Financial Assets

Which of the following is a characteristic of debt investments?

• Contractual payments

• Ownership interest

• High liquidity

• Market volatility

What is the effective interest method used for?

• Measuring equity investments

• Determining market rates

• Allocating interest expense

• Calculating cash flows

If a bond's stated rate is less than the market rate, it will sell at:

• Discount

• Premium

• Market value

• Par

What is the journal entry for acquiring a debt investment?

• Dr. Cash, Cr. Debt Investment

• Dr. Debt Investment, Cr. Interest Revenue

• Dr. Debt Investment, Cr. Cash

• Dr. Interest Revenue, Cr. Cash

What is the classification for debt investments held-for-collection?

• Trading securities

• Fair value through profit or loss

• Amortized cost

• Fair value through other comprehensive income

What is the accounting treatment for equity investments held-for-trading?

• Valued at cost

• Valued at fair value

• Valued at amortized cost

• Valued at historical cost

What is the treatment for unrealized gains in equity investments classified as FVTOCI?

• Reported in net income

• Reported as liabilities

• Reported in other comprehensive income

• Ignored in financial statements

What is the first step in determining the impairment of a debt investment (HFC)?

• Calculate fair value

• Review interest rates

• Evaluate cash flow projections

• Assess market conditions

What is the purpose of the Fair Value Adjustment account?

• To report unrealized losses only

• To track interest revenue

• To adjust carrying amounts to fair value

• To record cash transactions

What is the accounting treatment for equity investments classified as non-trading?

• Valued at historical cost

• Valued at amortized cost

• Valued at fair value

• Valued at cost