Exam 13: Marketable Securities and Derivatives

Martin Company acquired $500,000 face value of the outstanding bonds of Tory Company on January 1, 2012.The bonds pay interest semiannually on June 30 and December 31 at an annual rate of 7% and mature on December 31, 2014.The bonds were priced on the market on January 1, 2012, to yield 6% compounded semiannually.Martin Company classifies these bonds as held to maturity. a.Compute the amount that Martin Company paid for these bonds, excluding commissions and taxes. b.Prepare an amortization table for these bonds. c.Give the journal entries that Martin Company would make to account for these bonds during 2012. d.Give the journal entries that Martin Company would make to account for these bonds on December 31, 2014.

(Essay)

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Question 121

Gains and losses on derivatives not designated as hedges of a specific risk, gains and losses on fair value hedges, and the ineffective portion of cash flow hedges affect net income simultaneously with changes in fair value.

(True/False)

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Question 122

ValleyView Company ValleyView Company acquires common stock of Kansas Enterprises for $400,000 on November 1, 2013, and designates this investment as available-for-sale.The fair value of these shares is $435,000 on December 31, 2013.ValleyView sells these shares on August 15, 2014, for $480,000. (Refer to ValleyView.) The total income from the purchase and sale of these securities is _ reported _

(Multiple Choice)

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Question 123

A derivative may have zero initial cost, but potentially large positive or negative fair values later.

(True/False)

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Question 124

Marco Insurance Marco Insurance acquired shares of Penny Systems' common stock on December 28, 2013, for $400,000 and classified them as trading securities.The fair value of these securities on December 31, 2013, was $402,000.Marco Insurance sold these shares on January 3, 2014, for $405,000. (Refer to the Marco Insurance) The journal entries to record acquisition of trading securities on December 28, 2013.

(Multiple Choice)

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Question 125

Lightner Company decides that an available-for-sale security is impaired as of December 31, 2013 and has an unrealized loss of $5,000.The journal entry to record an impairment loss on securities available-for-sale would be:

(Multiple Choice)

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Question 126

U.S.GAAP requires firms to disclose which of the following information with respect to derivatives?

(Multiple Choice)

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Question 127

Which of the following is not true?

(Multiple Choice)

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Question 128

How are securities measured at acquisition?

(Essay)

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Question 129

According to U.S.GAAP,firms holding debt and equity securities for short-term profit potential

(Multiple Choice)

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Question 130

The provisions of U.S.GAAP require firms to classify marketable securities into the following categories except

(Multiple Choice)

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Question 131

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 $800.During Year 2, the firm sold some of the securities for $120 which had originally cost $100, but which had a market value of $90 at the end of Year 1.At the end of Year 2, the remaining securities had a market value of $1,150. 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.

(Essay)

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Question 132

Using the amortization procedure, the holder of the debt securities (the investor) records interest revenue each period at an amount equal to the _ at the start of the period multiplied by the _ applicable to that debt on the day the firm acquired the debt.The bonds are classified as held to maturity.

(Multiple Choice)

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Question 133

U.S.GAAP requires firms holding minority, passive investments in debt and equity securities as securities available-for-sale that the firm intends to sell within one year to report them as

(Multiple Choice)

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Question 134

Describe the fair value option applied to marketable securities and derivatives.

(Essay)

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Question 135

Kerry Corporation acquires the publicly traded debt of Jett Corporation on December 31, Year 1 as a temporary investment of excess cash.The securities mature in 4 years.How will the securities be recorded on Kerry's December 31, Year 1 financial statement?

(Multiple Choice)

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Question 136

U.S.GAAP and IFRS require firms to disclose the fair value of financial instruments in a note to the financial statements.What should such a note include?

(Essay)

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Question 137

Measurement of trading securities at ___ reflects income when it occurs in the form of a change in _, not when the investor realizes a gain or loss ___.

(Multiple Choice)

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Question 138

Complete the following chart for items a through d, describing the accounting treatment using the number by one of the following four approaches listed as follows. (Assume that the firm does not elect the fair value option): APPROACHES (1) Measured at fair value with changes recognized in net income. (2) Measured at amortized cost. (3) Measured at fair value with changes recognized initially in other comprehensive income. (4) Measurement depends on whether firm uses hedge accounting. In the third column of the chart, present your explanation regarding this approach.

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Question 139

Which of the following is/aretrue?

(Multiple Choice)

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Question 140

Showing 121 - 140 of 144

Gains and losses on derivatives not designated as hedges of a specific risk, gains and losses on fair value hedges, and the ineffective portion of cash flow hedges affect net income simultaneously with changes in fair value.

A derivative may have zero initial cost, but potentially large positive or negative fair values later.

Lightner Company decides that an available-for-sale security is impaired as of December 31, 2013 and has an unrealized loss of $5,000.The journal entry to record an impairment loss on securities available-for-sale would be:

U.S.GAAP requires firms to disclose which of the following information with respect to derivatives?

Which of the following is not true?

How are securities measured at acquisition?

According to U.S.GAAP,firms holding debt and equity securities for short-term profit potential

The provisions of U.S.GAAP require firms to classify marketable securities into the following categories except

U.S.GAAP requires firms holding minority, passive investments in debt and equity securities as securities available-for-sale that the firm intends to sell within one year to report them as

Describe the fair value option applied to marketable securities and derivatives.

Kerry Corporation acquires the publicly traded debt of Jett Corporation on December 31, Year 1 as a temporary investment of excess cash.The securities mature in 4 years.How will the securities be recorded on Kerry's December 31, Year 1 financial statement?

U.S.GAAP and IFRS require firms to disclose the fair value of financial instruments in a note to the financial statements.What should such a note include?

Measurement of trading securities at ___ reflects income when it occurs in the form of a change in _, not when the investor realizes a gain or loss ___.

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

Gains and losses on derivatives not designated as hedges of a specific risk, gains and losses on fair value hedges, and the ineffective portion of cash flow hedges affect net income simultaneously with changes in fair value.

A derivative may have zero initial cost, but potentially large positive or negative fair values later.

Lightner Company decides that an available-for-sale security is impaired as of December 31, 2013 and has an unrealized loss of $5,000.The journal entry to record an impairment loss on securities available-for-sale would be:

U.S.GAAP requires firms to disclose which of the following information with respect to derivatives?

Which of the following is not true?

How are securities measured at acquisition?

According to U.S.GAAP,firms holding debt and equity securities for short-term profit potential

The provisions of U.S.GAAP require firms to classify marketable securities into the following categories except

U.S.GAAP requires firms holding minority, passive investments in debt and equity securities as securities available-for-sale that the firm intends to sell within one year to report them as

Describe the fair value option applied to marketable securities and derivatives.

Kerry Corporation acquires the publicly traded debt of Jett Corporation on December 31, Year 1 as a temporary investment of excess cash.The securities mature in 4 years.How will the securities be recorded on Kerry's December 31, Year 1 financial statement?

U.S.GAAP and IFRS require firms to disclose the fair value of financial instruments in a note to the financial statements.What should such a note include?

Measurement of trading securities at _____ reflects income when it occurs in the form of a change in _____, not when the investor realizes a gain or loss _____.

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

Measurement of trading securities at ___ reflects income when it occurs in the form of a change in _, not when the investor realizes a gain or loss ___.