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HTM, Trading, and Available-for-sale debt securities. Investments in debt securities may be classified as


Available-for-sale securities
Held-to-maturity securities
Trading securities
   
At year end, Rim Co. held several investments with the intent of selling them in the near term.
The investments considered of $100,000; 8%, 5-year bonds, purchased for $92,000, and short-term notes purchased $35,000.
At year end, the bonds were selling on the open market for $105,000, and the short-term notes had a market value of $50,000.
What amount should Rim report as trading securities in its year-end balance sheet?
 
$155,000
   
The "discount on bond investments" account is a
 
contra-asset account
   
The discount on bond investment:
 
is a contra-asset account reduces the carrying value of the bond to its cost at date of purchase
  For discounted bonds, interest revenue is ______ cash interest each interest period.
 
greater than
   
The interest rate for debt of similar risk and maturity is referred to
as the _______ interest rate.
 
Market
   
Interest received is calculated based on the ___________ interest rate.
 
Stated
   
Interest revenue is calculated based on the _____ interest rate.
 
market
   
Equity and debit securities are commonly referred to as __________ instruments.
 
financial
   
Greenly Company acquired $40,000 face amount bonds of Neumann Company.
Greenly can expect to receive the following cash flows from its investment. (Select all that apply.)
 
Interest and principal
   
The interest rate for debt of similar risk and maturity is referred to as the _____ interest rate.
 
market
   
The price of a bond is equal to
 
present value of future interest payments plus present value of principal.
   
If a bond sells for less than its maturity value, the bond sells at a
 
discount
   
Which of the following are common financial instruments that are used to
finance or expand a company's operations? (Select all that apply.)
 
Common Stock
Preferred Stock
Corporate Bonds
   
On the date of acquisition, an investment in bonds should be recorded at
 
Cost
   
The price of a bond is equal to present value of future interest payments plus present value of principal.
 
Present value of future cash receipts
   
If a bond sells for less than its maturity value, the bond sells at a
 
discount
   
If a bond sells for more than its maturity value, the bond sells at a
 
Premium
   
If the market rate of interest decreases after a bond is purchased, the bond incurs:
 
an unrealized holding gain
   
If the market rate of interest rises after a bond is purchased, the bond incurs:
 
an unrealized holding loss
   
The primary reasons why holding gains and losses relating to held-to-maturity securities are not recognized
even though they are recognized for trading and AFS securities probably is that the information is:
 
less relevant
   
If an investor has the "positive intent and ability" to hold debt security until it matures, it should be classified as an:
 
held-to-maturity security
   
Over the life of the investment, amortization of a discount
 
increases each period.
   
Greene Company purchases an investment in bonds issued by Blue Company.
Greene intends to hold the bonds until they mature and did not elect the fair value option.
Greene should report the investment at:
 
amortized cost
   
Investments that are properly classified as held-to-maturity should be carried at:
 
amortized cost.
   
Debt securities that are classified as available-for-sale or trading are valued at:
 
fair market value
   
Blum Company invested in debt securities and classified them as "held-to-maturity."
At the accounting period, the value of the investment appreciated by $10,500.
The company should:
 
not recognize the unrealized gain.
   
Which of the following events is of little importance if an investment in debt securities is held to maturity.
 
Changes in fair value during the holding period.
   
For held-to-maturity debt instruments, the difference between fair value and amortized
cost must be ________ in a _______ to the financial statements.
 
disclosed; notes
   
Which of the following conditions must be present for a debt security to be classified as "held-to-maturity?"
 
The investor has the ability to hold the security until maturity.
The investor intends to hold the security until maturity.
   
Greene Corporation does not recognize unrealized holding gains and losses for its bond investments.
If the company is properly applying U.S. GAAP, its investment must be classified as:
 
held-to-maturity
   
Which of the following statements regarding the initial recognition of debt investments is correct?
 
All debt investments are initially recorded at cost.
   
