Financial Assets at Fair Value a.

Net realizable value

b. Fair value
1. Depending on the business model for managing financial c. Amortized cost
assets, an entity shall classify financial assets subsequent to d. The lower of amortized cost and fair value
initial recognition at
4. Debt investments not held for collection are reported at
a. Fair value through profit or loss
b. Amortized cost a. Amortized cost
c. Fair value through other comprehensive income b. Fair value
d. All of these are used in measuring financial assets. c. The lower of amortized cost and fair value
d. Net realizable value
2. A debt investment is measured at amortized cost
5. Debt investments reported at amortized cost are
a. By irrevocable election
b. When the debt investment is managed and evaluated a a. Managed and evaluated based or a documented risk
document risk-management strategy. management strategy
c. When the debt investment is held for trading b. Trading debt investments
d. When the business model is to collect contractual cash c. Held for collection debt investments
flows that are solely payments of principal and interest. d. All of these are correct
3. The irrevocable election to present subsequent changes in fair 6. Equity investments irrevocably accounted for at FVOCI are
value in other comprehensive income is applicable only to a. Nontrading investments of less than 20%.
a. Investment in equity instrument not held for trading b. Trading investments of less than 20%.
b. Investment in equity instrument held for trading. c. lnvestments of between 20% and 50%.
c. Financial asset measured at amortized cost. d. Investments of more than 50%.
d. Financial asset measured at fair value. 7. What financial asscts are assessed for impairment?
4. A debt investment shall be measured at fair value through a. Equity investments at FVPL
other comprehensive income b. Equity investments at FVOCI
a. When the debt investment is held for trading. c. Debt investments at FVPL
b. When the debt investment is not held for trading. d. Debt investments at amortized cost and debt
c. By irevocable designation investments at FVOCI
d. When the business model is to collect contractual cash 8. Impairments of debt investments at amortized cost are
flows and also to sell the fnancial asset
a. Based on discounted contractual cash flows.
5. Which is not a category of financial assets? b. Recognized as component of OCI.
a. Financial assets at fair value through profit or loss c. Based on fair value for nontrading investments.
b. Financial assets at fair value through other d. Evaluated at each reporting date.
comprehensive income 9. An impairment loss is the excess of the carrying amount of the
c. Financial assets at amortized cost debt investment over
d. Financial assets held for sale
a. Expected cash flows
b. Present value of the expected cash flows
1. Under IFRS, the presumption is that equity investments are c. Contractual cash flows
d. Present value of the contractual cash flows
a. Held for trading
b. Held to profit from price changes 10. Under IFRS, an entity
c. Held for trading and held to profit from price changes a. Should evaluate every investment for impairment.
d. Held as financial assets at fair value through other b. Accounts for an impairment as component of OCI.
comprehensive income c. Calculates the impairmènt loss on debt investment as
2. Entities are required to measure financial asset based on all of the excess of carrying amount over the expected
the following, except: discounted future cash flow.
d. All of the choices are correct.
a. The business model for managing financial asset.
b. Whether the financial asset is a debt or an equity
investment. 1. Reclassification of investments between categories are
c. The contractual cash flow characteristics of the accounted for
financial asset.
d. d. All of the choices are required. a. Prospectively, at the end of the period after the change
in the business model.
3. Debt investments that meet the business model and contractual b. Prospectively, at the beginning of the period after the
cash flow tests are reported at change in the business model.
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 c. Retrospectively, at the end of the period after the a. The financial asset continues to be measured at fair
change in the business model. value.
d. Retrospectively, at the beginning of the period after. the b. The fair value at reclassification date becomes the new
change in the business model. carrying amount.
c. The cumulative gain or loss previously recognized in
2. Transfers of investments between categories
OCI is reclassified to profit or loss.
a. Result in omitting recognition of fair value in the year d. All of these statements are true.
of the transfer.
b. Are accounted for at fair value for all transfers.
c. Are not recognized if investments are transferred from 1. It is the date on which the stock and transfer book of the entity
held for collection to fair value is closed for registration.
d. Should always affect net income.
a. Date of declaration
3. When a debt investment at anortized cost is reclassified to b. Date of record
FVPL, the difference between the previous carrying amount and c. Date of payment
fair value at reclassification date is d. Date of mailing the dividend check
a. Recognized in profit or loss 2. At which of the following dates has the shareholder
b. Not recognized theoretically realized income from dividend
c. Recognized in other comprehensive income
d. Included in retained earnings a. The date the dividend is declared
b. The date of record
4. When a debt jnvestınent at FVPL is reclassified to armortized c. The date the dividend check is mailed by the entity
cost, what is the new carrying amount at amortized cost? d. The date the dividend check is received
