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ACC124 > INTACC - CHAPTER 15 > Flashcards

INTACC - CHAPTER 15 Flashcards

1
Q

Entities are required to measure financial asset based on all of the following, except

a. The business model for managing financial asset.

b. Whether the financial asset is a debt or an equity investment.

c. The contractual cash flow characteristics of the financial asset.

d. All of the choices are correct.

A

b. Whether the financial asset is a debt or an equity investment.

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2
Q

Debt investments that meet the business model and contractual cash flow tests are reported at

a. Net realizable value
b. Fair value
c. Amortized cost
d. The lower of amortized cost and fair value

A

c. Amortized cost

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3
Q

Debt investments not held for collection are measured and reported at

a. Amortized cost
b. Fair value
c. The lower of amortized cost and fair value
d. Net realizable value

A

b. Fair value

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4
Q

Debt investments at amortized cost are

a. Managed and evaluated based on a documented risk management strategy

b. Trading debt investments

c. Held for collection debt investments

d. All of these are correct

A

c. Held for collection debt investments

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5
Q

Impairments of debt investments at amortized cost are

a. Based on discounted contractual cash flows.

b. Recognized as component of other comprehensive income.

c. Based on fair value for nontrading investments.

d. Evaluated at each reporting date.

A

d. Evaluated at each reporting date.

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6
Q

A debt investment is measured at amortized cost

a. By irrevocable election

b. When the debt investment is managed and evaluated

c. When the debt investment is held for trading on a document risk-management strategy.

d. When the business model is to collect contractual cash flows that are solely payments of principal and interest.

A

d. When the business model is to collect contractual cash flows that are solely payments of principal and interest.

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7
Q

The irrevocable election to present changes in fair value in other comprehensive income is applicable only to

a. Investment in equity instrument not held for trading.

b. Investment in equity instrument held for trading.

c. Financial asset measured at amortized cost.

d. Financial asset measured at fair value.

A

a. Investment in equity instrument not held for trading.

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8
Q

Equity investments irrevocably accounted for at FVOCI are

a. Nontrading investments of less than 20%.
b. Trading investments of less than 20%.
c. Investments of between 20% and 50%.
d. Investments of more than 50%.

A

a. Nontrading investments of less than 20%.

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9
Q

A debt investment shall be measured at fair value through other comprehensive income

a. When the debt investment is held for trading.

b. When the debt investment is not held for trading.

c. By irrevocable designation

d. When the business model is to collect contractual cash flows and also to sell the financial asset

A

d. When the business model is to collect contractual cash flows and also to sell the financial asset

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10
Q

Which is not a category of financial assets?

a. Financial assets at fair value through profit or loss

b. Financial assets at fair value through other comprehensive income

c. Financial assets at amortized cost

d. Financial assets held for sale

A

d. Financial assets held for sale

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11
Q

What financial assets are assessed for impairment?

a. Equity investments at FVPL
b. Equity investments at FVOCI
c. Debt investments at FVPL
d. Debt investments at amortized cost and debt investments at FVOCI

A

d. Debt investments at amortized cost and debt investments at FVOCI

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12
Q

An impairment loss is the excess of the carrying amount of the debt investment over

a. Expected cash flows
b. Present value of the expected cash flows
c. Contractual cash flows
d. Present value of the contractual cash flows

A

b. Present value of the expected cash flows

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13
Q

Under IFRS, an entity

a. Should evaluate every investment for impairment.

b. Accounts for an impairment as component of OCI.

c. Calculates the impairment loss on debt investment as the excess of carrying amount over the expected discounted future cash flows.

d. Should not recognize impairment loss on all financial assets.

A

c. Calculates the impairment loss on debt investment as the excess of carrying amount over the expected discounted future cash flows.

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14
Q

Under IFRS, the presumption is that equity
investments are

a. Held for trading

b. Held to profit from price changes

c. Held for trading and held to profit from price changes.

d. Held as financial assets at fair value through other comprehensive income

A

c. Held for trading and held to profit from price changes.

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15
Q

Depending on the business model for managing financial assets, an entity shall classify financial assets subsequent to initial recognition at

a. Fair value through profit or loss

b. Amortized cost

c. Fair value through other comprehensive income

d. All of these are used in measuring financial assets

A

d. All of these are used in measuring financial assets

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16
Q

How does the standard distinguish between the measurement methods to be used?

a. By reviewing the business model and the risks and rewards of the transaction.

b. By reviewing the business model and the contractual cash flow characteristics of the instrument.

c. By reviewing the realizability and the contractual cash flow characteristics of the instrument.

d. By reviewing the realizability of the instrument and risks and rewards of ownership.

