F4/M1 Financial Instruments Flashcards
Financial instrument disclosures
- Concentration of credit risk
- Fair Values of financial instruments
- Market risk (Changes in economic circumstances) is encouraged, but NOT required
(T/F): Put option is the right to dispose of ownership shares at a certain price
True
(T/F): Redeemable preferred stock is a type of debt security, not equity security
True
(T/F): Stock warrants, stock options, and put options are equity securities
True
(T/F): Trading securities and AFS securities can be both debt or equity
True; only Held To Maturity can be solely debt
(T/F): Cash Flows from sale of Trading Securities are Operating activities, where as Cash Flows from AFS securities are Investing Activities
True
(T/F): Unrealized G/L on AFS Securities go on OCI (Direct to equity)
True; “U” in PUFE
(T/F): In order to classify a security as Held to Maturity, the company must have the intent and ability to do so
True; must have intent and ability
JE - Unrealized Loss on Trading Security
Cr: Unrealized loss on Trading Security
Dr: Valuation Account
JE - Unrealized Loss on AFS Security
Cr: Unrealized loss on AFS Security (Direct to equity)
Dr: Valuation account
(T/F): Held To Maturity securities are reported at Amortized Cost and there are no unrealized Gains or Losses
True; FMV is a distractor
(T/F): Any transfer of a security to another classification of securities is accounted for at fair value
True
(T/F): When you go from Trading to any other type of security, the G/L has already been accounted for in earnings so no adjustment is necessary
True
(T/F): When you go to Trading from any other security classification, record the adjustment in earnings
True
(T/F): When you go to AFS from HTM, record G/L in OCI
True
(T/F): When you go to HTM from AFS, amortize any G/L in OCI with any bond premium or discount amortization
True
JE - Liquidating dividend
dividend in excess of share of RE
Dr: Cash
Cr: Investment in Investee
(T/F): When a bond is purchased at a discount or a premium and accounted for at amortized cost, interest income does NOT equal coupon received
True; interest income = CV (x) market rate
- If the bond is classified as Trading or AFS, then the coupon received = interest income
If an AFS Security or HTM Security is permanently impaired, the Gain or loss is reported in…
Income Statement
(T/F): An entity can choose to measure an investment at fair value instead of using the equity method for investments
True
(T/F): Capital leases are not eligible for the fair value measurement
True; must be financial assets and liabilities