At the time of acquisition, debt investments are recorded at
 
cost
   
Bonds typically provide two sources of cash flows to investors. These are associated with the payment of
 
Interest
Principal
   
Bonds typically provide two sources of cash flows to investors. These
are associated with the payment of
 
principal
interest
   
Investors use this interest rate to value investments in bonds:
market interest rate
   
The discount on bond investment (Select all that apply.)
 
is a contra-asset account
reduces the carrying value of the bond to its cost at date of purchase
   
The price of a bond is equal to the
 
present value of future cash receipts
   
The appropriateness of the classification of debt investments must be reassessed
 
each reporting date
   
What is the purpose of the Statement of Cash Flows?
 
it is intended to provide a cash based view of a company
   
What is the variation of the accounting equation that describes the preparation of the statement of cash flows?
 
Change in Cash= Change in Liabilities + Change in SE - Change in Noncash Assets
   
What cash flows are classified as operating activities? cash from revenue earned in daily transactions and cash flow causing
 
decreases in current liabilities
   
The two alternative methods that may be used in preparing the operating section of the statement of cash flows are the ______ and _____ methods
 
direct and indirect
   
Net cash flows provided by operating activities will be ______ when using the direct method compared to the indirect method
 
the same
   
The starting point for preparing the operating activities section using the indirect method is ________
 
net income
   
Consistent with IFRS, the fair value option is:
 
permitted only in specific circumstances
   
Any unrealized holding gains or losses at reclassification should be accounted for in a manner
consistent with the classification into which the security is being transferred.
 
True
   
If the interest rate paid on a bond is lower than the market interest rate, the bond will sell for an amount that is
 
less than its maturity value
   
On December 31, 2018, Gardner Company holds debt securities classified as HTM with a face amount of
$100,000 and a carrying value of $95,000. The bonds have an effective interest rate of 6% and pay interest
of $2,500 semi-annually on June 30 and December 31. The effective interest revenue recognized for the six
months ended December 31, 2018 is:
 
$2,850
 
95,000 x .06 = 5,700
5,700 / 2 = 2,850
   
At the time of acquisition, debt investments are recorded at
 
Cost
   
Investments in debt securities classified as trading are reported on the balance sheet at
 
Fair Value
   
At the end of the accounting period, trading debt securities must be adjusted to
 
Fair value
   
Debt investments in available-for-sale securities are reported at
 
fair value.
   
Gerhard Company purchases debt investments for $200,000 and classifies them as available-for-sale securities.
At the end of the accounting period, the fair value has increased to $207,000. Gerhard should report its investment at
 
$207,000
   
Cash flows from buying and selling debt securities classified as trading as a part of normal operations
typically are classified as _____ activities in the statement of cash flows.
 
Operating
   
Debt investments that will NOT be held for their entire life or sold in the very near future are referred to as
 
available-for-sale securities
   
Debt investments that do not meet the criteria for held-to-maturity or trading securities are classified as
 
available-for-sale
   
What is the best measure of a company's profitability
 
Accrual-based net income
   
What are the classifications used to categorize cash inflows and outflows on the statement of cash flows?
 
operating, investing, financing (OIF)
   
For any company to survive in the long run, it must generate positive cash flows from ____________ activities on a regular basis
 
operating
   
The net change in cash on the statement of cash flows equals
 
operating + investing + financing activities
   
An increase in Accounts Payable on the statement of cash flows prepared using the indirect method is found in
the ________ section as a ________ to net income.
 
operating activity; increase
   
The sale or maturity of investments in securities is a cash _______ activities section of the statement of cash flows
 
inflow in the investing
   
Issuing stock to owners is classified as a ________ activity
 
financing
   
Greenly Company acquired $40,000 face amount bonds of Neumann Company. Greenly can expect to
receive the following cash flows from its investment. (Select all that apply.)
 
principal
interest
   
Emil Company purchases $400,000 face amount, 6% semi-annual bonds when the market rate is 8%.
The rate used to determine interest received for the first 6 months on the investment is
 
3%
 
6% / 2 = 3%
   
On December 31, 2021, Gardner Company holds debt securities classified as HTM with a face
amount of $100,000 and a carrying value of $95,000. The bonds have an effective interest rate
of 6% and pay interest of $2,500 semi-annually on June 30 and December 31. The journal entry
to record the interest payment on December 31, 2021 includes (Select all that apply.)
 