A

b. By reviewing the business model and the contractual cash flow characteristics of the instrument.

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17
Q

Which of the following is not a characteristic of a financial asset held for trading?

a. It is acquired principally for the purpose of selling or repurchasing it in the near term.

b. On initial recognition, it is part of a portfolio of financial assets that are managed togetherand for which there is evidence of a recent actual pattern of short-term profit taking.

c. It is a derivative that is not designated as an effective hedging instrument.

d. It is a derivative that is designated as an effective hedging instrument.

A

d. It is a derivative that is designated as an effective hedging instrument.

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18
Q

All of the following financial assets shall be measured at fair value through profit or loss, except

a. Financial assets held for trading

b. Financial assets designated on initial recognition as at fair value through profit or loss

c. Investments in quoted equity instruments

d. Financial assets at amortized cost

A

d. Financial assets at amortized cost

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19
Q

Reclassifications of investments between categories are accounted for

a. Prospectively, at the end of the period after the change in the business model.

b. Prospectively, at the beginning of the period after the change in the business model.

c. Retrospectively, at the end of the period after the change in the business model.

d. Retrospectively, at the beginning of the period after the change in the business model.

A

b. Prospectively, at the beginning of the period after the change in the business model.

20
Q

Transfers of investments between categories

a. Result in omitting recognition of fair value in the year of the transfer.

b. Are accounted for at fair value for all transfers.

c. Are not recognized if investments are transferred from held for collection to fair value.

d. Should always affect net income.

A

b. Are accounted for at fair value for all transfers.

21
Q

When a debt investment at amortized cost is reclassified to FVPL, the difference between the previous carrying amount and fair value at reclassification date is

a. Recognized in profit or loss
b. Not recognized
c. Recognized in other comprehensive income
d. Included in retained earnings

A

a. Recognized in profit or loss

22
Q

When a debt investment at FVPL is reclassified to amortized cost, what is the new carrying amount at amortized cost?

a. Fair value at reclassification date

b. Face amount of the debt investment

c. Present value of the contractual cash flows

d. Original carrying amount of the debt investment

A

a. Fair value at reclassification date

23
Q

Which statement is true when a debt investment amortized cost is reclassified to FVOCI?

a. The debt investment is measured at fair value at reclassification date.

b. The difference between the previous carrying amount and fair value at reclassificationdate is recognized in other comprehensive income.

c. The original effective rate is not adjusted.

d. All of these statements are true.

A

d. All of these statements are true.

24
Q

Which statement is true when a debt investment at FVOCI is reclassified to amortized cost?

a. The fair value at reclassification date becomes the new carrying amount.

b. The cumulative gain or loss previously recognized in OCI is removed from equity andadjusted against the fair value at reclassification date.

c. The original effective rate is not adjusted.

d. All of these statements are true.

A

d. All of these statements are true.

25
Q

When a financial asset at FVPL is reclassified to FVOCI, the new carrying amount is equal to

a. Fair value at reclassification date

b. Original carrying amount

c. Present value of contractual cash flows

d. Present value of contractual cash flows representing principal

A

a. Fair value at reclassification date

26
Q

Which statement is true when a financial asset at FVOCI is reclassified to FVPL?

a. The financial asset continues to be measured at fair value.

b. The fair value at reclassification date becomes the new carrying amount.

c. The cumulative gain or loss previously recognized in OCI is reclassified to profit or loss.

d. All of these statements are true.

A

d. All of these statements are true.

27
Q

Fair value of an asset should be based upon

a. The replacement cost of an asset.

b. The price that would be received to sell the asset at the measurement date.

c. The original cost of the asset.

d. The price that would be paid to acquire the asset.

A
28
Q

Which of the following describes a principal market for establishing fair value of an asset?

a. The market that has the greatest volume and level of activity for the asset

b. Any broker or dealer market

c. The most observable market

d. The market in which the amount received would be maximized

A

a. The market that has the greatest volume and level of activity for the asset

29
Q

Which statement is true for measuring an asset at fair value?

a. The price of the asset should be adjusted for transaction cost.

b. The fair value of the asset should be adjusted for cost of disposal.

c. The fair value is based upon an entry price to purchase the asset.

d. The price should be adjusted for cost to transport the asset to the principal market.

A

d. The price should be adjusted for cost to transport the asset to the principal market.

