Exam 7: Financial Assets

For each of the following financial asset classifications shown in the left column, identify the combinations of (i)the type of financial instrument in the middle column that can be put into that classification and (ii)the business model that would lead to that classification. Accounting classification = Type of financial instrument + Business model FVPL FVOCI Amortized cost Associate Toint Venture Subsidiary

McGyer Limited invests its excess cash in short term investments. The following information is available about its investments at December 31, 2020: Cost Market Investment 1 \ 40,000 \ 36,000 Investment 2 30,000 26,000 Investment 3 80,000 84,000 If McGyer accounts for these at fair value through profit or loss investments, what is the amount of gain/loss to be recorded in fiscal 2020?

Which statement is correct about debt instruments?

Which statement is not correct about "associates"?

What is a "joint arrangement"?

What factor is the most important in classifying an investment at fair value through other comprehensive income?

Which statement is correct about non-strategic investments?

Which statement is not correct?

How would a short-term investment in bonds to earn a return on funds that would otherwise be held as cash be classified.

Kings has a 40% joint operation interest in Fisher. Based on the following information, what amount will be presented for "revenues" 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

Koala had the following transactions relating to its investments during 2020. Koala uses the effective interest method of amortization of premiums or discounts when applicable. a. On July 1, 2020, Koala acquired a $400,000, 16%, 8-year government bond with interest paid semi-annually on January 1 and July 1. Because the market rate of interest was 12% on that date, Koala paid $480,847 for the bond. The bonds were classified as at amortized cost by Koala and had a fair value of $440,000 plus accrued interest on December 31, 2020. b. On July 1, 2020, Koala acquired 10,000 shares of Gorilla at a price of $41 per share. On December 31, 2020, the ex-dividend date, dividends of $2.00 per share were declared with an expected date of payment of January 15, 2021. On December 31, 2020, the fair value of the Gorilla shares had increased to $42 per share. Management irrevocably elect to classify the investment at fair value through OCI. c. On July 1, 2020, Koala acquired 45,000 shares (20%)of the outstanding shares of Black Bear at a price of $15 per share, giving it significant influence over Black Bear. Black Bear had net income of $600,000 for the six months ended December 31, 2020 and declared and paid total dividends of $10,000 to its shareholders on December 31, 2020. On December 31, 2020, Black Bear's shares had a fair value of $19 per share. Required: Provide all journal entries required relating to these investments on July 1, 2020 and December 31, 2020, including any journal entries required relating to the change in fair value for the year.

Mirvish Limited invests in short term investments. The following information is available about its investments at December 31, 2020: Cost Market Investment 1 \ 40,000 \ 36,000 Investment2 30,000 26,000 If Mirvish accounts for these at fair value through OCI investments, what entry is necessary for fiscal 2020?

Simply purchases a $200,000 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?

What is the meaning of "joint control"?

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%. At what amount will the bond be recorded (rounded)?

Explain what financial assets are, how they differ from other types of assets, and why there is a variety of measurement standards for different categories of financial assets.

Fish Corp. purchases a $100,000 face value bond which matures in two years. The coupon rate is 6% and the market rate is 7%. What is the premium or discount (rounded)?