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20 Cards in this Set
- Front
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d. A financial asset of one entity and a financial liability or equity instrument of another entity |
A financial instrument is any contract that gives rise to a. A financial asset b. A financial liability c. A financial asset of one entity and a financial liability of another entity d. A financial asset of one entity and a financial liability or equity instrument of another entity |
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c. Warranty provision |
Which is not classified as a financial instrument? a. Convertible bond b. Foreign currency contract c. Warranty provision d. Loan receivable |
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c. A contractual right to exchange financial instruments with another entity under conditions that are potentially unfavorable. |
Which cannot be considered a financial asset? a. Cash b. A contractual right to receive cash or another financial asset from another entity. c. A contractual right to exchange financial instruments with another entity under conditions that are potentially unfavorable. d. An equity instrument of another entity |
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b. Trade accounts receivable. |
Which should be classified as financial asset? a. Patent b. Trade accounts receivable. c. Inventory d. Land. |
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b. Is a contractual obligation to deliver cash or another financial asset to another entity. |
A financial liability a. Must be classified as noncurrent liability. b. Is a contractual obligation to deliver cash or another financial asset to another entity. c. Is a contractual obligation to exchange financial instrument with another entity under conditions that are potentially favorable to the entity. d. Is a contractual obligation to deliver cash or any asset to another entity. |
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d. Income tax payable |
Financial liabilities include all of the following, except a. Trade accounts payable b. Notes payable c. Bonds payable d. Income tax payable |
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a. Equity instrument |
It is any contract that evidences residual interest in the assets of an entity after deducting all of the liabilities. a. Equity instrument b. Debt instrument c. Loan receivable d. Financial asset with indeterminable fair value |
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d. Either current or noncurrent liability depending on redemption date |
How should preference shares that are redeemable mandatorily be presented in the statement of financial position? a. Noncurrent liability b. Current liability c. Equity d. Either current or noncurrent liability depending on redemption date |
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c. Interest expense |
What is the presentation of preference dividend on mandatorily redeemable preference shares? a. Deducted from retained earnings b. Deducted from share premium c.Interest expense d. Deducted from share capital |
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b. Bond payable |
Which is not an equity instrument? a. Ordinary share capital b. Bond payable c. Preference share capital d. Share option or warrant |
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b. The issuer shall classify the liability and equity components of a compound instrument separately as liability or equity. |
What is the principal accounting for a compound instrument? a. The issuer shall classify a compound instrument as either a liability or equity based on evaluation of the predominant characteristics of the contractual arrangement. b. The issuer shall classify the liability and equity components of a compound instrument separately as liability or equity. c. The issuer shall classify a compound instrument as an equity in the entirety. d. The issuer shall classify a compound inStrument as a liability in the entirety, until converted equity. |
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a. First, the liability component is measured at fair value, and then the remainder of the proceeds is allocated to the equity component. |
How are the proceeds from issuing a compound instrument allocated between the liability and equity components? a. First, the liability component is measured at fair value, and then the remainder of the proceeds is allocated to the equity component. b. First, the equity component is measured at fair value, and then the remainder of the proceeds is allocated to the liability component. c. First, the fair values of. both the equity component and the liability component are estimated. Then the proceeds are allocated to the liability and equity components based on the relation between the estimated fair value. d. The equity component is measured at its intrinsic value. The liability component is measured at the face amount less the intrinsic value of the equity component. |
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d. The excess of the proceeds over the fair value of the bonds without the share warrants. |
When bonds are issued with share warrants, the equity component is equal to a. Zero b. The excess of the proceeds over the face amount of the bonds. c. The market value of the share warrants. d. The excess of the proceeds over the fair value of the bonds without the share warrants. |
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c. Both detachable and nondetachable share warrants |
When bonds are issued With share warrants, a portion of the proceeds should be allocated to equity When the bonds are issued with a. Detachable share warrants b. Nondetachable share warrants c. Both detachable and nondetachable share warrants d. Neither detachable nor nondetachable share warrants |
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d. The proceeds should be allocated between liability and equity under all of these circumstances. |
The proceeds from an issue of bonds payable with share warrants should not be allocated between the liability and equity components when
a. The fair value of the warrants is not readily available. b. The exercise of the warrants within the next reporting period seems remote. c. The warrants issued are nondetachable. d. The proceeds should be allocated between liability and equity under all of these circumstances. |
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a. A compound financial instrument |
A bond convertible by the holder into a fixed number of ordinary shares of the issuer is a. A compound financial instrument b. A primary financial instrument c. A derivative financial instrument d. An equity instrument |
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d. May be exchanged for shares of the issuer. |
Convertible bonds a. Have priority over other indebtedness. b. Are usually secured by a mortgage. c. Pay interest only in the event net income is sufficient. d. May be exchanged for shares of the issuer. |
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b. Allow an entity to issue debt financing at lower rate. |
Convertible bonds a. Are separated into liability and expense b. Allow an entity to issue debt financing at lower rate. c. Are separated into liability and equity components based on fair value. d. Are not accounted for as compound instrument. |
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d. The instrument should be recorded as part bond and part equity. |
What is the accounting for issued convertible bond? a. The instrument should be recorded solely as bond. b. The mstrument should be recorded as either bond or equity but not both. c. The instrament should be recorded solely as equity. d. The instrument should be recorded as part bond and part equity. |
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a. Separated into liability and equity with the liability recorded at fair value and the residual assigned to the equity. |
Issued convertible bonds are a. Separated into liability and equity with the liability recorded at fair value and the residual assigned to the equity. b. Always recorded using fair value c. Recorded at face amount for the liability d. Recorded at par value of the shares |