a. Fair value at reclassification date 3. Property dividends are recorded
b. Face amount of the debt investment
c. Present-value of the contractual cash flows a. As dividend income at carrying amount of the property
d. Original carrying amount of the debt investment b. An dividend income at fair value of the property
c. As return of investment
5. Which statement is true when a debt investment at amortized d. By means of memorandum only
cost is reclassified to FVOCI?
4. Liquidating dividends are credited to
a. The debt investment is measured at fair value at
reclassification date. a. Income
b. The difference between the previous carrying amount b. Retained earnings
and fair value at reclassification date is recognized in c. Investment account
other comprehensive income. d. Share capital
c. The original effective rate is not adjusted. 5. An investor that owns 10% of the ordinary shares has the
d. All of statements are true. right to
6. Which statement is true when a debt investment at FVOCI is a. Be paid 10% of the investee's profit in cash each year.
reclassified to amortized cost? b. Receive dividend equal to 10% of the par each year.
a. The fair value at reclassifcation date becomes the new c. Receive dividend equal to 10% of the total dividend
carrying amount. paid by the investee for the year to shareholders.
b. The cumulative gain or loss previously recognized in d. Keep investee from issuing any new shares unless the
OCI is removed firom equity and adjusted against the investor is willing to buy 10% of the new shares.
fair value at reclassification date. 6. What is the effect of share dividend of the same class?
c. The original effective rate is not adjusted.
d. All of these statements are true. a. Increase in investment and increase in cost per share
b. Decrease in investment and decrease in cost per share
7. When a financial asset at FVPL is reclassified to FVOCI, the c. No effect on investment but decrease in cost per share
new carrying amount is equal to d. No effect on investment but increase in cost per share
a. Fair value at reclassification date 7. When share dividends of different class are received
b. Original carrying amount
c. Present value of contractual cash flows a. No formal entry is made but only a memorandum
d. Present value of contractual cash fiows representing b. Cash is debited and dividend income is credited
principal c. A new investment account is debited and dividend
income is credited
8. Which statement is trủe when a financial asset at FVOCI is d. A new investment account is debited and the original
reclassified to FVPL? investment account is credited
8. Shares received in lieu of cash dividend, recorded as
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 a. Income at fair value of the shares received 4. The equity method is not required when the associate has been
b. Income at par value of the shares received acquired and held with a view to disposal within what time
c. Income at the cash dividend that would have been period?
received
a. Six months from the end of reporting period
d. Share dividends
b. Twelve months from the end of reporting period
9. Cash received in lieu of share dividends is recorded as c. Twelve months from date of classification as held for
sale
a. Dividend income
d. In the near future
b. Retun of investment
c. Partly income and partly return of investment 5. When an entity holds between 20% and 50% of the voting
d. If the share dividends are received and subsequently power of an investee
sold at the cash received and gain or loss is recognized
a. The investor must use the equity method.
10. What is the effect of share split up? b. The investor should use the equity method unless
circumstances indicate that it is unable to exercise
a. Increase in number of shares and increase in cost per
significant influence over the investee.
share
c. The investor must use the fair value method unless it
b. Decrease in number of shares and decrease in cost per
can be clearly demonstrated that the investor has
share
significant influence over the investee.
c. Increase in number of shares and decrease in cost per
d. The investor must use the fair value method.
share
d. Decrease in number of shares and increase in cost per 6. Which statement is incorrect concerning the equity method?
share
a. The investment is initially recorded at cost.
b. The investment in associate is increased or decreased by
the investor's share of the profit or loss of the investee
Investment in Associates after the date of acquisition.
1. It is an entity over which the investor has significant c. The investor's share of the profit or loss of the investee
influence. is recognized in the investor's profit or loss.
d. Dividends received from the investee are accounted for
a. Associate as dividend income.
b. Investee
c. Venture capital organization 7. If an associate has outstanding cumulative preference shares
d. Mutual fund held by outside interests, the investor computes share of profit or
loss
2. Which statement best describes significant influence?
a. After adjusting for preference dividends which were
a. The holding of a significant proportion of the share actually paid during the year.
capital in another entity b. Without regard for preference dividends.
b. The contractually agreed sharing of control over an c. After adjusting for the preference dividends only when
economic entity declared.
c. The power to participate in the financial and operating d. After adjusting for the preference dividends, whether or
policy decisions of an entity not the dividends have been declared.
d. The mutual sharing in the risks and benefits of a
combined entity 8. Goodwill arising from an investment in associate is

