AE 121 QUIZ #1 FINALS

1. The following define investments except

A. assets held by an entity for accretion of wealth, for capital appreciation or for other benefits accruing to the entity.
B. occupy an auxiliary relationship to the central revenue producing activities of a firm
C. assets not directly identified with the operating activities of a firm.
D. assets involved in the production or sale of goods and services E. none of the above
2. Current investments are investments that are by their very nature A. readily realizable
B. intended to be held for not more than one year
C. readily realizable and intended to be held for more than 1 year
D. readily realizable and intended to be held within one year
3. Which of the following is considered a financial asset?
A. Inventories D. Patent purchased
B. Shares issued E. B and C
C. Accounts receivable
4. Under PFRS 9, which is not a category of financial assets? A. Financial assets at FVPL
B. Financial assets at FVOCI
C. Financial assets at amortized cost
D. Financial assets held for sale E. answer not given
5. Which is not an equity instrument?
A. Ordinary shares
B. Preference shares
C. Share warrants
D. Redeemable preference shares
E. answer not given
6. Under PFRS 9, the initial classification of investments in financial assets is generally based on
A. whether the financial securities have active markets or not
B. Whether the financial securities are intended to be held within 1 year or not
C. the entity's business model and the contractual cash flow characteristics of the financial asset
D. All of the above
7. Which is false regarding the classification of financial assets:
A. Only equity securities can be classified as FVOCI
B. Only debt securities can be classified as amortized cost
C. Both debt and equity securities can be classified as FVPL
D. None of the above
E. All of the above
8. The option to designate financial assets as FVPL and the election to classify financial assets at FVOCI are available to an
entity's management
A. On initial recognition only
B. Subsequent to initial recognition only
C. On initial recognition and subsequent periods thereof D. Not available
9. Transaction costs directly attributable to the acquisition of financial asset shall be capitalized as cost of the investment, except
for
A. Trading securities
B. financial asset at FVOCI
C. financial asset at amortized cost D. investment in equity securities

10. S1: The election to classify financial assets at FVOCI is made on an instrument by instrument basis and is irrevocable. S2:
Once a financial
asset is classified as FVOCI, all fair value changes on the instrument is recognized in other comprehensive income
A. both are true C. S1 is true
B. both are false D. S2 is true

11. SABM Co. purchased ordinary shares of SLU Co., a non-publicly listed company. If SABM Co. classified the ordinary
shares as a regular investment, it should measure the investment at
A. cost
B. amortized cost
C. fair value unless fair value cannot be determined reliably D. lower of cost or fair value
12. S1: Cash, property and shares received in lieu of cash are dividends recognized as return on capital. S2: Liquidating, shares
and cash received in lieu of share are dividends not recognized as income.
A. both are true C. S1 is true
B. both are false D. S2 is true
13. What is the effect of stock dividend of the same class on the shareholders' investment balance and cost per share of
investment, respectively?
A. Increase; increase C. decrease; decrease
B. No effect; decrease D. No effect; increase
14. S1: When stock dividends of different class are received, a new investment account is debited and the original
investment account is credited. S2: Shares received in lieu of cash dividend are recorded as income at market value of the
shared received. Hear
A. both are true C. S1 is true
B. both are false D. S2 is true
15. Shares received in lieu of cash dividend are recorded as A. income at book value of the shares received
B. income at market value of the shared received
C. income at the cash dividend that would have been received D. share dividends
16. Liquidating dividends are credited to
A. Investment account C. Share capital
B. Retained earnings D. none of the above

17. An investor uses the cost method to account for investment in ordinary shares. Dividends received this year exceeded
the investor's share of investee's undistributed earnings since the date of investment. The amount of dividend revenue that
should be reported in the investor's income statement for this year would be
A. the portion of the dividends received this year that were in excess of the investor's share of investee's undistributed
earnings since the date of investment.
B. the portion of the dividends received this year that were not in excess of the investor's share of investee's
undistributed earnings since the date of investment.
C. the total amount of dividends received this year D. zero
18. S1: From the date share rights are issued until the date they expire, shares of the issuing corporation are said to sell ex-
right. S2: When share rights are received on investment in unquoted equity securities measured at cost, no entry is required
to transfer a portion of the cost of the original investment to a separate account for the share rights.
A. both are true C. S1 is true
B. both are false D. S2 is true

19. The cost of new shares acquired through the exercise of share rights is the
A. subscription price
B. allocated cost of share rights
C. subscription price plus the cost of share rights exercised D. subscription price less the allocated cost of the rights

20. When an investment in FVPL is sold during the year, the realized gain or loss on sale is equal to the
A. difference between the net proceeds and the carrying amount of investment at date of sale
B. difference between the net proceeds and the fair value of investment at date of sale
C. difference between the net proceeds and the acquisition cost of investment
D. none of the above