Question 1

The accounting for fair value hedges records the derivative at its

Accepted Answer

A)  amortized cost.
B)  carrying value.
C)  fair value.
D)  historical cost.

Question 2

All dividends received by an investor from the investee decrease the investment's carrying value under the equity method.

Accepted Answer

A) True 
 B)False

Question 3

All of the following are characteristics of a derivative financial instrument except the instrument

Accepted Answer

A)  has one or more underlyings and an identified payment provision.
B)  requires a large investment at the inception of the contract.
C)  requires or permits net settlement.
D)  All of these answer choices are characteristics.

Question 4

The IASB permits which of the following measurement categories for financial assets?
Fair value Amortized cost

Accepted Answer

A)  No No
B)  Yes No
C)  Yes Yes
D)  No Yes

Question 5

Equity investments acquired by a corporation which are accounted for by recognizing unrealized holding gains or losses as other comprehensive income and as a separate component of equity are

Accepted Answer

A)  non-trading where a company has holdings of less than 20%.
B)  trading investments where a company has holdings of less than 20%.
C)   investments where a company has holdings of between 20% and 50%.
D)  investments where a company has holdings of more than 50%.

Question 6

Companies that attempt to exploit inefficiencies in various derivative markets by attempting to lock in profits by simultaneously entering into transactions in two or more markets are called

Accepted Answer

A)  arbitrageurs.
B)  gamblers.
C)  hedgers.
D)  speculators.

Question 7

An option to convert a convertible bond into ordinay shares is a(n)

Accepted Answer

A)  embedded derivative.
B)  host security.
C)  hybrid security.
D)  fair value hedge.

Question 8

Which of the following statements is true regarding the differences between amortized cost and fair value for debt investments?

Accepted Answer

A)  When bonds sold at a discount and are accounted for using amortized cost, interest revenue will be greater than the interest revenue recorded under fair value.
B)  When bonds sold at a premium and are accounted for using amortized cost, interest revenue will be less than the interest revenue recorded under fair value.
C)  Under the fair value approach, an unrealized gain or loss is recorded in each year whereas no unrealized gains or losses are recorded under the amortized cost method.
D)  All of these answer choices are correct.

Question 9

An unrealized holding gain or loss on a trading debt investment is the difference between the investment's

Accepted Answer

A)  fair value and original cost.
B)  face value and amortized cost.
C)  fair value and amortized cost.
D)  face value and original cost.

Question 10

Impairments of debt investments are

Accepted Answer

A)  based on discounted contractual cash flows.
B)  recognized as a realized loss if the impairment is judged to be temporary.
C)  based on fair value for non-trading investments and on negotiated values for held-for-collection investments.
D)  evaluated at each reporting date for every held-for-collection investment.

Question 11

A gain on sale of a debt investment is the excess of the selling price over the bonds

Accepted Answer

A)  market price.
B)  fair value.
C)  face value.
D)  book value.

Question 12

If a company determines that an investment is impaired, it writes down the amortized cost basis of the individual security to reflect this loss in value.

Accepted Answer

A) True 
 B)False

Question 13

If the investor owns 60% of the investee's outstanding ordinary shares, the investor should generally account for this investment under the

Accepted Answer

A)  cost method.
B)  fair value method.
C)  consolidation equity method.
D)  consolidation method.

Question 14

Investments in trading debt investments are generally reported at

Accepted Answer

A)  amortized cost.
B)  face value.
C)  fair value.
D)  maturity value.

Question 15

Royce Company holds a portfolio of debt investments.The debt investments are not held-for-collection but managed to profit from interest rate changes.As a result, it accounts for these investments at fair value.As part of its strategic planning process, completed in the fourth quarter of 2015, Royce management decides to move from its prior strategy-which requires active management-to a held-for-collection strategy for these debt investments.The company will account for this change

Accepted Answer

The answer of Royce Company holds a portfolio of debt...

Question 16

Transfers between categories

Accepted Answer

A)  result in companies omitting recognition of fair value in the year of the transfer.
B)  are accounted for at fair value for all transfers.
C)  are considered unrealized and unrecognized if transferred out of held-to-maturity into trading.
D)  will always result in an impact on net income.

Question 17

IFRS requires companies to measure their financial assets based on all of the following except

Accepted Answer

A)  The company's business model for managing its financial assets.
B)  Whether the financial asset is a debt or equity investment.
C)  The contractual cash flow characteristics of the financial asset.
D)  All of these answer choices are IFRS requirements.