3. Which statement is true concerning significant influence? a. Included in the carrying amount of the investment and
amortized over the useful life.
a. If an investor holds, directly or indirectly, less than 20% b. Included in the carrying amount of the investment and
of the voting power of the investee, it is presumed that not amortized.
the investor does not have significant influence, unless c. Charged to retained earnings.
such influence can be clearly demonstrated. d. Charged to expense immediately.
b. If an investor holds, directly or indirectly, 20% or more
of the voting power of the investee, it is presumed that 9 How is goodwill arising on the acquisition of an associate dealt
the investor does have significant influence, unless it with in the financial statements?
can be clearly demonstrated that this is not the case. a. It is amortized.
c. A substantial or majority ownership by another investor b. It is impairment tested individually.
does not necessarily preclude an investor from having c. It is written off as loss.
significant influence. d. Goodwill is not recognized separately within the
d. All of these statements are true about significance carrying amount of the investment.
influence.
10. How is the impairment test carried out for an associate?
a. The goodwill is impairment tested individually
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 b. The entire carrying amount of the investment is tested ordinary shares outstanding on August 1 of the current year.
for impairment by comparing the recoverable amount During October of current year, the investee declared and paid a
with the carrying amount. cash dividend on all of the outstanding ordinary shares. How
c. The carrying amount of the investment shall be much investment income should be recorded in the current year?
compared with the market value.
a. 10% of investee's income from January 1 to July 31
d. The recoverable amounts of all investments in
plus 40% of investee's income from August l to
associates shall be associated together.
December 31
b. 40% of investee's income from August 1 to December
31 only
1. When an investor uses the fair value method to account for c. 40% of investee's income for the current year
investment in ordinary shares, cash dividends received by the d. Amount equal to dividends received from the investee
investor from the investee should be recorded as
a. Dividend income
b. An addition to the investor's share of the investee's Financial Asset at Amortized Cost
profit
c. A deduction from investor's share of profit of the 1. Trading bond investments are reported at
investee a. Amortized cost
d. A deduction from the investment account b. Face amount
2. An investor uses the fair value method to account for an c. Fair value
investment in ordinary shares. A portion of the dividends d. Maturity
received this year were in excess of the investor's share of 2. Which statement is correct in regard to trading bond
investee's earnings subsequent to the date of investment. The investments?
amount of dividend revenue that should be reported in the
investor's income statement for this year would be a. Trading bond investments are held with the intention of
selling them in a short period of time.
a. Zero b. Unrealized gains and losses are reported as part of net
b. The total amount of dividends received this year. income.
c. The portion of the dividends received this year that c. Any discount or premium is not amortized.
were in excess of the investor's share of investee's d. All of these statements are correct.
earnings subsequent to the date of investment.
d. The portion of the dividends received this year that 3. Accrued interest on bonds that are purchased between interest
were not in excess of the investor's share of investee's dates
earnings subsequent to the date of investment. a. Is ignored by both the seller and the buyer.
3. An investor uses the fair value method to account for b. Increases the amount a buyer must pay.
investment in ordinary shares. Dividends received in excess of c. Is recorded as a loss on the sale of the bonds.
the investor's share of investee's eatnings subsequent to the date d. Decreases the amount a buyer must pay.
of investment 4. The interest income for the year would be higher if the bond
a. Increase other comprehensive income was purchased at
b. Decrease the investment account a. Quoted price
c. Increase the investment account b. Face amount
d. Increase dividend revenue c. A discount
4. An investor uses the fair value method to account for a 15% d. A premium
ownership in an investee. At year-end, the investor has a 5. The interest income for the year would be lower if a bond is
receivable from the investee. How should the receivable be purchased at.
reported?
a. Quoted price
a. The total receivable should be reported separately. b. Face amount
b. The total receivable should be included as part of the c. A discount
investnent, without separate disclosure. d. A premium
c. Eighty-five percent of the receivable should be reported
separately, with the balance offset against the investee's
payable to the investor. 1. The actual interest earned by the bondholder is
d. The total receivable should be offset against the
investee's payable to the investor. a. Effective rate
b. Yield rate
5. On January 1 of the current year, an entity purchased 10% of c. Market rate
another entity's ordinary shares. The entity purchased additional d. Effective rate, yield rate or market rate
shares bringing the ownership up to 40% of the investee's

