Gia02 tb chapter 16 - Intermediate Accounting 2E - Gordon - TB PDF

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Intermediate Accounting, 2e (Gordon/Raedy/Sannella)Chapter 16 Investing Assets16 Overview of the Investments in Debt and Equity1) Debt securities represent an investment by one company into the common or preferred shares of another company. Answer: FALSE Diff: 1 Var: 1 Objective: 16. IFRS/GAAP: GAAP...

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Intermediate Accounting, 2e (Gordon/Raedy/Sannella) Chapter 16 Investing Assets 16.1 Overview of the Investments in Debt and Equity 1 )De bts e c ur i t i e sr e pr e s enta ni nve s t me ntbyonec ompa nyi nt ot hec ommonorpr e f er r e ds har e sof a not herc ompany . Ans we r :F ALSE Di ff: 1 Va r : 1 Obj ec t i ve :1 6. 1 I FRS /GAAP:GAAP AACS B:Ana l yt i c alt hi nki ng

2 )Yi e l di st hea c t ua lr e t ur ni nve s t or sr e c ei veoni nve s t me nt si nbonds . Ans we r :TRUE Di ff: 1 Va r : 1 Obj ec t i ve :1 6. 1 I FRS /GAAP:GAAP AACS B:Ana l yt i c alt hi nki ng

3 )I nv es t me nt si ns e c ur i t i esofot he rc ompani e sa r ec l a s s i fie dasei t he rde bts ec ur i t i esore qui t ys ec ur i t i e s . Ans we r :TRUE Di ff: 1 Va r : 1 Obj ec t i ve :1 6. 1 I FRS /GAAP:GAAP/I FRS AACS B:Appl i c a t i onofkno wl edge

4 )Bondsar epr i c e ds uc ht ha tt he i ryi e l dwi l lbet hes a mea st hes t a t edr a t eofi nt er e s t . Ans we r :F ALSE Di ff: 1 Va r : 1 Obj ec t i ve :1 6. 1 I FRS /GAAP:GAAP/I FRS AACS B:Appl i c a t i onofkno wl edge

5 )Equi t ys ec ur i t i esar ea ni nve s t me nti nt hec ommonorpr e f er r e ds har e sofanot herc ompany . Ans we r :TRUE Di ff: 1 Va r : 1 Obj ec t i ve :1 6. 1 I FRS /GAAP:GAAP/I FRS AACS B:Appl i c a t i onofkno wl edge

6 )Bondsar epr i c e di nt hemar ke ts ot ha tt he i r__ __ ___ _i st hes amea st hema r ke tr a t eofi nt er e s t . A)yi e l d B)s t a t e dr a t e C)pa rv al ue D)di s c ount Ans we r :A Di ff: 1 Va r : 1 Obj ec t i ve :1 6. 1 I FRS /GAAP:GAAP AACS B:Re fle c t i vet hi nki ng

7 )Zeni t hCor por at i onr epor t si t si nv es t me nt si nde bts ec ur i t i esa tc os t . Thi sme t hodofa c c ount i ngi s c ons i s t e ntwi t ht hequa l i t at i vec har ac t er i s t i cof_ __ ___ __f r om t hec onc e pt ualf r ame wor k. A)f a i t hf ulr e pr e s ent at i on B)r e l e va nc e C)bot hf ai t hf ulr e pr e s ent a t i ona ndr e l e va nc e 1 Copyr i ght©20 1 9Pe ar s onEduc a t i on,I nc .

D)ne i t he rr e pr e s e nt a t i onnorr e l e va nc e Ans we r :A Di ff: 1 Va r : 1 Obj ec t i ve :1 6. 1 I FRS /GAAP:GAAP AACS B:Re fle c t i vet hi nki ng

8 )Al t i maCor por a t i onac t i ve l ymana ge sapor t f ol i oofpubl i c l yt r a deds t oc kf undedwi t he x c es sc a s h.The pur pos eoft hepor t f ol i oi st oge ner a t ega i nsons a l e sa ndt hepor t f ol i oi sr e por t e datf ai rva l ue .Thi s me t hodofac c ount i ngi sc ons i s t entwi t ht hequal i t a t i vec har a c t er i s t i cof_ ___ __ __f r om t hec onc e pt ua l f r ame wor k. A)r e l e vanc e B)f ai t hf ulr e pr e s e nt at i on C)bot hf ai t hf ulr e pr e s ent a t i ona ndr e l e va nc e D)ne i t he rr e pr e s e nt a t i onnorr e l e va nc e Ans we r :A Di ff: 1 Va r : 1 Obj ec t i ve :1 6. 1 I FRS /GAAP:GAAP AACS B:Re fle c t i vet hi nki ng

