Recording Entries for Impairment-AFS Determine the amount of impairment loss (if any) to record in income under the following three separate scenarios for an AFS debt investment. In all three cases, the company does not intend to sell and does not believe it is more likely than not that it will be required to sell the investment before recovery of any unrealized loss. Assume that the company has already adjusted the AFS investments to fair value through OCI. Scenario Fair value Amortized cost 1 2 3 162,000126,000108,000 144,000144,000144,000 Expected credit loss27,000 27,000 27,000 ??? Impairment loss ??? ???

Recording Entries for Impairment-AFS Determine the amount of impairment loss (if any) to record in income under the following three separate scenarios for an AFS debt investment. In all three cases, the company does not intend to sell and does not believe it is more likely than not that it will be required to sell the investment before recovery of any unrealized loss. Assume that the company has already adjusted the AFS investments to fair value through OCI. Scenario Fair value Amortized cost 1 2 3 162,000126,000108,000 144,000144,000144,000 Expected credit loss27,000 27,000 27,000 ??? Impairment loss ??? ???

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Under IFRS, a company: a. should evaluate only equity investments for impairment. b. accounts for an impairment as an unrealized loss, and includes it as a part of other comprehensive income and as a component of other accumulated comprehensive income until realized. c. calculates the impairment loss on debt investments as the difference between the carrying amount plus accrued interest and the expected future cash flows discounted at the investment's historical effective-interest rate. d. All of the above.
16. When a debt investment at FVOCI is reclassified to amortized cost, the entity will a. Remeasure the financial asset to original cost. b. The effective rate used for amortization shall be the effective rate at the date of reclassification. c. The cumulative gain or loss previously recognized in OCI is removed from equity and adjusted against the fair value at the reclassification date. d. The cumulative gain or loss previously recognized in OCI is removed from equity and transferred to profit and loss.
If in subsequent period, there is objective evidence of recovery in impairment previously recognized for debt investments measured at amortized cost, the amount of the reversal: shall not be recognized. shall be recognized in profit or loss. shall be recognized in equity. shall be recognized when the asset is derecognized.
Which statement is true when a debt investment at amortized cost is reclassified to FVOCI? a. All these statements are true. b. The difference between the previous carrying amount and fair value at reclassification date is recognized in other comprehensive income. c. The original effective rate is not adjusted d. The debt investment is measured at fair value at reclassification date.
Assume that a business is headed for certain bankruptcy and it is evident that its liabilities greatly exceed its assets. Which principle would be violated if its financial statements wereprepared using standard U.S. GAAP?a. Entity assumptionb. Continuity assumptionc. Historical cost principled. Stable-monetary-unit assumption
17. When a debt investment at FVOCI is reclassified to FVPL, an entity willa. Remeasure the investment to the original cost and eliminate the cumulative unrealized gain or loss in OCI.b. Transfer the cumulative unrealized gain or loss to retained earningsc. The cumulative gain or loss previously recognized in OCI is reclassified to profit or loss.d. The effective rate at the date of reclassification shall be the basis for interest income to be recognized in subsequent periods.
Which statement is incorrect regarding reclassification of financial assets? Group of answer choices The effective interest rate and the measurement of expected credit losses are not adjusted as a result of the reclassification from AC measurement category to FVTOCI and vice versa. The effective interest rate is determined on the basis of the fair value of the asset at the reclassification date when an entity reclassifies a financial asset out of FVTPL measurement category. All reclassifications out of FVTOCI measurement category result in ‘reclassification adjustment’. Reclassifications to FVTPL measurement category result to amounts recognized in profit or loss.
In reference to the downstream or upstream sale of depreciable assets, which of the following statements is correct? A. Gains and losses appear in the parent-company accounts in the year of sale and must be eliminated by the parent company determining its investment income under equity method of accounting. B. The initial effect of unrealized gains and losses from downstream sales of depreciable asset is different from the sale of non-depreciable assets. C. Gains, but not losses, appear in the parent-company accounts in the year of sale and must be eliminated by the parent company in determining its investment income under the equity method of accounting. D. Upstream sales from the subsidiary to the parent company always result in unrealized gains or losses.
Gem Company classifies a portion of its retained earnings as appropriated for loss contingencies. Consequently, the company Group of answer choices A.) May transfer to income a part of said retained earnings so appropriated. B.)Should not identify said appropriation as an appropriation of retained earnings. C.) Should show the said appropriation of retained earnings within the stockholders' equity section of the balance sheet D.)Could charge costs or losses to the said appropriated retained earnings.
When the required balance of the loss allowance decreases, a. the entity recognizes gain. b. the entity recognizes loss. c. the entity recognizes unearned interest to be amortized over the remaining term of the instrument. d. the entity recognizes a deferred charge to be amortized over the remaining term of the instrument.
Under PFRS 3, when is a gain recognized in consolidating financial information? Group of answer choices a.When the amount of a bargain purchase exceeds the value of the applicable liability held by the acquired company. b.In an acquisition when the value of all assets and liabilities cannot be determined. c.When any bargain purchased is created d.In a combination created in the middle of the fiscal year
An entity, with an investment in debt securities carried as FVOCI, deemed its original business model as not applicable starting November 30, 2020, and decided to reclassify its investment as FVPL. Which of the following statements is true? A. The reclassification shall be made on November 30, 2020; the investment is transferred at fair value from FVOCI to FVPL; the cumulative gain or loss previously recognized in OCI is transferred to profit or loss B. The reclassification shall be made on January 1, 2021; the investment is transferred at fair value from FVOCI to FVPL; the cumulative gain or loss previously recognized in OCI is transferred to profit or loss C. The reclassification shall be made on January 1, 2021; the investment is transferred at fair value from FVOCI to FVPL; the cumulative gain or loss previously recognized in OCI is transferred to retained earnings D. The reclassification shall be made on November 30, 2020; the…