30
Q

Which of the following is an assumption used in fair value measurement?

a. The asset must be in-use

b. The asset must be considered in-exchange

c. The most conservative estimate must be used

d. The asset is in the highest and best use

A

d. The asset is in the highest and best use

31
Q

Which of the following would meet the qualifications a market participants?

a. A liquidation market in which sellers are compelled to sell.

b. A subsidiary of the reporting unit interested in purchasing assets similar to those beingvalued.

c. An independent entity that is knowledgeable about the asset.

d. A broker or dealer that wishes to establish new market for the asset.

A
32
Q

The fair value at initial recognition is

a. The price paid to acquire the asset.

b. The price paid to acquire the asset less transaction cost.

c. The price paid to transfer or sell the asset.

d. The carrying amount of the asset acquired.

A

a. The price paid to acquire the asset.

33
Q

Which of the following is not a valuation technique used in fair value measurement?

a. Income approach
b. Residual value approach
c. Market approach
d. Cost approach

A

b. Residual value approach

34
Q

Valuation techniques for fair value that include the Black-Scholes formula, a binomial model, or discounted cash flow are examples of which valuation technique?

a. Income approach
b. Market approach
c. Cost approach
d. Exit value approach

A

a. Income approach

35
Q

The market approach for measuring fair value requires which of the following?

a. Present value of future cash flows

b. Prices and other relevant information of transactions from identical or comparable assets

c. The price to replace the service capacity of the asset

d. The weighted average of the present value of future cash flows

A

b. Prices and other relevant information of transactions from identical or comparable assets

36
Q

Which of the following would be considered a Level 2 input for fair value measurement?

a. Quoted market price on a stock exchange for an identical asset

b. Quoted market price available from a business broker for a similar asset

c. Historical performance and return on the investment

d. All of these would be considered Level 2 input for fair value measurement

A

b. Quoted market price available from a business broker for a similar asset

37
Q

It is the date on which the stock and transfer book of s entity is closed for registration.

a. Date of declaration
b. Date of record
c. Date of payment
d. Date of mailing the dividend check

A

b. Date of record

38
Q

At which of the following dates has the shareholder theoretically realized income from dividend?

a. The date the dividend is declared

b. The date of record

c. The date the dividend check is mailed by the entity

d. The date the dividend check is received

A

a. The date the dividend is declared

39
Q

Property dividends are recorded

a. As dividend income at carrying amount of the property

b. As dividend income at fair value of the property

c. As return of investment

d. By means of memorandum only

A

b. As dividend income at fair value of the property

40
Q

Liquidating dividends are credited to

a. Income
b. Retained earnings
c. Investment account
d. Share capital

A

c. Investment account

41
Q

An investor that owns 10% of the ordinary shares has the right to

a. Be paid 10% of the investee’s profit in cash each year.

b. Receive dividend equal to 10% of the par each year.

c. Receive dividend equal to 10% of the total dividend paid by the investee for the year to shareholders.

d. Keep investee from issuing any new shares unless the investor is willing to buy 10% of the new shares.

A

c. Receive dividend equal to 10% of the total dividend paid by the investee for the year to shareholders.

42
Q

What is the effect of share dividend of the same class?

a. Increase in investment and increase in cost per share

b. Decrease in investment and decrease in cost per share

c. No effect on investment but decrease in cost per share

d. No effect on investment but increase in cost per share

A

d. No effect on investment but increase in cost per share

43
Q

When share dividends of different class are received

a. No formal entry is made but only a memorandum

b. Cash is debited and dividend income is credited

c. A new investment account is debited and dividend income is credited

d. A new investment account is debited and the original investment account is credited

A

d. A new investment account is debited and the original investment account is credited

44
Q

Shares received in lieu of cash dividend are recorded as

a. Income at fair value of the shares received

b. Income at par value of the shares received

c. Income at the cash dividend that would have been received

d. Share dividends

A

a. Income at fair value of the shares received

45
Q

Cash received in lieu of share dividends is recorded as

a. Dividend income
b. Return of investment
c. Partly income and partly return of investment
d. If the share dividends are received and subsequently sold at the cash received and gain or loss is recognized

A

d. If the share dividends are received and subsequently sold at the cash received and gain or loss is recognized

46
Q

What is the effect of share split up?

a. Increase in number of shares and increase in cost per share

b. Decrease in number of shares and decrease in cost per share

c. Increase in number of shares and decrease in cost per share

d. Decrease in number of shares and increase in cost per share

A

c. Increase in number of shares and decrease in cost per share

ACC124 (23 decks)

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