9 )Al loft hef ol l owi ngar eke yques t i onst ha tmus tbea ddr e s s e dwhe na c c ount i ngf ori nv es t me nt si nde bt a nde qui t ys e c ur i t i e se x c e p t__ ___ __ _. A)How l ongdoe smanage me nti nt endt ohol dt hei nves t me nt ? B)I st hef ai rva l ueoft heequi t yi nve s t me ntr e adi l yde t e r mi nabl e ? C)How i sr e t ur none qui t yi mpac t edbyt hi si nv es t me nt ? D)How muc hc ont r oldoest hei nv es t orha veovert hei nves t eec ompanyf ort hi se qui t yi nve s t me nt ? Ans we r :C Di ff: 1 Va r : 1 Obj ec t i ve :1 6. 1 I FRS /GAAP:GAAP AACS B:Re fle c t i vet hi nki ng

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1 0)Wha tke yques t i onsmus tbeaddr es s edwhenac c ount i ngf ori nve s t ment si nde btande qui t y s e c ur i t i e s ? Ans we r :Ac c ount i ngf ori nv es t me nt si nde bta nde qui t ys ec ur i t i esi nvol ve daddr e s s i ngf ourke y ques t i ons : 1 .I st hei nv es t me ntade bts e c ur i t yora ne qui t ys e c ur i t y? 2 .How l ongdoesmana ge menti nt e ndt ohol dt hei nv es t me nt ? 3 .I ft hei nve s t me nti sa nequi t ys ec ur i t y , how muc hc ont r oldoe st hei nve s t orha veove rt hei nv es t e e c ompany ? 4 .I ft hei nve s t me nti sa nequi t ys ec ur i t y , i st hef ai rva l uer e adi l yde t e r mi nabl e ? Di ff: 2 Va r : 1 Obj ec t i ve :1 6. 1 I FRS /GAAP:GAAP AACS B:Re fle c t i vet hi nki ng

1 1)How dot hequal i t a t i vec ha r ac t er i s t i c sofr e l e va nc eandf ai t hf ulr e pr e s e nt at i onr el a t et ot he me a s ur e me ntbas e sus edf ori nve s t ment s ? Ans we r :Thes t andar ds e t t er s ' r equi r eme nt sf orc os torf ai rval ueac c ount i ngf ori nve s t me nt si nvol vea t r a deoffbet we e nt het wof undame nt alqual i t a t i vec har a c t er i s t i c si nt hec onc e pt ualf r a me wor kof r e l e va nc eandf a i t hf ulr e pr es e nt a t i on.Thec os t bas i smet hodofva l ua t i onc l e ar l ypr ovi de saf ai t hf ul r e pr e s e nt at i onofana s s e t ' sv al ue . Whi l et he r ei sahi ghdegr e eofac c ur ac y , i ti sof t e nnotr e l e va nt .Ont he ot he rhand, f ai rva l uei shi ghl yr e l e va nti nt ha ti tr efle c t sf ut ur ee c onomi cbe nefit sa s s oc i a t edwi t ht he a s s et . Howe ve r ,i nmanyc a s e s ,t hef ai rva l uei ss ubj e c t i veand, t hus ,ma ynotpr ovi deaf a i t hf ul r e pr e s e nt at i on. Di ff: 2 Va r : 1 Obj ec t i ve :1 4. 9 I FRS /GAAP:GAAP AACS B:Re fle c t i vet hi nki ng

16.2 Investments in Debt Securities 1 )Compani esc l a s s i f yde bts ec ur i t i esi noneoft wowa ys :a vai l a bl ef or s al eorhe l dt oma t ur i t y. Ans we r :F ALSE Di ff: 1 Va r : 1 Obj ec t i ve :1 6. 2 I FRS /GAAP:GAAP AACS B:Ana l yt i c alt hi nki ng