4
2. The interest rate written on face of bond is known as b. Decreased by accrued interest from May 1 to June 1.
c. Increased by accrued interest from June 1 to November
a. Nominal rate
1.
b. Coupon rate
d. Increased by accrued interest from May 1 to June 1.
c. Stated rate
d. Nominal rate, coupon rate or stated rate
3. To compute the price to pay for a bond, what present value 1. Which statement is true about the interest method?
concept is used?
a. The interest method does not use a constant rate.
a. The present value of 1 b. Amortization of discount decreases each period.
b. The present value of an ordinary annuity of 1 c. Amortization of premium decreases each period.
c. The present value of 1 and present value of ordinary d. The interest method applies the effective interest rate to
annuity of 1 the beginning carrying amount.
d. The future value of 1
2. The fair value option
4. Bonds usually sell at a discount when investors are willing to
invest in bonds a. Must be applied to all debt instruments.
b. May be selected as a valuation method at any time.
a. At the stated interest rate. c. Reports all gains and losses in income.
b. At rate lower than the stated interest rate. d. All of the choices are correct.
c. At rate higher than the stated interest rate.
d. Because a capital gain is expected. 3. The fair value option allows an entity to

5. Bonds usually sell at a premium a. Record income when the fair value increases.
b. Measure bond investnents at fair value in some years.
a. When market rate is greater than stated rate. c. Report most financial instruments at fair value.
b. When stated rate is greater than market rate. d. All of these statements are correct.
c. When the price of the bonds is greater than maturity
amount. 4. A bond investment that satisfies the amortized cost and
d. In none of these cases. FVOCI measurement may be designated

6. The effective interest rate on bond is lower than the stated rate a. Irrevocably at fair value through profit or loss
when bond sells b. Revocably at fair value through profit or loss
c. Irrevocably at fair value through OCI
a. At maturity value d. Irrevocably at amortized cost
b. Above face amount
c. Below face amount 5. Under what condition can an entity classify financial asset that
d. At face amount meets the amortized cost criteria at FVPL?

7. The eftective interest rate on bond is higher than the stated a. Where the instrument is held to maturity
rate when bond sells b. Where the business model approach is adopted
c. Where the financial asset passes the contractual cash
a. At face amount flow characteristics test
b. Above face amount d. If doing so eliminates or reduces an accounting
c. Below face amount mismatch
d. At maturity value
8. The interest method of amortizing discount provides
Effective Interest Method
a. Increasing amortization and increasing interest income
b. Increasing amortization and decreasing interest income 1. What is the interest rate written on the face of the bond?
c. Decreasing amortization and increasing interest income
a. Coupon rate
d. Decreasing amortization and decreasing interest income
b. Nominal rate
9. The interest method of amortizing premium provides c. Stated rate
d. Coupon rate, nominal rate or stated rate
a. Increasing amortization and increasing interest income
b. Increasing amortization and decreasing interest income 2. What is the rate of interest actually incurred?
c. Decreasing amortization and decreasing interest income
a. Market rate
d. Decreasing amortization and increasing interest income
b. Yield rate
10. When the interest payment dates of a bönd are May 1 and c. Effective rate
November 1, and a bond is purchased on June the amount of d. Market, yield or effective rate
cash paid by the investor would be
3. When the effective interest method is used, the periodic
a. Decreased by accrued interest from June 1 to November amortization would
1.
5
 a. Increase if the bonds were issued at a discount. d. The initial sale price of bond represents the sum of all
b. Decrease if the bonds were issued at a premium. future cash outlows.
c. Increase if the bonds were issued at a premium.
d. Increase if the bonds were issued at either a discount or
a premium. 1. When bonds are sold at a premium, at each subsequent interest
4. A discount on bond payable is charged to interest expense payment date, the cash paid is

a. Equally over the life of the bond a. Less than the effective interest
b. Only in the year the bond is issued b. Equal to the effective interest
c. Using the effective interest method c. Greater than the effective interest
d. Only in the year the bond matures d. More than if the bonds had been sold at a discount

