Chpt 8 Financial Asset Movements

Question 1

Financial assets held to maturity/loans and receivables

Initial measurement

Answer 1

Debit financial asset (add transaction cost to total investment)

Credit cash

Question 2

Financial assets held to maturity/loans and receivables

Effective interest

Answer 2

Debit financial asset⬆️

Credit profit and lost:interest receivable ⬆️

Question 3

Financial assets held to maturity/ loans and receivables

Interest received

Answer 3

Debit cash ⬆️

Credit financial asset ⬇️

Question 4

Financial assets at fair value through profit or loss

Initial measurement

Answer 4

Debit financial asset (excluding transaction cost)

Credit cash

Question 5

Financial assets at fair value through profit or loss

At year end

Answer 5

Debit financial asset

credit profit or loss

Question 6

Compound instruments e.g. convertible debt

Initial recording

Answer 6

Debit cash ⬆️
Credit financial liability
Credit equity (balancing figure)

Question 7

Impairment loss on debt held at Amortised cost

Answer 7

Equals difference between carrying value and present value of future expected cash flows discounted original effective interest rate

Question 8

Impairment loss reported in the statement of profit or loss

Answer 8

Debit statement of profit or loss

Credit financial asset