2 )Compani esdet e r mi net hec os tofhe l dt oma t ur i t yde bts e c ur i t i e sa st hepr e s entva l ueoft hef ut ur e c a s hflows ,di s c ount e da tt hemar ke tr a t eofi nt e r e s t . Ans we r :TRUE Di ff: 1 Va r : 1 Obj ec t i ve :1 6. 2 I FRS /GAAP:GAAP AACS B:Re fle c t i vet hi nki ng

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3 )Compani esdet e r mi net hec os tofhe l dt oma t ur i t yde bts e c ur i t i e sa st hepr e s entva l ueoft hef ut ur e c a s hflows ,di s c ount e da tt hes t a t e dr at eofi nt e r e s t . Ans we r :F ALSE Di ff: 1 Va r : 1 Obj ec t i ve :1 6. 2 I FRS /GAAP:GAAP AACS B:Re fle c t i vet hi nki ng

4 )Change si nt hef ai rva l ueoft r adi ngde bts e c ur i t i e sa r er e por t e di not herc ompr ehens i vei nc ome . Ans we r :F ALSE Di ff: 2 Va r : 1 Obj ec t i ve :1 6. 2 I FRS /GAAP:GAAP AACS B:Ana l yt i c alt hi nki ng

5 )Avai l abl e f or s a l ede bts ec ur i t i esar er e por t eda tf ai rva l ue ,wi t hunr e al i ze dgai nsorl os s e sr e por t e di n ot he rc ompr e hens i vei nc ome . Ans we r :TRUE Di ff: 1 Va r : 1 Obj ec t i ve :1 6. 2 I FRS /GAAP:GAAP AACS B:Re fle c t i vet hi nki ng

6 )Ac ompanyr e por t sunr e al i z e dga i nsorl os s e sf r om t r adi ngde bts ec ur i t i e si not he rc ompr e he ns i ve i nc ome . Ans we r :F ALSE Di ff: 1 Va r : 1 Obj ec t i ve :1 6. 2 I FRS /GAAP:GAAP/I FRS AACS B:Appl i c a t i onofkno wl edge

7 )As epar a t ef a i rva l ueadj us t mentac c ounti st ypi c a l l yus e dt or e fle c tt hedi ffe r e nc ebe t we e nt hef ai r va l ueandt hec os toft hei nve s t me nts oast oa voi de xc es s i vec hange si nt hei nve s t mentac c ounti t s e l f . Ans we r :TRUE Di ff: 1 Va r : 1 Obj ec t i ve :1 6. 2 I FRS /GAAP:GAAP/I FRS AACS B:Appl i c a t i onofkno wl edge

8 )Bot ht r adi ngde bts e c ur i t i e sandhe l dt oma t ur i t yde bts ec ur i t i esar eval ue da tf ai rval ue . Ans we r :F ALSE Di ff: 1 Va r : 1 Obj ec t i ve :1 6. 2 I FRS /GAAP:GAAP/I FRS AACS B:Appl i c a t i onofkno wl edge

9 )Onl yde bts ec ur i t i esc anbec l a s s i fie dashe l dt oma t ur i t ys ec ur i t i es . Ans we r :TRUE Di ff: 1 Va r : 1 Obj ec t i ve :1 6. 2 I FRS /GAAP:GAAP/I FRS AACS B:Appl i c a t i onofkno wl edge

1 0)Ac ompa nyge ner a l l yc l a s s i fie ss e c ur i t i e sasa vai l abl ef or s a l ewhe ni tpl a nst oac t i ve l ybuyands el l s e c ur i t i e swi t ht heobj e c t i veofgener a t i ngagai nont hes al e . Ans we r :F ALSE Di ff: 1 Va r : 1 Obj ec t i ve :1 6. 2 4 Copyr i ght©20 1 9Pe ar s onEduc a t i on,I nc .

