Investments

Question 1

Info

Answer 1

Started on 24 August 2014 @4.75 PM
Total questions 67
To do at a time 28,
Practice session 88

Question 2

can we remeasure Held to maturity and Held for trading for FVTPL

Answer 2

Yes

Question 3

When the investor’s equity in the earnings of the investee would be affected.

Answer 3

The investor’s equity in the earnings of the subsidiary is Only affected by the investee’s income or loss for the period.

Question 4

Common Stock and warrant in the market price will ascertained, how?

Answer 4

Proportionatally.

Question 5

Use of fair value option

Answer 5

If Clarion elects the fair value option for reporting its financial assets, any unrealized gains or losses are reported in the current year’s income statement

Question 6

Hint

Answer 6

Accounting for investment income differs from the equity method when the fair value option is elected.

Question 7

Dey does not elect to use the fair value option in reporting financial assets. What amount of unrealized loss should Dey report in its December 31, year 1 balance sheet?

Answer 7

Available for sale.

Question 8

Beirn Corporation reports under IFRS. Simms reports the cost and fair value of its securities at year end as
Held to maturity $22,500 $25,000
Held for trading $15,000 $13,000

Answer 8

the held-for-trading securities are the only securities classified as FVTPL and FVTPL remeasurement gains and losses are recognized in earnings of the period.

Question 9

Hint

Answer 9

Held-to-maturity securities are carried at amortized cost unless the fair value option method of reporting is elected for financial assets.
Held-to-maturity securities be carried at amortized cost and that available-for-sale and trading securities be carried at market value.

Question 10

Hint

Answer 10

If Clarion does not elect the fair value option for valuing its financial assets, the rules of ASC Topic 320 apply. Therefore, only the trading security is reported at fair value, and the unrealized gain of $21,000 on Stock X is reported in earnings of the period. The bond investments in Company Y and Company Z would be reported at amortized cost.

Question 11

Cash surrender policy calculation

Answer 11

Need to learn.

Question 12

Hint

Answer 12

For available-for-sale securities, both unrealized losses and unrealized gains are shown as “Other comprehensive income.”

Question 13

IFRS Rule fair value

Answer 13

IFRS requires that if an asset is classified as fair value through profit or loss, it is remeasured to fair value and any profit or loss is recorded in the period

Question 14

Hint

Answer 14

Unrealized losses on trading securities are reported in the income statement, while unrealized losses on available-for-sale securities are reported as “Other comprehensive income” and a reduction of accumulated other comprehensive income, a component of stockholders’ equity (bypassing the income statement).

Question 15

When an investor uses the cost adjusted for fair value method to account for investments in common stock held in either a trading or available-for-sale portfolio, cash dividends received by the investor from the investee should normally be recorded as

Answer 15

Dividend income.

Using the cost adjusted for fair value method, cash dividends are normally recorded as dividend income.

Question 16

Under IFRS, financial instruments should be classified as

Answer 16

Tradable Fair value through profit or loss
No Yes
IFRS classifies instruments as fair value through profit or loss (FVTPL). Held for trading is a category of FVTPL, but tradable is not.

Question 17

Investments with the intent of selling them in the near term.

Answer 17

May be considered as Trading Securities.

Question 18

How trading security is reported on balance sheet.

Answer 18

At fair market value

Question 19

How available for sale security is reported on balance sheet.

Answer 19

At fair market value

Question 20

How held to maturity security is reported on balance sheet.

Answer 20

At amortized cost.

Question 21

How unrealized holding gains and losses of trading security is reported on
the income statement.

Answer 21

Earnings section.

Question 22

How unrealized holding gains and losses of available for sale security is reported on
the income statement.

Answer 22

In OCI

Question 23

How unrealized holding gains and losses of held to maturity is reported on
the income statement.

Answer 23

Unrealized gains and losses are excluded from earnings (unless decline is “other than temporary”)

Question 24

How IFRS classifies financial instruments

Answer 24

Fair value through profit and loss
Held to maturity
Available for sale