Debit cash           $2,500
Debit discount on bond investment        $350
Credit interest revenue                 $ 2,850
   
Interest revenue is calculated based on the __________ interest rate.
market
   
Marlon Company recognizes interest revenue of $5,400 related to its bonds; its periodic bond
interest payment receipts are $5,200. The bonds must have issued at:
 
discount
   
During the current period, Muenster Company amortized $5,000 of discount relating to its investment
in debt securities. The company's amortization next period should be ______ the current period.
 
higher than
   
If the market rate of interest decreases after a bond is purchased, the bond incurs
 
an unrealized holding gain
   
Interest received is calculated based on the_______ interest rate.
 
stated
   
Which of the following types of debt investments are reported at fair value? (Select all that apply.)
 
Available for sale
Trading
   
For discounted bonds, interest revenue is ____ cash interest each interest period.
 
greater than
   
Over the life of the investment, amortization of a discount
 
increases each period
   
Which of the following is the most important concept or principle that explains the differences
in reporting holding gains and losses?
 
Relevance
   
Holding bonds during periods in which the fair value of the bonds changes results in
 
unrealized gains and losses.
   
Debt securities that are classified as available-for-sale or trading are valued at
 
fair market value
   
Which of the following conditions must be present for a debt security to be classified as "held-to-maturity?"
(Select all that apply.)
 
the investor has the ability to hold the security until maturity
the investor intends to hold the security until maturity
   
Greene Company purchases an investment in bonds issued by Blue Company. Greene intends to hold
the bonds until they mature and did not elect the fair value option. Greene should report the investment at
 
amortized cost
   
The primary reasons why holding gains and losses relating to held-to-maturity securities are not recognized
 even though they are recognized for trading and AFS securities probably is that the information is
 
less relevant
   
Greene Corporation does not recognize unrealized holding gains and losses for its bond investments.
If the company is properly applying U.S. GAAP, its investment must be classified as
 
held to maturity
   
Lucky Company invested in debt securities and classified them as HTM. At the end of the accounting period,
the value of the investment appreciated by $10,500. The company should
 
disclose the fair market value in the notes
   
Assume that last year T-bills returned 2.8 percent while your investment in large-company stocks earned an
average of 7.6 percent. Which one of the following terms refers to the difference between these two rates of return?
 
risk premium
   
Which one of the following correctly describes the dividend yield?
 
Next year's annual dividend divided by today's stock price
   
Which one of the following categories of securities had the lowest average risk premium for the period 1926-2016?
 
U.S. Treasury bills
   
Stacy purchased a stock last year and sold it today for $4 a share more than her purchase price.
She received a total of $1.15 per share in dividends. Which one of the following statements is correct in relation to this investment?
 
The capital gains yield is positive.
   
Which of the following statements are true based on the historical record for 1926-2016?
 
Bonds are generally a safer, or less risky, investment than are stocks.
   
The return earned in an average year over a multiyear period is called the _____ average return.
 
arithmetic
   
Which one of the following categories of securities had the highest average annual return for the period 1926-2016?
 
Small-company stocks
   
Standard deviation is a measure of which one of the following?
 
Volatility
   
The average compound return earned per year over a multiyear period is called the _____ average return.
 
geometric
   
Assume all stock prices fairly reflect all of the available information on those stocks.
Which one of the following terms best defines the stock market under these conditions?
 
Efficient capital market
   
Which one of the following best defines the variance of an investment's annual returns over a number of years?
 
