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Oblicon Theories
Oblicon Theories
Byner Corporation accounts for its investment I. Unrealized gains and losses on financial
in the common stock of Yount Company under assets held for trading shall be included in
the equity method. Byner Corporation should profit or loss
ordinarily record a cash dividend received from II. Unrealized gains and losses on financial
Yount as assets measured at amortized cost shall be
included as component of other comprehensive
Correct answer: a reduction of the carrying income
value of the investment.
Correct answer: I only
Item 2
If credit risk has not increased significantly Item 7
since initial recognition, an entity may In accounting for investments in debt
recognize a loss allowance equal to 12-month securities that are classified as held for trading
expected credit losses. securities,
Correct answer: True Correct answer: any discount or premium is
not amortized.
Item 3
Liquidating dividends are credited to Item 8
When stock rights are not exercised but
Correct answer: investment account expired, the carrying value of the stock rights is
Correct answer: treated as loss
Item 4
When a financial asset at fair value through
other comprehensive income is derecognized, Item 9
any cumulative unrealized gains or losses is The recoverable amount of a credit-impaired
financial asset (but not purchased or originated
Correct answer: transferred directly in credit-impaired or variable rate loan) is
equity computed at the present value of the remaining
cash flows from the instrument discounted at
the current rate at the reporting date.
Item 13
When an investor uses the equity method to Item 17
account for investments in common stock, the According to PFRS, expected credit losses are
investment account will be increased when the the weighted average of credit losses with the
investor recognizes respective risks of a default occurring as the
weights.
Correct answer: a proportionate share of the
net income of the investee. Correct answer: True
Item 14 Item 18
A 180-day, 12 percent interest-bearing note The effect of direct origination cost is a
receivable is sold to a bank after being held for decrease in the effective interest rate of a loan
45 days. The proceeds are calculated using a receivable.
15 percent interest rate. The note receivable Correct answer: True
has been
Correct answer: Discounted (Yes); Pledged
(No) Item 19
Transaction costs that are directly attributable
to the acquisition of financial asset shall be
Item 15 Correct answer: Capitalized as cost of the
Under PFRS 9,A financial asset shall be financial asset
measured subsequently at amortized cost
when
I. The business model of the entity is to hold
the financial asset in order to collect the Item 20
contractual cash flows on specified dates The impairment requirements of PFRS 9 are
II. The contractual cash flows are solely applicable to all debt instruments including
those that are measured at fair value through Item 25
profit or loss. An entity recognizes impairment gain when
Correct answer: False there is an improvement in the credit quality of
a previously impaired financial asset.
Correct answer: True
Item 21
Which statement is correct concerning the
subsequent measurement of financial asset at
fair value?
Item 26
I. The financial asset shall be measured at fair When an investment in equity securities
value if the business model is not to collect irrevocably elected on initial recognition to be
contractual cash flows on specified dates and subsequently measured at FVOCI is
the contractual cash flows are not solely transferred to held for trading because the
payments of interest and principal. company anticipates selling the stock in the
II. An entity may designate a financial asset as near future, the carrying amount assigned to
measured at fair value through profit or loss the investment upon entering it in the trading
even if the financial asset satisfies the portfolio should be
amortized cost measurement. Correct answer: None of these
Correct answer: Both I and II
Item 27
Item 22 The balance in Accounts Receivable is not
Subsequent changes in fair values of a reduced in recording which of the following
financial asset classified as fair value through types of financing arrangements?
profit or loss are Correct answer: General assignment
Correct answer: recognized in profit or loss (pledge) of accounts receivable
Item 23 Item 28
Entities may apply a simplified approach when When there is a significant increase in the
recognizing impairment losses on trade credit risk of a financial asset since its initial
receivables. recognition but there is no objective evidence
of impairment, interest revenue is computed on
Correct answer: True the net carrying amount of the financial asset
(i.e., gross carrying amount less loss
allowance).
Item 31
The entry to record a note receivable Item 36
discounted with a bank most likely includes A financial asset is credit-impaired when one
or more events that have detrimental impact on
Correct answer: Crediting note receivable the estimated future cash flows of the financial
equal to the face amount of the note asset have occurred.
Response: True
Correct answer: True
Item 32
A 90-day, 15 percent interest-bearing note Score: 1 out of 1 Yes
receivable was immediately discounted at a
bank at 12 percent. The proceeds received
from the bank upon discounting would be the Item 37
The equity method of accounting for an
Response: face value less the discount at 12 investment in the common stock of another
percent. company should be used when the investment
Correct answer: maturity value less the Response: gives the investor voting control
discount at 12 percent. over the investee.
Score: 0 out of 1 No Correct answer: enables the investor to
exercise significant influence over the investee.
Item 33
Depending on the business model for Score: 0 out of 1 No
managing financial assets, an entity shall
classify financial assets subsequent to initial Item 38
recognition at Which of the following is true when accounts
receivable are factored without recourse?
Response: Fair value
Response: The factor assumes the risk of
Correct answer: Either fair value or amortized collectability and absorbs any credit losses in
cost collecting the receivables.
Score: 0 out of 1 No Correct answer: The factor assumes the risk of
collectability and absorbs any credit losses in
Item 34 collecting the receivables.
Under the equity method in PAS 28, goodwill
amortization Score: 1 out of 1 Yes
Item 58
Which of the following may result to the
derecognition of a receivable?
Response: The receivable is transferred and
the transferor retains control over the
transferred receivable.
Correct answer: The contractual rights to the
cash flows from the receivable expire and the
receivable is impaired.
Score: 0 out of 1 No
Item 59
When the accounts receivable of a company
are sold outright to a company that normally
buys accounts receivable of other companies
without recourse, the accounts receivable have
been
Response: factored.
Correct answer: factored.
Score: 1 out of 1 Yes
Item 60
Cash received in lieu of stock dividends is
accounted for as
Response: dividend income
Correct answer: If the stock dividends are
received and subsequently sold and gain or
loss is recognized.
Score: 0 out of 1 No
Item 61
According to PFRS 9 Financial Instruments,
investments in debt securities classified under
the amortized cost measurement category
should be recorded on the date of acquisition
at
Response: fair value plus brokerage fees and
other costs incident to the purchase.
Correct answer: fair value plus brokerage fees
and other costs incident to the purchase.