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78. Which of the following is/are elements of a derivative?
79. Which of the following is/are elements of a derivative?
80. Which of the following is not true?
81. U.S. GAAP and IFRS require firms to classify derivatives as
82. Which of the following is/aretrue?
83. Derivative instruments acquired to hedge exposure to changes in the
fair values of assets or liabilities are fair value hedges. Fair value hedges are
84. Cash flow hedges are
85. Which of the following is/aretrue?
86. The accounting for fair value hedges is similar under both U.S. GAAP and IFRS. Which of the following
is/aretrue?
87. For cash flow hedges, which of the following is/aretrue?
88. The matching convention provides both the basis for hedge accounting, as well as the logic for the treating
gains and losses from changes in fair value of fair value hedges differently from cash flow hedges. Which of the
following is/are not true?
89. When accounting for a fair value hedge of a recognized asset or liability, on the date a firm enters the
derivative contract and designates that contract as a fair value hedge,
90. When accounting for a cash flow hedge of an recognized asset or liability, which of the following is/are
true?
91. When accounting for a cash flow hedge of an recognized asset or liability, which of the following is/are
true?
92. U.S. GAAP requires firms to disclose which of the following information with respect to derivatives?
93. Which of the following is/aretrue?
94. Firms can elect the fair value option for the following items: (1) bonds held to maturity, (2)
available-for-sale securities, and (3) cash flow hedges. Which of the following is/aretrue?
95. Which of the following can be a counterparty in a derivative transaction?
96. To be classified as a current asset, marketable securities must be readily convertible into cash and
97. Kerry Corporation acquires the publicly traded debt of Jett Corporation on December 31, Year 1 as a
temporary investment of excess cash. The securities mature in 4 years. How will the securities be recorded on
Kerry's December 31, Year 1 financial statement?
98. Which of the following is not a derivative?
99. Which of the following items appears in the balance sheet at amortized acquisition cost?
100. According to U.S. GAAP,firms holding debt and equity securities for short-term profit potential
101. Which of the following would most likely not be classified as Investment in Securities appearing between
the Current Assets and the Property, Plant and Equipment sections of the balance sheet?
102. Short-term marketable equity securities were acquired on July 1, Year 1 for $23,000, and classified as
available-for-sale. On December 31, Year 1, the securities had a market value of $24,000, determined as
follows:
Cost
Fair Market Value
July 1, Year 1
December 31, Year 1
Security AA
$ 9,000
$ 7,000
Security BB
5,000
10,000
Security CC
9,000
7,000
Total
$23,000
$24,000
What adjustment is required to reflect December 31, Year 1 fair value?
103. Monahan Company
Information concerning Monahan Company's portfolio of debt securities at May 31, Year 6, and May 31, Year
7, is presented below. All of the debt securities were purchased by Monahan during June, Year 5. Prior to June,
Year 5, Monahan had no investments in debt or equity securities.
As of May 31, Year 6
Amortized Cost
Fair Value
Cleary Company bonds
$164,526
$168,300
Beauchamp Industry bonds
204,964
205,200
Morrow Inc. bonds
305,785
285,200
$675,275
$658,700
As of May 31, Year 7
Amortized Cost
Fair Value
Cleary Company bonds
$152,565
$147,600
Beauchamp Industry bonds
193,800
204,500
Morrow Inc. bonds
289,130
291,400
$635,495
$643,500
(CMA adapted, Jun 97 #11) Refer to the Monahan Company example. Assuming that the above securities are
properly classified as available-for-sale securities under U.S. GAAP, the unrealized holding gain or loss as of
May 31, Year 7, would be
104. (CMA adapted, Jun 97 #12) Refer to the Monahan Company example. Assuming that the above securities
are properly classified as held-to-maturity securities under U.S. GAAP, the unrealized holding gain or loss as of
May 31, Year 7, would
105. According to U.S. GAAP, firms holding debt securities with a positive intent and ability to hold to
maturity display such securities in the Investments section of the balance sheet at
106. Which of the following would most likely be classified as Marketable Securities in the Current Assets
section of the balance sheet?
107. U.S. GAAP requires firms holding securities available-for-sale to value the securities on the balance sheet
after acquisition at
108. U.S. GAAP requires firms holding debt and equity securities, as well as derivatives, as trading securities to
value the securities on the balance sheet after acquisition at
109. U.S. GAAP requires firms holding debt and equity securities as securities available-for-sale to treat
unrealized holding gains or losses each period as
110. U.S. GAAP requires firms holding minority, passive investments in debt and equity securities as securities
available-for-sale that the firm intends to sell within one year to report them as
111. U.S. GAAP requires firms holdingtrading securities to report unrealized holding gains and losses on the
investments
112. U.S. GAAP classifies securities that are neither debt securities held to maturity or trading securities as
113. A financial instrument that obtains its value from some other financial item is known as a(n)
114. Derivatives include
115. Which of the following is not a derivative?
116. Which of the following is a characteristic of a derivative?
117. Which of the following is a characteristic of a derivative?
118. The U.S. GAAP and IASB require that firms record derivatives on the balance sheet date at
119. Gains and losses on effective cash flow hedges are reported initially in
120. Gains and losses on speculative securities, fair value hedges, and the ineffective portion of cash flow
hedges are included in
121. Cash flow hedges are revalued to market value each period and gains and losses from changes in the
market values of such derivatives appears
122. A fair value hedge
123. The 2009 annual report of Genes-R-Us reports the following data about its marketable securities held
available-for-sale.