The average squared difference between the actual returns and the arithmetic average return
   
If an investor has the positive intent and ability to hold a debt security until it matures, it should be classified as a(n)
 
held to maturity
   
Marian Company's records show the following account balances at 2/1/18: Investment in HTM securities,
$500,000; and discount on HTM investment, $20,000. On that day, the company sells the investment for $520,000.
The journal entry would include debits of (Select all that apply.)
 
$20,000 to discount
$520,000 to cash
   
An investor who purchased corporate bonds that are not publicly traded may estimate the bonds' fair value by determining the
 
present value of the future cash flows
   
Investments that are properly classified as held-to-maturity should be carried at
 
amortized cost
   
Cash flows from buying and selling held-to-maturity securities are typically classified as _____ activities
on the Statement of Cash Flows.
 
investing
   
Holding gains and losses associated with investments properly classified
as held-to-maturity are
 
not recognized
   
Investments in debt securities acquired principally for the purpose of selling them in the near term are
classified as ________ securities.
 
trading
   
For held-to-maturity debt instruments, the difference between fair value and amortized cost must
be___________ in a_____________ to the financial statements.
 
Disclosed; note
   
Marian Company's records show the following account balances at 2/1/18:
Investment in HTM securities, $500,000; and discount on HTM investment,
$20,000. On that day, the company sells the investment for $520,000. The
journal entry would include credits of (Select all that apply.)
 
$500,000 to investments in HTM
$40,000 to gains from sale of investment
   
If a company holds bonds that are not actively traded, it can estimate
the fair value of those bonds by using___________ ____________ techniques.
 
present
value
   
An investment in trading debt securities is initially recorded at
 
cost
   
Characteristics that support classification of investments as trading
securities include (Select all that apply.)
 
frequent and active trading
motivation to realize short-term profits
   
Holding gains and losses associated with investments properly classified
as "trading securities" are
 
recognized as part of iincome
   
Which of the following fundamental concepts or principles supports the
use of the fair value method?
 
relevance
   
Holding gains and losses are unrealized because the related investment has not
 
been sold
   
Rather than debiting or crediting the investment account, fair value adjustments for trading securities
are typically recognized in a separate account.
 
True
   
True or false: An investment in trading debt securities should initially
be recorded at cost.
 
True
   
Northern Company has bonds with an amortized cost of $600,000 and a fair value of $675,000.
Northern properly classifies these bonds as trading securities. At the end of the reporting period,
(Select all that apply.)
 
Northern will report an unrealized holding gain in net income
Northern will make a fair value adjustment of $75,000
   
Porter Company classified its investment in the bonds of Bailey Company as a trading security. Subsequent to the
investment, the fair value of the investment increased by $5,000. The result of this increase in value will
 
be increased in the net income
   
Unrealized gains and losses on AFS debt securities must be recognized in
 
other comprehensive income
   
Changes in the fair value are more relevant for trading debt securities than for held-to-maturity debt securities
because they provide an indication of
 
management's success at investing
   
Northern Company has bonds with an amortized cost of $600,000. At the end of the first reporting period, the
bonds had a fair value of $675,000. 2 days after the end of the first reporting period, the bonds have a fair value
of $680,000 and Northern decides to sell the bonds. Northern properly classifies these bonds as trading securities.
Prior to recording the sale, the journal entry to adjust the bonds to fair value includes (Select all that apply.)
 
Credit unrealized holding gain on trading securities net income $5,000
Debit fair value adjustment $5,000
   
Gains and losses that have not been realized through sales of the related investment are also referred to as:
 
unrealized gains and losses
   
Fair value adjustments for trading securities are typically recognized
 
in a separate valuation account
   
Cash flows from buying and selling debt securities classified as trading as a part of normal operations typically
are classified as ___________activities in the statement of cash flows. (Enter only one word.)
 
operating
   
Northern Company has bonds with an amortized cost of $600,000 and a fair value of $675,000. Northern properly
 classifies these bonds as available for sale (AFS) securities. At the end of the reporting period, the journal entry includes
(Select all that apply.)
 