I FRS /GAAP:GAAP/I FRS AACS B:Appl i c a t i onofkno wl edge

1 1)I fade bts ec ur i t yi snotc l as s i fiedashe l dt oma t ur i t yort r adi ng,t he ni ti sc l as s i fie da sa na vai l abl e f or s a l es e c ur i t y . Ans we r :TRUE Di ff: 1 Va r : 1 Obj ec t i ve :1 6. 2 I FRS /GAAP:GAAP/I FRS AACS B:Appl i c a t i onofkno wl edge

1 2)Re al i ze dgai nsandl os s e soc c urwhenac ompanyhol dss e c ur i t i e st ha te xpe r i enc eac ha ngei nf a i r va l ue . Ans we r :F ALSE Di ff: 1 Va r : 1 Obj ec t i ve :1 6. 2 I FRS /GAAP:GAAP/I FRS AACS B:Appl i c a t i onofkno wl edge

1 3)Whi c hoft hef ol l owi ngi sade bts ec ur i t yt hatac ompanyi nt e ndst ohol donl yf ort hes hor tt er m? A)t r a di ngs e c ur i t y B)a va i l a bl e f or s al es ec ur i t y C)he l dt oma t ur i t ys ec ur i t y D)Notenoughi nf or ma t i ont oc l as s i f yt hi ss e c ur i t y. Ans we r :A Di ff: 1 Va r : 1 Obj ec t i ve :1 6. 2 I FRS /GAAP:GAAP AACS B:Ana l yt i c alt hi nki ng

1 4)I nve s t ment si nde bts ec ur i t i est ha tc a nnotber e a di l yc l a s s i fie di nt wor epor t i ngc a t egor i e sa r e c l as s i fie das_ __ ___ __ . A)a va i l a bl e f or s a l es e c ur i t i e s B)t r adi ngs e c ur i t i es C)he l dt oma t ur i t ys ec ur i t i e s D)mi nor i t ys e c ur i t i es Ans we r :A Di ff: 1 Va r : 1 Obj ec t i ve :1 6. 2 I FRS /GAAP:GAAP AACS B:Appl i c a t i onofkno wl edge

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1 5)Whi c hoft hef ol l owi ngi sade bts ec ur i t yf orwhi c hmana ge me nthasbot ht hepos i t i vei nt e ntand a bi l i t yt ohol dt hede bti nve s t mentunt i lal lpr i nc i pa la ndi nt e r e s ti sf ul l ypa i d? A)t r a di ngs e c ur i t y B)hel dt oma t ur i t ys ec ur i t y C)a va i l a bl e f or s al es ec ur i t y D)Notenoughi nf or ma t i ont oc l as s i f yt hi ss e c ur i t y. Ans we r :B Di ff: 1 Va r : 1 Obj ec t i ve :1 6. 2 I FRS /GAAP:GAAP AACS B:Ana l yt i c alt hi nki ng

1 6)J ul es&As s oc i at e spur c has e dt hebondsofJ a yBi r dRe t a i l e r sdur i ngt heye ar . J ul e si nt endst ohol d ont ot he s ebondst oc ol l e c tal lpr i nc i pala ndi nt e r e s t , butduet ofina nc i a lc ons t r ai nt s ,wi l lmos tl i ke l yha ve t os e l lt hi si nv es t me ntont heopenmar ke twi t hi nt hene xtye a r .How s houl dJ ul e sc l a s s i f yt hi si nve s t me nt ? A)hel dt oma t ur i t yde bti nv es t me nt B)a va i l a bl e f or s al ee qui t yi nve s t me nt C)t r a di ngde bti nve s t me nt D)a va i l abl ef or s al ede bti nve s t me nt Ans we r :D Di ff: 2 Va r : 1 Obj ec t i ve :1 6. 2 I FRS /GAAP:GAAP AACS B:Appl i c a t i onofkno wl edge

1 7)GooGooEnt er pr i s esi nv es t e di nt hebondsofGr e a t e rGl ous t e r .The s ebondspa yi nt e r e s tof2 %.The e ffe c t i ver a t eofi nt e r e s tf ors i mi l a rbondsont heda t eofi nve s t me ntwas6%.Di dGooGoopur c has et he bondsa tadi s c ountorpr e mi um? A)Thes ebondswer epur c has e da tadi s c ountbe c a us et hes t a t e dr a t eex c e e dst hema r ke tr a t e . B)Thes ebondswer epur c has e da tapr e mi um bec a us et hes t a t e dr a t eex c e e dst hema r ke tr a t e . C)The s ebondswe r epur c ha s e da tadi s c ountbec a us et hema r ke tr a t ee x c e e dst hes t a t e dr at e . D)The s ebondswe r epur c ha s eda tapr e mi um be c aus et hemar ke tr a t ee x c e e dst hes t a t e dr a t e . Ans we r :C Di ff: 2 Va r : 1 Obj ec t i ve :1 6. 2 I FRS /GAAP:GAAP AACS B:Ana l yt i c alt hi nki ng

