Chapter 2 - Cash and Cash Equivalents & Balance Sheet (2)

Question 1

An asset is classified as current when:

Answer 1

1) The entity expects to realize the asset or to consume or sell it within 12 months or the normal opening cycle; or
2) The entity holds the asset primarily for the purpose of trading

Question 2

A liability is classified as current when

Answer 2

1) The entity expects to settle the liability within the normal operating cycle
2) The liability will be settled within 12 months after the reporting period or;
3) The entity holds the liability for the pupose of trading

Question 3

Financial Instrument

Answer 3

Any contract that gives results in a finanicla asset of one entity and a financial liability or equity instrument of another entity

Question 4

Financial Liability

Answer 4

A contractual obligation:

• To deliver cash or another financial asset to another entity;
• To exchange financial assets or financial liabilities with another entity on potentially unfavorable terms;

A contract that will be settle in the entity’s own equity instruments

Question 5

Financial Assets are measured at amortized cost only if 2 conditions are met:

Answer 5

The entity’s business model is to hold the asset to collect scheduled cash flows;

The terms of the instrument call for cash flows that are exclusively payments of principal and interest on specified dates

Question 6

Financial Asset

Answer 6

Cash; An equity instrument of another entity; A Contracual right to receive cash or another financial asset from another entity; or to exchange financial assets or financial assetsor financial assets or financial liabilities with another entity on potentially unfavorable terms;;A contract that will be settle in the entity;s own equity instruments