5. Under the effective interest method of amortization, the 2. When bonds are sold at a discount, at each subsequent interest
interest expense is equal to payment date, the cash paid is

a. The stated rate of interest multiplied by the face amount a. More than the effective interest
of the bond. b. Less than the effective interest
b. The market rate of interest multiplied by the face c. Equal to the effective interest
amount of the bonds. d. More than if the bonds had been sold at a premium
c. The stated rate of interest multiplied by the beginning 3. When bonds are sold at a discount, at each interest payment
carrying amount of the bonds. date, the interest expense
d. The market rate of interest multiplied by the beginning
carrying amount of the bonds. a. Increases
b. Decreases
6. When interest expense for the current year is more than c. Remains the same
interest paid, the bonds were issued at d. Is equal to the change in carrying amount
a. A discount 4. When bonds are sold at a premium, at each interest payment
b. A premium date, the interest expense
c. Face amount
d. An indeterminable amount a. Remains constant
b. Is equal to the change in carrying amount
7. When interest expense for the current year is less than interest c. Increases
paid, the bonds were issued at d. Decreases
a. A discount 5. Interest expense is
b. A premium
c. Face amount a. The effective rate times the carrying amount of the
d. An indeterminable amount bond during the interest period.
b. The stated rate times the face amount of the bond.
8. Bond issue cost c. The effective rate times the face amount of the bond.
a. Is included in the measurement of the bonds payable d. The stated interest rate times the carrying amount.
measured at amortized cost.
b. ls amortized using the interest method over the life of
the bonds payable. 1. What is the effective interest rate of a bond measured at
c. Will effectively increase the market rate of interest. amortized cost?
d. All of these relate to bond issue cost. a. The stated rate of the bond.
9. Bonds usually sell at b. The interest rate currently charged by the entity or by
others for similar bond.
a. Maturity amount c. The interest rate that exactly discounts estimated future
b. Face amount cash payments through the expected life of the bond or
c. Present value when appropriate, a shorter period to the net carrying
d. Statistical expected value amount of the bond.
10. Which statement is true about bonds payable? d. The basic risk-free interest rate that is derived from
observable government bond prices.
a. The specific provisions of a bond issue are described in
a document called bond indenture. 2. For a bond issue which sells for less than face amount, the
b. Periodic interest expense is the stated interest rate times market rate of interest is
the amount of bond outstanding. a. Dependent on rate stated on the bond
c. Bonds will sell for a premium when the market rate of b. Equal to rate stated on the bond
interest exceeds stated rate. c. Less than rate stated on the bond
d. Higher than rate stated on the bond
6
3. What is the market rate of interest for a bond issue which sells 10. An entity issued a bond with a stated rate of interest that is
for more than face amount? less than the effective interest rate on the date of issuance. The
bond was issued on one of the interest payment dates. What
a. Less than rate stated on the bond
should the entity report on the first interest payment date?
b. Equal to rate stated on the bond
c. Higher than rate stated on the bond a. An interest expense that is less than the cash payment
d. Independent of rate stated on the bond made to bondholders.
b. An interest expense that is greater than the cash
4. If bonds are issued at a premium, this indicates that
payment made to bondholders.
a. The yield rate of interest exceeds the nominal rate c. A debit to discount on bond payable.
b. The nominal rate of interest exceeds the yield rate d. A debit to premium on bond payable.
c. The yield and nominal rates coincide
d. No necessary relationship exists between
5. Which statement is true for a bond maturing on a single date
when the effective interest method of amortizing discount on
bonds payable is used?
a. Interest expense as a percentage of the bond carrying
amount varies from period to period
b. Interest expense increases each six-month period
c. Interest expense remains constant each six month
period
d. Nominal interest rate exceeds effective interest rate
6. The market price of a bond issued at a discount is the present
value of the principal amount at the market rate of interest
a. Less the present value of all future interest payments at
the market rate of interest.
b. Less the present value of all future interest payments at
the rate of interest stated on the bond.
c. Plus the present value of all the future interest payments
at the market rate of interest.
d. Plus the present value of all future interest payments at
the rate of interest stated on the bond.
7. In theory, the proceeds from the sale of a bond would be equal
to
a. The face amount of the bond
b. The present value of the principal amount due at the end
of the life of the bond plus the present value of the
interest payments made during the life of the bond
c. The face amount of the bond plus the present value of
the interest payments made during the life of the bond
d. The sum of the face amount of the bond and the
periodic interest payments.
8. Under IAS, the valuation method used for bonds payable is
a. Historical cost
b. Discounted cash flow valuation at current yield rate
c. Maturity amount
d. Discounted cash flow valuation at yield rate at issuance
9. How should an entity calculate the not proceeds to be received
from bond issuance?
a. Discount the bonds at the stated rate of interest.
b. Discount the bonds at the market rate of interest.
c. Discount the bonds at the stated rate of interest and
deduct bond issuance cost.
d. Discount the bonds at the market rate of interest and
deduct bond issuance cost.
7