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1 8)Cas s a&As s oc i a t e spur c ha s e dt hebondsofJ a yBi r d.Thes ebondspa y6 %i nt e r es ts emi a nnual l y .The e ffe c t i ver a t eofi nt e r e s ta tt hedat eofi nve s t me ntwa s3 %.Di dCa s s a&As s oc i a t e spur c has et he s ebondsa t adi s c ountorpr e mi um? A)Thes ebondswer epur c has e da tadi s c ountbe c a us et hes t a t e dr a t eex c e e dst hema r ke tr a t e . B)Thes ebondswer epur c has e da tapr e mi um bec a us et hes t a t e dr a t eex c e e dst hema r ke tr a t e . C)The s ebondswe r epur c ha s e da tadi s c ountbec a us et hema r ke tr a t ee x c e e dst hes t a t e dr at e . D)The s ebondswe r epur c ha s eda tapr e mi um be c aus et hemar ke tr a t ee x c e e dst hes t a t e dr a t e . Ans we r :B Di ff: 2 Va r : 1 Obj ec t i ve :1 6. 2 I FRS /GAAP:GAAP AACS B:Ana l yt i c alt hi nki ng

1 9)Ba t e manEnt e r pr i s e si nves t e di nt hebondsofGr ea t erGl ouc e s t e ronJ anuar y1 ,20 18 .Thes e1 0ye ar , $ 30 0, 000bondspa yi nt e r e s tof3% wi t hs e mi annualpa yme nt se ve r yJ une30a ndDe c e mber31 .The e ffe c t i ver a t eofi nt e r e s tf ors i mi l a rbondsonJ anua r y1wa s4%.Whati st hes e mi annua li nt er e s tpa yme nt r e c e i ve dbyBa t e manf ort he s ebonds ? A)$ 4, 50 0 B)$9 , 0 00 C)$ 3, 75 0 D)$5 , 250 Ans we r :A Ex pl a nat i on:$ 30 0, 000parva l ue×3 % annuali nt e r e s tr a t e×6 /1 2mont hs Di ff: 2 Va r : 1 Obj ec t i ve :1 6. 2 I FRS /GAAP:GAAP AACS B:Appl i c a t i onofkno wl edge

2 0)Pr i c eEnt e r pr i s e si nv es t e di nt hebondsofGr e a t erGl ouc e s t e ronJ a nuar y1, 201 8. Thes e6 0yea r , $ 60 000 0bondspa yi nt e r e s tof3% e ve r yJ une3 0andDe c e mbe r31 .Theeffe c t i ver a t eofi nt e r e s tf ors i mi l ar bondsonJ anua r y1was4 %. Wha ti st hepur c has epr i c eoft hes ebonds ? A)$ 60 0, 000 B)$5 82, 00 0 C)$ 62 4, 000 D)$4 63 , 9 34 Ans we r :D Ex pl a nat i on:Pr e s e ntva l ueoft hebondwasc a l c ul a t e dus i ngt hePr e s entVal ue( PV)f unc t i oni nExc elwi t h t hef ol l owi ngi nput s : r a t e=2% ( 4 % mar ke tr a t e/2pa yme nt spe ry e a r ) npe r=12 0( 60ye ar s×2pa yme ntpe rye a r ) pmt=$9 , 000( $60 0, 00 0×. 03×6/12 ) f v=6 00, 00 0 Ex c e lFor mul a=PV( . 02, 12 0, 9, 00 0, 600 00 0)=$ 463 , 9 34 Di ff: 2 Va r : 1 Obj ec t i ve :1 6. 2 I FRS /GAAP:GAAP AACS B:Appl i c a t i onofkno wl edge

