Exam 13: Marketable Securities and Derivatives

In Year 1, the firm purchased a portfolio of marketable securities for $1,000, which it holds as current assets.At the end of Year 1, the portfolio had a market value of $700.During Year 2, the firm sold some of the securities for $160 which had originally cost $100, but which had a market value of $80 at the end of Year 1.At the end of Year 2, the remaining securities had a market value of $850. Required: a. Assume the firm treats its holdings as available-for-sale. 1. Record the entry made at the end of Year 1. 2. Record the entries made during Year 2 and at the end of Year 2. b. Assume the firm treats its holdings as trading securities. 1. Record the entry made at the end of Year 1. 2. Record the entries made during Year 2 and at the end of Year 2.

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Question 41

How are securities measured after acquisition?

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Question 42

Cummings Industries places a firm order for the equipment on June 30, 2013.It simultaneously signs a forward currency contract for £20,000.The forward rate on June 30, 2013, for settlement on June 30, 2014, is $1.64 per £1.Cummings designates the forward contract as a fair value hedge of the firm commitment. REQUIRED: a. U.S. GAAP and IFRS guidance does not require Cummings to record either the purchase commitment or the forward contract on the balance sheet as a liability or an asset on June 30, 2013. What is the logic for this accounting? b. On December 31, 2013, the forward exchange rate for settlement on June 30, 2014, is $1.73 per £1. Give the journal entries to record the change in the fair value of the purchase commitment and the change in the fair value of the forward contract for 2013. Assume an 8% interest rate for discounting cash flows to their present values on December 31, 2013. c. Give the journal entries on June 30, 2014, to record the change in the present value of the purchase commitment and the forward contract for the passage of time. d. On June 30, 2014, the spot exchange rate is $1.75 per £1. Give the journal entries to record the change in the fair value of the purchase commitment and the change in the fair value of the forward contract due to changes in the exchange rate during the first six months of 2014. e. Give the journal entry on June 30, 2014, to purchase £20,000 with U.S. dollars and acquire the equipment. f. Give the journal entry on June 30, 2014, to settle the forward contract. g. How would the entries in parts (b) through (f) differ if Cummings had chosen to designate the forward currency contract as a cash flow hedge of a forecasted transaction instead of a fair value hedge of a firm commitment? h. What type of scenario would justify Cummings treating the forward currency contract as a fair value hedge? What type of scenario that would justify the firm treating the contract as a cash flow hedge?.

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Question 43

Which of the following is a characteristic of a derivative?

(Multiple Choice)

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Question 44

Which of the following is not true regarding investments in securities available-for-sale?

(Multiple Choice)

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Question 45

Which of the following is/are true?

(Multiple Choice)

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Question 46

Which of the following is/are not true?

(Multiple Choice)

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Question 47

Both U.S.GAAP and IFRS require that firms record derivatives at their fair values on the balance sheet date.

(True/False)

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Question 48

To be classified as a current asset, marketable securities must be readily convertible into cash and

(Multiple Choice)

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Question 49

Which of the following would most likely be classified as Marketable Securities in the Current Assets section of the balance sheet?

(Multiple Choice)

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Question 50

U.S.GAAP and IFRS require firms to account for debt securities held-to-maturity that are deemed to be impaired.The investor recognizes (debits) _ and reduces (credits) _.

(Multiple Choice)

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Question 51

Which of the following is a characteristic of a derivative?

(Multiple Choice)

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Question 52

U.S.GAAP classifies securities that are neither debt securities held to maturity or trading securities as

(Multiple Choice)

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Question 53

What are derivative instruments and how are they used?

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Question 54

Firms initially record trading securities at fair value, excluding transactions costs (which firms expense as they incur them).

(True/False)

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Question 55

The 2013 annual report of Travel Industries reports the following data about its marketable securities held available-for-sale. Required: a. What was the cost of the securities available-for-sale that Travel Industries sold during the year 2013? b. What was the cost of the securities available-for-sale that Travel Industries purchased during the year 2013? c. What was Travel Industries' Other Comprehensive Income related to securities available-for-sale for 2013? d. What were the total gains or losses, net, both realized and unrealized on Travel Industries' securities available-for-sale during the year 2013?

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Question 56

Discuss the accounting for debt securities held to maturity and arguments against this approach.

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Question 57

(CMA adapted, Jun 97 #12) Refer to the Manley Company example.Assuming that the above securities are properly classified as held-to-maturity securities under U.S.GAAP, the unrealized holding gain or loss as of May 31, Year 7, would

(Multiple Choice)

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Question 58

The provisions of IFRS require firms to classify marketable securities into which of the following categories?

