets. 
B) This method results in reflecting two legal entities as one economic unit for financial reporting purposes. 
C) Income is recognized equal to the investor's share of the investee's net income. 
D) Dividends from the investee are deducted from the investor's investment account. 
A) The investment account on the balance sheet equals the original cost plus the investor's share of the investee's post-acquisition changes in net assets. 
B) This method results in reflecting two legal entities as one economic unit for financial reporting purposes. 
C) Income is recognized equal to the investor's share of the investee's net income. 
D) Dividends from the investee are deducted from the investor's investment account.

How should derivatives be classified?

Identify whether each of the following items is a financial asset: 3-year bond issued by the reporting entity Financial asset? (Yes/No) Finished goods inventory Prepaid rent Investment in a joint venture Investment in shares of another entity

A bond has a maturity value of $500,000 payable in 3 years. These bonds have a 5% coupon rate payable annually, and the market yield was 2% when the bonds were purchased. How much will be recorded for the bond purchase (rounded)?

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?

Which statement is correct about joint arrangements?

Fish Corp. purchases a $100,000 face value bond which matures in one year. The coupon rate is 6% and the market rate is 6%. What is the premium or discount?

Philips has a 50% joint operation interest in Josef. Based on the following information, what amount will be presented for net income on Philips' proportionately consolidated income statement? Philips Josef Revenue 1,000 2,000 Income from Josef 200 Expenses 450 1,600 Net income 750 400

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? Kings Fisher Revenue \ 1,000 \ 2,000 Income from Fisher 160 Expenses 450 1,600 Net income 710 400

Which statement is correct about non-strategic financial assets?

Explain the nature of and the appropriate accounting treatment for at fair value through profit or loss securities and at fair value through OCI securities.

Explain the meaning of the "effective interest method."

Explain the difference between a joint arrangement, joint control, joint operation and a joint venture.

Which statement is not correct about the equity method?

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

How should derivatives be classified?

Identify whether each of the following items is a financial asset: 3-year bond issued by the reporting entity Financial asset? (Yes/No) Finished goods inventory Prepaid rent Investment in a joint venture Investment in shares of another entity

A bond has a maturity value of $500,000 payable in 3 years. These bonds have a 5% coupon rate payable annually, and the market yield was 2% when the bonds were purchased. How much will be recorded for the bond purchase (rounded)?

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?

Which statement is correct about joint arrangements?

Fish Corp. purchases a $100,000 face value bond which matures in one year. The coupon rate is 6% and the market rate is 6%. What is the premium or discount?

Philips has a 50% joint operation interest in Josef. Based on the following information, what amount will be presented for net income on Philips' proportionately consolidated income statement? Philips Josef Revenue 1,000 2,000 Income from Josef 200 Expenses 450 1,600 Net income 750 400

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? Kings Fisher Revenue \ 1,000 \ 2,000 Income from Fisher 160 Expenses 450 1,600 Net income 710 400

Which statement is correct about non-strategic financial assets?

Explain the nature of and the appropriate accounting treatment for at fair value through profit or loss securities and at fair value through OCI securities.

Explain the meaning of the "effective interest method."

Explain the difference between a joint arrangement, joint control, joint operation and a joint venture.

Which statement is not correct about the equity method?

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