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2 1)CoxCor por a t i oni nve s t e di nt hebondsofLa t i fI ndus t r i e sonJ anua r y1,2 018 .The s e1 0ye ar , $10 0, 00 0 bondspa yi nt e r e s tof6% e ve r yJ une30a ndDe c e mbe r3 1. Theeffe c t i ver a t eofi nt er e s tf ors i mi l a rbondson J anua r y1wa s4%.Whati st hepur c ha s epr i c eoft hes ebonds ? A)$ 10 0, 000 B)$9 4, 000 C)$ 10 4, 000 D)$1 16 , 3 51 Ans we r :D Ex pl a nat i on:Pr e s e ntva l ueoft hebondwasc a l c ul a t e dus i ngt hePr e s entVal ue( PV)f unc t i oni nExc elwi t h t hef ol l owi ngi nput s : r a t e=2% ( 4 % mar ke tr a t e/2pa yme nt spe ry e a r ) npe r=20( 1 0ye ar s×2pa yment spe rye a r ) pmt=$3 , 000( $10 0, 00 0×6% ×6/1 2) f v=1 00, 00 0 Ex c e lFor mul a=PV( 0. 02 , 2 0, 30 00, 10 0, 00 0)=$ 116 , 3 51 Di ff: 2 Va r : 1 Obj ec t i ve :1 6. 2 I FRS /GAAP:GAAP AACS B:Appl i c a t i onofkno wl edge

2 2)OnApr i l1 ,2 018 ,El l uc i anCor por a t i oni nve s t edi nt hebondsi s s uedbyt heCi t yofWe s t mi ns t e ron J anua r y1,2 01 8.Thes e1 0ye ar ,$7 00, 0 00bondspa yi nt e r e s tof2% wi t hs e mi annualpa yme nt se ve r yJ une 3 0andDe c e mbe r31. El l uc i a npai dpa rval uepl usa c c r ue di nt e r e s t .Wha ti st heamountofa c c r uedi nt er es t pai da tt het i meofpur c ha s e ? A)$ 3, 50 0 B)$1 4, 000 C)$ 4, 66 6. 67 D)$7 , 000 Ans we r :A Ex pl a nat i on:$ 70 0, 000parval ue×2% annua li nt e r e s tr a t e×3 /12mont hs=$3 , 500 Di ff: 2 Va r : 1 Obj ec t i ve :1 6. 2 I FRS /GAAP:GAAP AACS B:Appl i c a t i onofkno wl edge

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2 3)OnApr i l1 ,2 018 ,El l uc i anCor por a t i oni nve s t edi nt hebondsi s s uedbyt heCi t yofWe s t mi ns t e ron J anua r y1,2 01 8.Thes e1 0ye ar ,$3 00, 0 00bondspa yi nt e r e s tof2% wi t hs e mi annualpa yme nt se ve r yJ une 3 0andDe c e mbe r31. El l uc i a npai dpa rval uepl usa c c r ue di nt e r e s t .Wha ti st het ot alamountpa i db y El l uc i anf ort heCi t yofWe s t mi ns t e rbonds ? A)$ 30 1, 500 B)$3 00, 00 0 C)$ 29 8, 500 D)$3 03 , 0 00 Ans we r :A Ex pl a nat i on:( $30 0, 00 0parval ue×2% annuali nt er e s tr a t e×3 /1 2mont hs )a c c r ue di nt e r e s t+parva l ue= $ 1, 50 0+3 00, 00 0=$3 01 , 5 00 Di ff: 2 Va r : 1 Obj ec t i ve :1 6. 2 I FRS /GAAP:GAAP AACS B:Appl i c a t i onofkno wl edge

2 4)OnApr i l1 ,2 018 ,El l uc i anCor por a t i oni nve s t edi nt hebondsi s s uedbyt heCi t yofWe s t mi ns t e ron J anua r y1,2 01 8.Thes e1 0ye ar ,$6 00, 0 00bondspa yi nt e r e s tof2% wi t hs e mi annualpa yme nt se ve r yJ une 3 0andDe c e mbe r31. El l uc i a npai dpa rval uepl usa c c r ue di nt e r e s t .El l uc i an' sfis c alye arendson De c e mber31. Wha ti sEl l uc i an' sne ti nt er e s tr e ve nuef or20 18? A)$ 9, 00 0 B)$1 2, 000 C)$ 3, 00 0 D)$6 , 000 Ans we r :A Ex pl a nat i on:$ 60 0, 000parval ue×2% annua li nt e r e s tr a t e×9 /12mont hs=$9, 00 0 Di ff: 2 Va r : 1 Obj ec t i ve :1 6. 2 I FRS /GAAP:GAAP AACS B:Appl i c a t i onofkno wl edge

