QUIZ Chapter-11 Investments- Additional- Concepts PDF

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P a g e | 1Chapter 11Investments – Additional ConceptsNAME: Date: Professor: Section: Score:QUIZ: When an investment in a debt security measured at amortized cost is transferred to held for trading security, the carrying amount assigned to the held for trading security should be a. its original cost...

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Chapter 11 Investments – Additional Concepts NAME: Pr of es s or :

Sec t i on:

Dat e: Sc or e:

QUI Z: 1. Whe nani nve s t me nti nade bts e c ur i t yme as ur e da tamor t i ze dc os ti st r ans f e r r e dt ohe l df or t r adi ngs e c ur i t y, t hec ar r yi ngamountas s i gnedt ot hehe l df ort r a di ngs ec ur i t ys houl dbe a .i t sor i gi nalc os t . t sf a i rval ueatt hedat eoft het r a ns f er . b. i c .t hel owe rofi t sor i gi nalc os tori t sf ai rval uea tt heda t eoft het r a ns f e r . d. t hehi gherofi t sor i gi nalc os tori t sf ai rval uea tt heda t eoft het r ans f e r . 2. Whe n an i nves t me nti ne qui t ys ec ur i t i es i r r e voc abl ye l e c t e d on i ni t i alr e c ogni t i on t o be s ubs eque nt l y me as ur e da tFVOCIi st r a ns f e r r e dt o he l df ort r adi ng bec aus et he c ompany ant i c i pa t e ss e l l i ngt hes t oc ki nt hene arf ut ur e ,t hec ar r yi ngamountas s i gne dt ot hei nves t me nt uponent e r i ngi ti nt het r adi ngpor t f ol i os houl dbe a .i t sor i gi nalc os t . b. i t sf ai rval uea tt heda t eoft het r ans f e r . c .t hehi gherofi t sor i gi nalc os tori t sf ai rval uea tt heda t eoft het r ans f e r . d. Noneoft hes e 3. Ac c or di ngt oPFRS9Fi na nc i a lI ns t r ume nt s ,i nves t me nt si nde bts e c ur i t i esc l as s i fiedunde rt he amor t i z edc os tme as ur e me ntc a t e gor ys houl dber ec or dedont heda t eofac qui s i t i ona t a .l owe rofc os tormar ke t . b. mar ke tval ue . ai rval uepl usbr oker agef ee sandot herc os t si nc i dentt ot hepur c has e. c .f d. f ac eval ue . 4. Whi c hoft hef ol l owi ngi sc or r ec taboutt hee ffe c t i vei nt er e s tme t hodofamor t i za t i on? a . Thee ffe c t i vei nt e r e s tmet hodappl i e dt oi nves t me nt si nde bts ec ur i t i e si sdi ffe r e ntf r om t ha t appl i e dt obondspa yabl e . b. Theamor t i z at i onofadi s c ountde c r e as e sf r om per i odt oper i od. c . Theamor t i z at i onofapr e mi um de c r e as esf r om pe r i odt ope r i od. d. The effec t i ve i nt er es tmet hod pr oduc esa c ons t antr at e ofr et ur n on t he book val ue ( c ar r yi ngamount )oft hei nves t mentf r om per i odt oper i od. 5. A de bts e c ur i t yi spur c ha s ed atadi s c ount .Theent i t ywant st oc l as s i f yt hei nves t me ntasa financ i alas s etme as ur e da tFVOCI .Theent r yt or ec or dt heamor t i za t i onoft hedi s c ounti nc l udes a bi tt oi nves t mentac c ount . a. de b. de bi tt ot hedi s c ountac c ount . c . de bi tt oI nt er e s tRe venue . d. noneoft he s e . 6. OnDe c e mbe r29, 20x 1,anent i t yc ommi t si t s e l ft opur c has eafinanc i alas s e tf or₱10, 000, whi c hi s i t sf ai rval ueonc ommi t me ntda t e( t r a deda t e ) .Tr ans ac t i onc os t sar ei mma t e r i al .OnDe c e mbe r31, 20x1andonJ anuar y4,20x2( s e t t l e me ntda t e )t hef ai rval ue soft heas s etar e₱1 2, 000and₱15, 000, r e s pe c t i ve l y . I ft heent i t yus e st hes et t l ementda t eac c ount i ngandt ha tt hei nves t me nti sc l as s i fie d

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ashe l df ort r adi ng, how muc hi st hec ar r yi ngamountoft hei nves t me nti nt heDec e mber31, 20x1 s t a t e me ntoffinanc i alpos i t i on? a .10, 00 0 c . 15, 000 b. 12, 000 d. 0 7. OnJ anuar y1,2 0x1,DagulCo.ac qui r e d10%,₱4, 000, 000bondsf or₱3, 807, 853 .Thepr i nc i pali s dueonJ anuar y1, 20x4buti nt er e s ti sdueannual l ys t ar t i ngDe c embe r31,20x1. Theyi e l dr a t eon t hebondsi s12%.OnJ ul y ,120x1,Da gulCo.c hangedi t sbus i ne s smode l .I twasas c er t ai ne dt hat t hei nves t me nti nbondsa tamor t i z edc os ts houl dber ec l as s i fie dt ohe l df ort r adi ngs e c ur i t i e son r e c l as s i fic a t i ondat e .Thebondswe r equot e da t102,10 3and 10 4onJ ul y1,20x1 ,De c ember31, 20x1andJ anuar y1, 20x2, r e s pec t i ve l y. How muc hi st hegai n( l os s )onr e c l as s i fic a t i ononJ anuar y 1, 20x2? c . 295, 205 a .243 , 676 b. 255, 20 5 d. 0 8. On Mar c h 31,20x1,Budoy Co.r e c e i ve d 10 , 000 s t oc kr i ght sf r om i t si nve s t me nti n equi t y s ec ur i t i e st os ubs c r i bet onew s har e sa t₱60pe rs har ef ore ver y4r i ght she l d.Pr i ort oi s s uanc eof s t oc kr i ght s ,t hes har e swer es e l l i nga t₱80pe rs har e .How muc hi st hei ni t i alc ar r yi ngamountof t hes t oc kr i ght s ? a .20, 00 0 c . 50, 000 b. 40, 000 d. c annotbede t e r mi ne d

“Come to me, all you who are weary and burdened, and I will give you rest. 29 Take my yoke upon you and learn from me, for I am gentle and humble in heart, and you will find rest for your souls.” (Mat t he w1 1: 2 82 9) - END -

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ANSWERS: 1. B 2. D 3. C 4. D 5. A 6. D0-t heent i t yus e st hes e t t l e me ntda t eac c ount i ng 7. C Solution: Date 1/1/x1 12/31/x1 12/31/x2 12/31/x3

Collections

Interest income

Amortization

400,000 400,000 400,000

456,942 463,775 471,428

56,942 63,775 71,428

(4M x 104%) – 3,864,795 = 295,205 8. B Theoretical/Parity value = (80 – 60) / (4 + 1) = 4; 10,000 x 4 = 40,000

Present value 3,807,853 3,864,795 3,928,571 3,999,999...