(Multiple Choice)

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Question 59

For cash flow hedges, which of the following is/aretrue?

(Multiple Choice)

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Question 60

Showing 41 - 60 of 144

How are securities measured after acquisition?

Which of the following is a characteristic of a derivative?

Which of the following is not true regarding investments in securities available-for-sale?

Which of the following is/are true?

Which of the following is/are not true?

Both U.S.GAAP and IFRS require that firms record derivatives at their fair values on the balance sheet date.

To be classified as a current asset, marketable securities must be readily convertible into cash and

Which of the following would most likely be classified as Marketable Securities in the Current Assets section of the balance sheet?

U.S.GAAP and IFRS require firms to account for debt securities held-to-maturity that are deemed to be impaired.The investor recognizes (debits) _ and reduces (credits) _.

Which of the following is a characteristic of a derivative?

U.S.GAAP classifies securities that are neither debt securities held to maturity or trading securities as

What are derivative instruments and how are they used?

Firms initially record trading securities at fair value, excluding transactions costs (which firms expense as they incur them).

Discuss the accounting for debt securities held to maturity and arguments against this approach.

(CMA adapted, Jun 97 #12) Refer to the Manley Company example.Assuming that the above securities are properly classified as held-to-maturity securities under U.S.GAAP, the unrealized holding gain or loss as of May 31, Year 7, would

The provisions of IFRS require firms to classify marketable securities into which of the following categories?

For cash flow hedges, which of the following is/aretrue?

Introduction to Business Activities and Overview of Financial Statements and the Reporting Process

The Basics of Record Keeping and Financial Statement Preparation: Balance Sheet

The Basics of Record Keeping and Financial Statement Preparation: Income Statement

Balance Sheet: Presenting and Analyzing Resources and Financing

Income Statement: Reporting Results of Operating Activities

Statement of Cash Flows

Introduction to Financial Statement Analysis

Revenue Recognition, Receivables, and Advances From Customers

Working Capital

Long-Lived Tangible and Intangible Assets

Notes, Bonds, and Leases

Liabilities: Off-Balance Sheet Financing, Retirement Benefits, and Income Taxes

Intercorporate Investments in Common Stock

Shareholders Equity: Capital Contributions and Distributions

Statement of Cash Flows: Another Look

Synthesis and Extensions

Filters

Exam 13: Marketable Securities and Derivatives

How are securities measured after acquisition?

Which of the following is a characteristic of a derivative?

Which of the following is not true regarding investments in securities available-for-sale?

Which of the following is/are true?

Which of the following is/are not true?

Both U.S.GAAP and IFRS require that firms record derivatives at their fair values on the balance sheet date.

To be classified as a current asset, marketable securities must be readily convertible into cash and

Which of the following would most likely be classified as Marketable Securities in the Current Assets section of the balance sheet?

U.S.GAAP and IFRS require firms to account for debt securities held-to-maturity that are deemed to be impaired.The investor recognizes (debits) _____ and reduces (credits) _____.

Which of the following is a characteristic of a derivative?

U.S.GAAP classifies securities that are neither debt securities held to maturity or trading securities as

What are derivative instruments and how are they used?

Firms initially record trading securities at fair value, excluding transactions costs (which firms expense as they incur them).

Discuss the accounting for debt securities held to maturity and arguments against this approach.

(CMA adapted, Jun 97 #12) Refer to the Manley Company example.Assuming that the above securities are properly classified as held-to-maturity securities under U.S.GAAP, the unrealized holding gain or loss as of May 31, Year 7, would

The provisions of IFRS require firms to classify marketable securities into which of the following categories?

For cash flow hedges, which of the following is/aretrue?

Introduction to Business Activities and Overview of Financial Statements and the Reporting Process

The Basics of Record Keeping and Financial Statement Preparation: Balance Sheet

The Basics of Record Keeping and Financial Statement Preparation: Income Statement

Balance Sheet: Presenting and Analyzing Resources and Financing

Income Statement: Reporting Results of Operating Activities

Statement of Cash Flows

Introduction to Financial Statement Analysis

Revenue Recognition, Receivables, and Advances From Customers

Working Capital

Long-Lived Tangible and Intangible Assets

Notes, Bonds, and Leases

Liabilities: Off-Balance Sheet Financing, Retirement Benefits, and Income Taxes

Intercorporate Investments in Common Stock

Shareholders Equity: Capital Contributions and Distributions

Statement of Cash Flows: Another Look

Synthesis and Extensions

Filters

U.S.GAAP and IFRS require firms to account for debt securities held-to-maturity that are deemed to be impaired.The investor recognizes (debits) _ and reduces (credits) _.