Question 18

Under IFRS,

Accepted Answer

A)  The accounting for non-trading equity investments deviates from the general provisions for equity investments.
B)  Realized gains and losses related to changes in the fair value of non-trading equity investments are reported as a part of other comprehensive income and as a component of other accumulated comprehensive income.
C)  Dividends received in cash are always reported as income on the income statement.
D)  All of hese answer choices are correct.

Question 19

Debt investments not held for collection are reported at

Accepted Answer

A)  amortized cost.
B)  fair value.
C)  the lower of amortized cost or fair value.
D)  net realizable value.

Question 20

Investments in trading debt investments should be recorded on the date of acquisition at

Accepted Answer

A)  face value.
B)  fair value.
C)  amortized cost.
D)  the lower of face value or amortized cost.

Exam 17: Investments

Which of the following statements is true regarding the differences between amortized cost and fair value for debt investments?

Correct Answer
verified

Debt investments not held for collection are reported at

Correct Answer
verified

Investments in trading debt investments are generally reported at

Correct Answer
verified

IFRS requires companies to measure their financial assets based on all of the following except

Correct Answer
verified

Equity investments acquired by a corporation which are accounted for by recognizing unrealized holding gains or losses as other comprehensive income and as a separate component of equity are

Correct Answer
verified

A gain on sale of a debt investment is the excess of the selling price over the bonds

Correct Answer
verified

The IASB permits which of the following measurement categories for financial assets? Fair value Amortized cost

Correct Answer
verified

Impairments of debt investments are

Correct Answer
verified

An option to convert a convertible bond into ordinay shares is a(n)

Correct Answer
verified

All dividends received by an investor from the investee decrease the investment's carrying value under the equity method.

Correct Answer
verified

The accounting for fair value hedges records the derivative at its

Correct Answer
verified

Correct Answer
verified

Companies that attempt to exploit inefficiencies in various derivative markets by attempting to lock in profits by simultaneously entering into transactions in two or more markets are called

Correct Answer
verified

An unrealized holding gain or loss on a trading debt investment is the difference between the investment's

Correct Answer
verified

Under IFRS,

Correct Answer
verified

Transfers between categories

Correct Answer
verified

Investments in trading debt investments should be recorded on the date of acquisition at

Correct Answer
verified

If a company determines that an investment is impaired, it writes down the amortized cost basis of the individual security to reflect this loss in value.

Correct Answer
verified

If the investor owns 60% of the investee's outstanding ordinary shares, the investor should generally account for this investment under the

Correct Answer
verified

All of the following are characteristics of a derivative financial instrument except the instrument

Correct Answer
verified

Exam 17: Investments

Which of the following statements is true regarding the differences between amortized cost and fair value for debt investments?

Correct AnswerverifiedShow Answer

Debt investments not held for collection are reported at

Correct AnswerverifiedShow Answer

Investments in trading debt investments are generally reported at

Correct AnswerverifiedShow Answer

IFRS requires companies to measure their financial assets based on all of the following except

Correct AnswerverifiedShow Answer

Equity investments acquired by a corporation which are accounted for by recognizing unrealized holding gains or losses as other comprehensive income and as a separate component of equity are

Correct AnswerverifiedShow Answer

A gain on sale of a debt investment is the excess of the selling price over the bonds

Correct AnswerverifiedShow Answer

The IASB permits which of the following measurement categories for financial assets? Fair value Amortized cost

Correct AnswerverifiedShow Answer

Impairments of debt investments are

Correct AnswerverifiedShow Answer

An option to convert a convertible bond into ordinay shares is a(n)

Correct AnswerverifiedShow Answer

All dividends received by an investor from the investee decrease the investment's carrying value under the equity method.

Correct AnswerverifiedShow Answer

The accounting for fair value hedges records the derivative at its

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Companies that attempt to exploit inefficiencies in various derivative markets by attempting to lock in profits by simultaneously entering into transactions in two or more markets are called

Correct AnswerverifiedShow Answer

An unrealized holding gain or loss on a trading debt investment is the difference between the investment's

Correct AnswerverifiedShow Answer

Under IFRS,

Correct AnswerverifiedShow Answer

Transfers between categories

Correct AnswerverifiedShow Answer

Investments in trading debt investments should be recorded on the date of acquisition at

Correct AnswerverifiedShow Answer

If a company determines that an investment is impaired, it writes down the amortized cost basis of the individual security to reflect this loss in value.

Correct AnswerverifiedShow Answer

If the investor owns 60% of the investee's outstanding ordinary shares, the investor should generally account for this investment under the

Correct AnswerverifiedShow Answer

All of the following are characteristics of a derivative financial instrument except the instrument

Correct AnswerverifiedShow Answer

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