Debit Fair Value adjustment $75,000
Credit unrealized holding gains on AFS securities OCI $75,0000
   
Investments in debt securities classified as trading are reported on the balance sheet at _____________ _______________.
(Enter one word per blank.)
 
fair value
   
The interest rate for debt of similar risk and maturity is referred to as the Blank______ interest rate.
 
market
   
The discount on bond investment (Select all that apply.)
 
reduces the carrying value of the bond to its cost at date of purchase
is a contra-asset account
Interest received is calculated based on the
stated or face interest rate
   
Margot Company purchases $100,000 face amount, 6% semi-annual bonds for $110,000 when the
market interest rate is 5%. The journal entry to record the interest for the first 6-month period includes
(Select all that apply.)
 
credit premium on bond investment $250
debit cash $3,000
credit interest revenue $2,750
   
Debt investments that will not be held for their entire life or sold in the very near future are referred to as
 
available-for-sale securites
   
Rosa Company purchases debt securities and classifies them as "available-for-sale" securities.
How should Rosa recognize changes in the value of the investment?
 
as unrealized holding gain or loss in other comprehensive income
   
Holding gains and losses associated with investments properly classified as held-to-maturity are
 
not realized
   
Which of the following conditions must be present for a debt security to be classified as
"held-to-maturity?" (Select all that apply.)
 
The investor intends to hold the security until maturity.
The investor has the ability to hold the security until maturity.
   
Gains and losses that have not been realized through sales of the related investment are also referred to as:
 
unrealized holding gains and losses
   
Markus Company sells 1,000 bonds of its debt investment in Berta Inc. for $20,000. The original cost
of the 1,000 bonds was $18,000. During the prior year, the bonds were reported on the balance sheet
at a fair value of $19,000. Assume the investment was accounted for as available-for-sale and all unrealized
holding gains and losses have been reversed.
The journal entry to record the sale of the bonds should include these credits: (Select all that apply.)
 
Investment in AFS - $18,000
Gain on sale of investment - $2,000
   
Debt investments in available-for-sale securities are reported at
 
fair value
   
Investors use this interest rate to value investments in bonds:
 
Market
   
Palmer Company purchases bonds with a face amount of $500,000 for $480,000 and properly
classifies them as "held-to-maturity." On the maturity date of the bonds, the book value of bonds will be:
 
500,000
   
On December 31, Gardner Company holds debt securities classified as HTM with a face amount
of $100,000 and a carrying value of $95,000. The bonds have an effective interest rate of 6% and
pay interest of $2,500 semi-annually on June 30 and December 31. The journal entry to record
the interest payment on December 31, includes (Select all that apply.)
 
Debit discount on bond investment $350
Debit cash $2,500
Credit interest revenue $2,850
   
On the date of acquisition, an investment in bonds should be recorded at:
cost
   
Debt investments that do not meet the criteria for held-to-maturity or trading securities are classified
as_____________-_______________-_____________
 
available-for-sale
   
Unrealized holding gains and losses associated with debt investments
properly classified as "available for sale" are
 
recognized as other comprehensive income
   
Over the life of the investment, amortization of a discount
 
increases each period.
   
Neumann Company changes from the equity method to another method. Which of the following
occur at the time of change? (Select all that apply.)
 
The balance in the investment account when the equity method is discontinued serves as the new cost basis.
No adjustment is made to the remaining carrying amount of the investment.
   
Discontinuing the application of the equity method when the investor's share of the investee losses exceeds
the carrying amount of the investment avoids the problem of reducing the investment account
 
below zero
   
Loren Company properly reclassifies an investment that previously lacked significant influence to the
equity method. Loren should (Select all that apply.)
 
include a disclosure note describing the change to the equity method.
use balance in the investment account at the date of change as the starting balance for applying the equity method.
   
For a specific investment in equity securities, use of the equity method tends to produce ______ financial
statement results than would using the fair value method.
 
different
   
The overall objective of derivatives is to
 
manage risk
   
Marketable securities go in
 
OCI
   
When equity securities that lack significant influence are sold, (Select all that apply.)
 