Genes-R-Us
Securities
Available-for-Sale
Data from 2009
Annual Report
(Dollar Amounts in
Millions)
At Year End
During Year
Ended 12/31
Gross
Unrealized
Fair
Proceeds
Realized
Cost
Gains
(Losses)
Value
Year
of Sale
Gains
(Losses)
Dec. 31-08
$517
$81
$(4)
$594
2008
$410
$13
$2
Dec. 31-09
883
90
(6)
967
2009
431
10
2
Required:
a.
What was the cost of the securities available-for-sale that Genes-R-Us sold during the year 2009?
b.
What was the cost of the securities available-for-sale that Genes-R-Us purchased during the year 2009?
c.
What was Genes-R-Us' Other Comprehensive Income related to securities available-for-sale for 2009?
d.
What were the total gains or losses, net, both realized and unrealized on Genes-R-Us' securities
available-for-sale during the year 2009?
a.
423 = 431 - (10-2)
b.
789 = 883 - 517 + 423
c.
7 = (90 - 81) + (-6 - (-4))
d.
15 = (90 - 81) + (-6 + 4) + (10 - 2)
124. In Year 1, the firm purchased a portfolio of marketable securities for $1,000, which it holds as current
assets. At the end of Year 1, the portfolio had a market value of $800. During Year 2, the firm sold some of the
securities for $120 which had originally cost $100, but which had a market value of $90 at the end of Year 1. At
the end of Year 2, the remaining securities had a market value of $1,150.
Required:
a.
Assume the firm treats its holdings as available-for-sale.
1. Record the entry made at the end of Year 1.
2. Record the entries made during Year 2 and at the end of Year 2.
b.
Assume the firm treats its holdings as trading securities.
1. Record the entry made at the end of Year 1.
2. Record the entries made during Year 2 and at the end of Year 2.
a.
1.
Unrealized Loss on Marketable Securities (SE)
200
Marketable Securities
200
2.
Cash
120
Marketable Securities
100
Realized Gain on Sale of Marketable Securities
20
Marketable Securities
450
Unrealized Loss on Marketable Securities (SE)
200
Unrealized Gain on Marketable Securities (SE)
250
b.
1.
Unrealized Loss on Trading Securities (IncSt)
200
Marketable Securities
200
2.
Cash
120
Marketable Securities
90
Realized Gain on Sale of Trading Securities
30
Marketable Securities
440
Unrealized Gain on Trading Securities (IncSt)
440
125. In Year 1, the firm purchased a portfolio of marketable securities for $1,000, which it holds as current
assets. At the end of Year 1, the portfolio had a market value of $700. During Year 2, the firm sold some of the
securities for $160 which had originally cost $100, but which had a market value of $80 at the end of Year 1. At
the end of Year 2, the remaining securities had a market value of $850.
Required:
a.
Assume the firm treats its holdings as available-for-sale.
1. Record the entry made at the end of Year 1.
2. Record the entries made during Year 2 and at the end of Year 2.
b.
Assume the firm treats its holdings as trading securities.
1. Record the entry made at the end of Year 1.
2. Record the entries made during Year 2 and at the end of Year 2.
a.
1.
Unrealized Loss on Marketable Securities (SE)
300
Marketable Securities
300
2.
Cash
160
Marketable Securities
100
Realized Gain on Sale of Marketable Securities
60
Marketable Securities
250
Unrealized Loss on Marketable Securities (SE)
250
b.
1.
Unrealized Loss on Trading Securities (IncSt)
300
Marketable Securities
300
2.
Cash
160
Marketable Securities
80
Realized Gain on Sale of Trading Securities
80
Marketable Securities
230
Unrealized Gain on Trading Securities (IncSt)
230
126. During 2009, Curly Corporation sold marketable securities for $14,000 that had a carrying value of
$13,000 at the time of sale. The financial statements of Curly Corporation reveal the following
information with respect to securities available-for-sale:
December 31 2009 2008
Balance Sheet
Marketable Securities at Fair Value . . . $195,000 $187,000
Net Unrealized Holding Gain on
Securities Available-for-Sale. . . . . . . . $ 10,000 $ 12,000
2009
Income Statement
Realized Gain on Sale of Securities Available-for-Sale . . . $4,000
a. What was the acquisition cost of the marketable securities sold?
b. What was the unrealized holding gain on the securities sold at the time of sale?
c. What was the unrealized holding gain during 2009 on securities still held by the end of 2009?
d. What was the cost of marketable securities purchased during 2009?
the cost of new securities is $20,000 = $8,000 + $12,000.
