Bakersfield College

ACG 2021

1)Under IFRS No. 9 equity investments are classified as either fair value through other comprehensive income (FVOCI)” or “fair value through profit and loss (FVPL).”

 

 

2.            Under IFRS No. 9, a debt investment can be accounted for at amortized cost if the debt agreement includes only interest and principal and the investor intends to hold it to collect contractual cash flows.

 

 

 

3. Under IAS No. 39, transfers of debt investments out of the FVPL category into AFS or HTM are permitted under “rare circumstances.”

 

 

 

4. Under IFRS No. 9, cost can be used as an estimate of fair value in some circumstances.

 

 

Multiple Choice Questions

 

5. The investment category for which the investor's "positive intent and ability to hold" is important is:
   1. Securities reported under the equity method.
   2. Trading securities.
   3. Securities classified as held to maturity.
   4. Securities available for sale.

 

 

 

6. Which of the following investment securities held by Zoogle Inc. may be classified as held-to- maturity securities in its balance sheet?
   1. Long-term debenture bonds.
   2. Common stock.
   3. Callable preferred stock.
   4. All of these answer choices are correct.

 

 

 

7. Which of the following investment securities held by Zoogle Inc. are not reported at fair value in its balance sheet?
   1. Common stock held as available for sale securities.
   2. Debt securities held to maturity.
   3. Preferred stock held as trading securities.
   4. All of these answer choices are reported at fair value.

 

 

 

8. In which investment category are fair values and subsequent growth of an investee not relevant for reporting?
   1. Securities reported under the equity method.
   2. Trading securities.
   3. Held-to-maturity securities.
   4. Securities available for sale.

 

 

 

9. Which category completely excludes equity securities?
   1. Securities available for sale.
   2. Consolidating securities.
   3. Held-to-maturity securities.
   4. Trading securities.

 

 

 

10. In 2014, Osgood Corporation purchased $4 million of 10-year municipal bonds at face value. On December 31, 2016, the bonds had a market value of $3,600,000 and Osgood reclassified the bonds from held to maturity to trading securities. Osgood's December 31, 2016, balance sheet and the 2016 income statement would show the following:

Income

Investment in municipal bonds

 

statement loss on investments

a.                        3,600,000                                    0

b.                        3,600,000                       400,000

c.                        4,000,000                       400,000

d.                        4,000,000                                    0

 

 

Use the following to answer questions :

 

Beresford Inc. purchased several investment securities during 2015, its first year of operations. The following information pertains to these securities. The fluctuations in their fair values are not considered permanent.

 

	Fair Value	Fair Value	Amortized Cost	Amortized Cost
Held to Maturity Securities:	12/31/2015	12/31/2016	12/31/2015	12/31/2016
ABC Co. Bonds	$375,000	$400,000	$367,500	$360,000
	Fair Value	Fair Value
Trading Securities:	12/31/2015	12/31/2016	Cost
DEF Co. Stock	$48,000	$59,500	$66,000
GEH Inc. Stock	$47,000	$77,000	$39,000
IJK Inc. Stock	$44,000	$38,500	$32,900
	Fair Value	Fair Value
Available for Sale Securities:	12/31/2015	12/31/2016	Cost
LMN Co. Stock	$130,500	$150,400	$140,000

11. What balance sheet amount would Beresford report for its total investment securities at 12/31/2015?

a.     $637,000.

b.     $644,500.

c.     $645,400.

d.     None of these answer choices is correct.

 

 

 

12. What would be the balance in Beresford’s accumulated other comprehensive income with respect to these investments in its 12/31/2016 balance sheet (ignore taxes)?