First unrealized holding gains and losses that occurred during the current year prior to sale are recorded in net income.
On the date of sale, the amounts associated with the investment are removed from the balance sheet accounts.
   
Northern Company has bonds with an amortized cost of $600,000. At the end of the first reporting period,
the bonds had a fair value of $675,000. 2 days after the end of the first reporting period, the bonds have a
fair value of $680,000 and Northern decides to sell the bonds. The initial investment in the bonds was
$700,000 and the discount on bond account has a $100,000 balance. Northern properly classifies these
bonds as trading securities. The journal entry to record the sale of the bonds includes (Select all that apply.)
 
debit to discount on bond investment $100,000
credit to investment in bonds $700,000
credit to fair value adjustment $80,000.
debit to cash $680,000
   
Adjustments made to OCI and AOCI to account for the tax effects of unrealized holding gains and losses on
available-for-sale debt securities also give rise to Blank______. (Select all that apply.)
deferred tax liabilities
deferred tax assets
   
Which of the following events is of little importance if an investment in debt securities is held to maturity.
 
Changes in fair value during the holding period
   
A key factor determining the accounting for equity investments is
 
the extent to which the investor can influence the investees activities
   
An investor that owns between Blank______ and Blank______ percent of the voting stock
of an investee is assumed to have significant influence over the investee.
 
20; 50
   
Regarding the valuation of equity investments that lack significant influence beginning in 2018,
which of the following statements is correct?
 
Companies are required to use the fair value through net income method.
   
Archie Inc. has available-for-sale debt securities that have a fair value that exceeds
their amortized cost, and Archie has been recording changes in fair value over the life
of the securities. If Archie now sells those securities, it should reverse previous unrealized
holding _____ included in ______.
 
Gains; OCI
   
Consistent with the equity method, investment income is
 
based on investee's income times ownership percentage.
   
True or false: The 20% ownership threshold dictates the accounting treatment of equity investments
regardless of other influences.
 
False
   
Abbott Inc. owns 30% of the outstanding voting shares of Berta Inc. On the date of acquisition, the fair value
of Berta's equipment with a remaining useful life of five years and no residual value exceeded its carrying
value by $20,000. During the year after the acquisition, the undervalued equipment will Blank______ Abbott's
investment revenue by Blank______.
 
decrease; $1,200
   
How are available-for-sale debt securities reported? (Select all that apply.)
 
Realized gains and losses are reported in net income in the period the investment is sold
unrealized gains and losses are reported as part of other comprehensive income when they occur
   
Cash flows from buying and selling AFS debt securities are typically shown on the Statement
of Cash Flows in the _____ activities section.
 
investing
   
On December 31, 2021, Sparrow Company has bonds with an amortized cost of $424,000 and a
fair value of $452,000. These bonds are properly classified as AFS securities. On January 12, 2022,
Sparrow sells the bonds for $450,000. Just prior to recording the sale on January 12, 2022, the
journal entry to adjust the bonds to fair value will include:
 
A debit to unrealized holding loss - OCI $2,000
   
Which of the following represents a key difference between the three debt investment classifications
(HTM, AFS, trading) with respect to financial reporting?
 
classification of unrealized gains and losses
   
When accounting for the sale of AFS debt securities, how are unrealized gains reversed? (Select all that apply.)
 
debit a reclassification adjustment
credit the fair value adjustment account
   
Silvia Company acquires a 30% interest in Small Company. The fair value of Small's inventory exceeds its
carrying value by $100,000. During the subsequent year, the inventory is sold. As a result of the sale of
inventory, investment revenue is reduced by $30,000. This adjustment yields the same net investment
revenue as if Blank______ had carried the inventory on its books at Blank______.
 
Small; fair value
   
Under the equity method, the fair value of the investment shares at the end of the reporting period is
 
not reported.
   