2 5)Whi c hoft hef ol l owi ngs t a t e me nt sr e ga r di nga va i l abl ef or s al ede bts e c ur i t i e si st r ue ? A)Fai rva l ueadj us t ment sar et r e a t e dasadj us t me nt st oneti nc ome . B)Fa i rva l ueadj us t ment sar et r e a t e dasa dj us t me nt st oot he rc ompr e he ns i vei nc ome . C)Av ai l a bl ef or s a l es e c ur i t i e sar eval ue dont hebal anc es he e ta thi s t or i c alc os t . D)I nt er e s tr e ve nueandf a i rva l ueadj us t ment sar ene t t e dt odet e r mi net hee ffec tonne ti nc ome . Ans we r :B Di ff: 2 Va r : 1 Obj ec t i ve :1 6. 2 I FRS /GAAP:GAAP AACS B:Appl i c a t i onofkno wl edge

9 Copyr i ght©20 1 9Pe ar s onEduc a t i on,I nc .

2 6)Whi c hoft hef ol l owi ngs t a t e me nt sr e ga r di ngt r a di ngde bts ec ur i t i esi sf a l s e ? A)I fat r adi ngde bts ec ur i t yi spur c ha s eda tapr e mi um,t hepr e mi um mus tbeamor t i z edonape r i odi c bas i s . B)Fa i rva l ueadj us t ment sar et r e a t e dasa dj us t me nt st oneti nc ome . C)I ft hef ai rva l ueoft r adi ngde bts ec ur i t i esi sl e s st hant heamor t i z edc os t ,t hef ai rval uea dj us t me nt a c c ountwi l lha veac r edi tbal anc e . D)Fa i rva l uea dj us t me nt sar et r e a t e dasadj us t me nt st oot he rc ompr e he ns i vei nc ome . Ans we r :D Di ff: 2 Va r : 1 Obj ec t i ve :1 6. 2 I FRS /GAAP:GAAP AACS B:Appl i c a t i onofkno wl edge

2 7)OnJ anua r y1, Ye ar1,Gi bs onCor por a t i onpur c has edbondsi s s ue dbyWi l l i a ms onCompany .Thes e bondswe r ec l as s i fie da shel dt oma t ur i t ys e c ur i t i es . Thef a c eva l ueoft he s ebondsi s$ 10 0, 000 ,pa y8 % i nt er e s tandwe r epur c has e dt oyi el d6 %. Thebondsma t ur ei n10y ea r sa ndpa yi nt er e s tonanannua l bas i s .I fGi bs onCor por a t i onpai d$ 11 4, 720f ort hes ebonds ,how muc hi nt e r es tr e v enues houl di tr e por t ont hebondsa tDec e mbe r31 ,Ye a r1 ?As s umet ha tGi bs onus e dt hee ffe c t i vei nt er e s tme t hod. A)$ 9, 17 8 B)$8 , 0 00 C)$ 6, 00 0 D)$6 , 883 Ans we r :D Ex pl a nat i on:$ 11 4, 720×6% =$6 , 8 83 Di ff: 2 Va r : 1 Obj ec t i ve :1 6. 2 I FRS /GAAP:GAAP AACS B:Ana l yt i c alt hi nki ng

2 8)OnJ ul y1 ,Ye ar1, Fa i r fie l dCompa nypur c has e d$5mi l l i onofHampt onCor por a t i on' s6% bondsf or $ 3, 93 2, 522 .Thebondswe r epur c ha s e dt oyi e l d8 %i nt er es tandwe r ec l a s s i fie dashe l dt oma t ur i t y s e c ur i t i e s .Thebondsma t ur ei n25yea r sa ndpa yi nt er e s ta nnual l yonJ ul y1 .As s umi ngt hatFa i r fiel dus e s t hee ffe c t i vei nt er es tme t hodofa mor t i za t i on,wha tamounts houl di tr e por tf ori t si nv es t me nti nbondson De c e mber31, Ye ar1?( Roundal lc al c ul a t i onst ot hene ar es tc e nt ,a ndyourfina lans we rt ot hene ar e s t dol l ar . ) A)$ 4, 23 2, 522 B)$3 , 9 39, 82 3 C)$ 3, 94 7, 124 D)$3 , 925 , 2 21 Ans we r :B Ex pl a nat i on:$...