MCQ Review

Question 1

Reporting OCI in a full set of financial Statement

Answer 1

1. in a single continuous statement or comprehensive income, OR
2. in two separate but consecutive statements (as in come statement and statement of OCI)

Question 2

What is Firm commitment

Answer 2

A firm commitment is an agreement with an unrelated party, binding on both parties and usually legally enforceable, that specifies all significant terms and includes a disincentive for nonperformance

Question 3

What is Forecasted transaction

Answer 3

A forecasted transaction is a transaction that is expected to occur for which no firm commitment exists.

Question 4

What is interest-rate swap?

Answer 4

An interest-rate swap is an exchange of fixed interest payments for payments based on a floating rate.

Question 5

What is the inherent in an interest-rate swap agreement?

Answer 5

The risks inherent in an interest-rate swap include both credit risk and market risk. Credit risk is the risk of accounting loss from a financial instrument because of the possibility that a loss may occur from the failure of another party to perform according to the terms of a contract. Market risk arises from the possibility that future changes in market prices may make a financial instrument less valuable or more onerous. Market risk therefore includes the risk that changes in interest rates will make the swap agreement less valuable or more onerous.

Question 6

Examples of Level 2 observable input

Answer 6

1. Quoted prices for similar assets and liabilities in markets that are active
2. Interest rates that are observable at commonly quoted intervals
3. Quoted prices for identical assets and liabilities in markets that are not active

Question 7

Which section Interest received in cash flow?

Answer 7

Operating

Question 8

Which section Interest paid in cash flow?

Answer 8

Operating

Question 9

Which section Dividend paid in cash flow?

Answer 9

Financing out flow

Question 10

Which section dividend received in cash flow?

Answer 10

Oeprating

Question 11

Which financial statements must be reported for fiduciary funds?

Answer 11

1. Statement of fiduciary net position

2. Statement of changes in fiduciary net position

Question 12

Debentures are

Answer 12

1. Unsecured bonds
2. Secured by the full faith and credit of the issuing firm
3. Only companies with the best credit ratings can issue debentures
4. General obligation of the borrower and rank equally with convertible bonds

Question 13

How should the effect of a change in accounting estimate be accounted for?

Answer 13

1. By prospectively applying the change to current and future periods
2. the entity may not (1) restate or retrospectively adjust prior-period statements or (2) report pro forma amounts for prior periods.