The adjustments that investors make when applying the equity method are designed to
 
mimic what would happen if an investment were consolidated.
   
Adjustments made to OCI and AOCI to account for the tax effects of
unrealized holding gains and losses on available-for-sale debt
securities also give rise to _________. (Select all that apply.)
 
deferred tax assets
deferred tax liabilities
   
Under IFRS, one of the conditions that must be met in order to carry investments at "amortized cost"
is that contractual cash flows
 
consist only of principal and interest payments.
   
Under IFRS, transfers of debt securities between the amortized cost, FVOCI, and FVPL categories occur
if and only if the company
 
changes its business model with respect to the debt investment.
   
Hanes company sells debt investments costing $26,000 for $28,000. In journalizing the sale, credits are to:
 
debt investments and gain on sale of debt investments
   
Investors must disclose this information related to their investments. (Select all that apply.)
 
Changes in net unrealized holding gains and losses
Gross realized and unrealized holding gains and losses
Aggregate fair value
Amortized cost basis by major type
   
Which reporting method should be used if the investor can exert significant influence over the investee?
Equity method
   
Markus Company sells 1,000 bonds of its debt investment in Berta Inc. for $20,000. The original cost
of the 1,000 bonds was $18,000. During the prior year, the bonds were reported on the balance sheet
at a fair value of $19,000. Assume the investment was accounted for as available-for-sale and all unrealized
holding gains and losses have been reversed. The journal entry to record the sale of the bonds should include
these credits: (Select all that apply.)
 
Investment in AFS - $18,000
Gain on sale of investment - $2,000
   
Accounting for held-to-maturity, trading, and available-for-sale debt securities differ with respect to
 
the year-end fair value adjustment
   
Folger Company recognizes an unrealized holding gain for debt investments that are classified as AFS.
If the company had classified the investments as trading securities, its total shareholders' equity would be
 
the same
   
Adjustments must be made to _____ to account for the tax effects of debt investments. (Select all that apply.)
 
AOCI
OCI
   
Consistent with IFRS, an investment that meets the "SPPI" criteria is accounted for using amortized cost if
the business purpose of the investment is to
 
hold the investment to collect and contractual cash flows
   
Under U.S. GAAP, which of the following statements regarding the classification of debt investments is correct?
 
The classification of investments must be reassessed each reporting period.
   
Which of the following are categories available for classifying investments in debt securities consistent
with IFRS No. 9? (Select all that apply.)
 
amortized cost
fair value through profit or loss (FVPL)
fair value through OCI (FVOCI)
   
Under IFRS, transfers of debt securities between the amortized cost,
FVOCI, and FVPL categories occur if and only if the company
 
changes its business model with respect to the debt investment.
   
Under IFRS, one of the conditions that must be met in order to carry investments at "amortized cost"
is that contractual cash flows
 
consist only of principal and interest payments
   
The fair value option can be applied to: (Select all that apply.)
 
financial assets
financial liabilities
   
The appropriateness of the classification of debt investments must be reassessed
each reporting date
   
Which of the following is correct regarding the fair value option?
(Select all that apply.)
 
The election is irrevocable
The election can be applied to selected securities
   
True or false: Any unrealized holding gain or loss that exist when a
transfer of investment category occurs should be immediately recognized
into income.
 
False
   
Consistent with IFRS, the fair value option is:
 
permitted only in specific circumstances
   
Consistent with IFRS, transfers between investment categories are
 
permitted only in rare circumstances
   
Global Company holds a portfolio of equity securities. The company
intends to sell the securities during the next accounting period. The
company should classify the investment as
 
current
   
Under the fair value option, unrealized gains and losses on debt securities are
 
recognized in net income

    Homework   1.1  1.2   2.1  2.2  3.1  3.2   4.1  4.2  5.1  5.2   6.1   6.2  7.1  7.2  8.1  8.2  9.1  9.2  10.1   10.2  11.1   11.2  12.1  12.2   13.1  13.2