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 $ Expected credit loss $ Impairment loss $ 1 216,000 $ 192,000 $ 36,000 $ 0$ 2 168,000 $ 192,000 $ 36,000 $ 24,000 3 144,000 192,000 36,000 48,000 x

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 $ Expected credit loss $ Impairment loss $ 1 216,000 $ 192,000 $ 36,000 $ 0$ 2 168,000 $ 192,000 $ 36,000 $ 24,000 3 144,000 192,000 36,000 48,000 x

Financial Accounting Intro Concepts Meth/Uses

14th Edition

ISBN:9781285595047

Author:Weil

Publisher:Weil

Chapter14: Intercorporate Investments In Common Stock

Section: Chapter Questions

Problem 4Q

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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.
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 $ Expected credit loss $ Impairment loss $ 1 216,000 $ 192,000 $ 36,000 $ 0$ 2 168,000 $ 192,000 $ 36,000 $ 24,000 $ 3 144,000 192,000 36,000 12,000 x
Investment in debt instruments classified as FA@FVTOCI recognizes which of the following in OCI? Group of answer choices Impairment gains and losses All of these Interest calculated using the effective interest method. Changes in fair value
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.
Presented below are two independent cases related to available-for-sale debt investments. Amortized cost Fair value Expected credit losses Case 2 Case 1 Case 2 $37,230 $91,300 26,680 100,350 82,740 For each case, determine the amount of impairment loss, if any. Of no loss, please enter O. Do not leave any fields blank) Case 1 Impairment Loss $ Impairment Loss $ 21,640
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.
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.
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.
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.
If an associate incurs losses, the investor is required to________. Select one: a. recognise the losses only to the point where the carrying amount of the investment is equal to zero b. reclassify the investment as current assets c. recognise the losses only to the point where the carrying amount of the investment is equal to the initial investment d. ignore the losses for the purposes of equity accounting adjustments
1. Which of the following may be measured subsequently at amortized cost?a. None of theseb. A non-derivative equity instrumentc. A derivalived. A non-derivative debt instrument 2. An investment in equity instrument may not be classified as a financial asset subsequently measured ata. Fair value through other comprehensive incomeb. Amortized costc. Fair value through proft or lossd. None of these 3. Significant influence isa. The contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control.b. The power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.c. The power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies.d. Deemed to exist when the investor is exposed, or has rights, to variable returns from its involvement with the…
Which of the following financial assets are assessed for impairment? Equity investments at Fair Value through Profit or Loss Equity investments at Fair Value through Other Comprehensive Income Debt investments at Fair Value through Profit or Loss Debt investments at amortized cost and debt investments at FVOCI.