The transaction costs of acquiring an investment measured at amortized cost are A. Included in the initial measurement of the investment and amortized to profit or loss using the effective interest method. B. Initiallt deferred and recognized in profit or loss only when the aaset is derecognized or becomes impaired. C. Initially deferred and recognized directly in equity when the asset is derecognized or becomes impaired. D. Expensed immediately on acquisition date.
Multiple choice
1. The transaction costs of acquiring an investment measured at amortized cost are
A. Included in the initial measurement of the investment and amortized to profit or loss using the effective interest method.
B. Initiallt deferred and recognized in profit or loss only when the aaset is derecognized or becomes impaired.
C. Initially deferred and recognized directly in equity when the asset is derecognized or becomes impaired.
D. Expensed immediately on acquisition date.
2. An entity acquired 10 year bonds at a premium. The investment is measured at amortized cost . Seven years after the acquisition, the entity sold 90% of the bonds at a discount. Which is the following is true?
A. Gain is realized on the sale.
B. The remaining 10% should be reclassified out of the amortized cost measument category.
C. Loss is realized on the sale.
D. B and C
3. There are no payments made during the life of this type of bond; both the principal and interest( computed on a compounded basis) are payable only at maturity date.
A. Zero coupon or strip bonds
B. No sufficient fund bonds
C. FVOCCI asset
D. Fair value asset.
4. Jackhammer Co. Calculates the interest income on an investment in debt securities using the effective interest method but reports the investment at fair value. Jackhammer Co. 's investment must have been classified as.
A. Amortized cost asset
B. FVPL ASSET
C. FVOCI Asset
D. Fair value asset
5. A entity purchased bonds at a premium. The bonds are measured at anortized cost. Assume the fair
A. Less cash interest is received each year than interest revenue.
B. The ending valuation allowance account balance will depend on the ending market value and original cost.
C. The ending valuation allowance accountbalance will depend on the ending market value and original cost adjusted for premium amortization..
D. The carrying amout of the bonds decreases over the term of the bonds.
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An entity acquired 10-year bonds at a premium. The investment is measured at amortized cost. Seven years after the acquisition, the entity sold 90% of the bonds at a discount. Which of the following is true?
A. Gain is realized on the sale.
B. The remaining 10% should be reclassified out of the amortized cost measument category.
C. Loss is realized on the sale.
D. B and C
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