IA1 Ch13-14 Pre-Test

An increase in prices would result to the recognition of a gain in a "short" futures contract.

• True
• False

If the market price exceeds the strike price in a put option contract, the option is said to be in the money.

• True
• False

The maximum amount of loss in an option contract that is not designated as a hedging instrument is equal to the acquisition cost of the option.

• True
• False

Dogs Co. enters into a futures contract. At the inception, Dogs Co. pays a deposit to the broker. The deposit forms part of the carrying amount of the derivative instrument.

• True
• False

Howl Co. acquires an option. Howl Co. pays an amount for the option. The payment forms part of the carrying amount of the derivative instrument.

• True
• False

An investment that provides the investor significant influence over the investee is accounted for using the equity method.

• True
• False

Significant influence is presumed to exist if the investor holds at least 10% of the voting power of the investee.

• True
• False

An investor's representation in the board of directors of the investee may provide evidence of significant influence.

• True
• False

Investments in associates are measured at fair value at each reporting date and changes in fair value are recognized in profit or loss.

• True
• False

Under the equity method, investment income that is recognized in profit or loss is equal to the investor's share in the investee's profit or loss for the period adjusted for the depreciation or amortization of any undervaluation or overvaluation of the investee's net identifiable assets as at the date significant influence was obtained.

• True
• False