Question 1

Which of the following is not a financial asset?

Accepted Answer

A)  Cash
B)  Equity investment
C)  Inventory
D)  Receivables

Question 2

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

Accepted Answer

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

Question 3

Which of the following is not generally correct about recording a sale of a debt investment before maturity date?

Accepted Answer

A)  Accrued interest will be received by the seller even though it is not an interest payment date.
B)  An entry must be made to amortize a discount to the date of sale.
C)  The entry to amortize a premium to the date of sale includes a debit to Debt investments.
D)  A gain on the sale is the excess of the selling price over the book value of the bonds.

Question 4

The IASB requires that investments meeting the business model (held-for-collection) and contractual cash flow tests be valued at fair value.

Accepted Answer

A) True 
 B)False

Question 5

Under the fair value option, companies report all gains and losses related to changes in fair value in

Accepted Answer

A)  comprehensive income.
B)  income.
C)  equity.
D)  other comprehensive income.

Question 6

Under IFRS, a company

Accepted Answer

A)  Should evaluate every investment for impairment.
B)  Accounts for an impairment as an unrealized loss, and includes it as a part of other comprehensive income and as a component of other accumulated comprehensive income until realized.
C)  Calculates the impairment loss on debt investments as the difference between the carrying amount plus accrued interest and the expected future cash flows discounted at the investment's historical effective-interest rate.
D)  All of these answer choices are correct.

Question 7

Amortized cost is the initial recognition amount of the investment minus cumulative amortization.

Accepted Answer

A) True 
 B)False

Question 8

An investor has a long-term investment in ordinary shares.Regular cash dividends received by the investor are recorded as

Accepted Answer

The answer of An investor has a long-term investment in...

Question 9

A held-for-collection debt investment is purchased at a premium.The entry to record the amortization of the premium includes a

Accepted Answer

A)  Credit to Debt Investments.
B)  Credit to Interest Receivable.
C)  Credit to Interest Revenue.
D)  None of these answers are correct.

Question 10

Unrealized holding gains or losses on trading investments are reported in

Accepted Answer

A)  equity.
B)  net income.
C)  other comprehensive income.
D)  accumulated other comprehensive income.

Question 11

Under IFRS, the fair value option

Accepted Answer

A)  must be applied to all instruments the company holds.
B)  may be selected as a valuation method by the company at any time during the first2 years of ownership.
C)  reports all gains and losses in income.
D)  All of these answer choices are correct.

Question 12

Held-for-collection investments are reported at

Accepted Answer

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

Question 13

Debt investments that are accounted for and reported at amortized cost, are

Accepted Answer

A)  debt investments which are managed and evaluated based on a documented risk-management strategy.
B)  trading debt investments.
C)  held-for-collection debt investments.
D)  All of these answer choices are correct.

Question 14

Transferring an investment from one classification to another should occur only when the business model for managing the investment changes.

Accepted Answer

A) True 
 B)False

Question 15

An impairment loss is the difference between the recorded investment and the

Accepted Answer

A)  expected cash flows .
B)  present value of the expected cash flows.
C)  contractual cash flows.
D)  present value of the contractual cash flows.

Question 16

Santo Corporation declares and distributes a cash dividend that is a result of current earnings.How will the receipt of those dividends affect the investment account of the investor under each of the following accounting methods?

Accepted Answer

The answer of Santo Corporation declares and distributes a cash...

Question 17

Under the fair value method, the investor reports as revenue its share of the net income reported by the investee.

Accepted Answer

A) True 
 B)False  False

Question 18

Which of the following are reported at fair value?

Accepted Answer

A)  Debt investments.
B)  Equity investments.
C)  Both debt and equity investments.
D)  None of these answers choices are correct. C

Question 19

Equity security holdings between 20 and 50 percent indicates that the investor has a controlling interest over the investee.

Accepted Answer

A) True 
 B)False  False

Question 20

Companies account for transfers between investment classifications retroactively, at the end of the accounting period after the change in the business model.

Accepted Answer

A) True 
 B)False

Exam 17: Investments

Which of the following is not a financial asset?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following is not generally correct about recording a sale of a debt investment before maturity date?

Correct AnswerverifiedShow Answer

The IASB requires that investments meeting the business model (held-for-collection) and contractual cash flow tests be valued at fair value.

Correct AnswerverifiedShow Answer

Under the fair value option, companies report all gains and losses related to changes in fair value in

Correct AnswerverifiedShow Answer

Under IFRS, a company

Correct AnswerverifiedShow Answer

Amortized cost is the initial recognition amount of the investment minus cumulative amortization.

Correct AnswerverifiedShow Answer

An investor has a long-term investment in ordinary shares.Regular cash dividends received by the investor are recorded as

Correct AnswerverifiedShow Answer

A held-for-collection debt investment is purchased at a premium.The entry to record the amortization of the premium includes a

Correct AnswerverifiedShow Answer

Unrealized holding gains or losses on trading investments are reported in

Correct AnswerverifiedShow Answer

Under IFRS, the fair value option

Correct AnswerverifiedShow Answer

Held-for-collection investments are reported at

Correct AnswerverifiedShow Answer

Debt investments that are accounted for and reported at amortized cost, are

Correct AnswerverifiedShow Answer

Transferring an investment from one classification to another should occur only when the business model for managing the investment changes.

Correct AnswerverifiedShow Answer

An impairment loss is the difference between the recorded investment and the

Correct AnswerverifiedShow Answer

Santo Corporation declares and distributes a cash dividend that is a result of current earnings.How will the receipt of those dividends affect the investment account of the investor under each of the following accounting methods?

Correct AnswerverifiedShow Answer

Under the fair value method, the investor reports as revenue its share of the net income reported by the investee.

Correct AnswerverifiedFalse

Which of the following are reported at fair value?

Correct AnswerverifiedC

Equity security holdings between 20 and 50 percent indicates that the investor has a controlling interest over the investee.

Correct AnswerverifiedFalse

Companies account for transfers between investment classifications retroactively, at the end of the accounting period after the change in the business model.

Correct AnswerverifiedShow Answer

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