F4M1

Question 1

Financial Instruments include

Answer 1

Financial assets and financial liabilities

Question 2

Contract with favorable terms (asset or liability)

Answer 2

asset

Question 3

Contract with unfavorable terms (asset or liability)

Answer 3

liability

Question 4

Fair Value Option for financial instruments

Answer 4

On specified elected dates, entities may choose to measure at fair value. This is irrevocable

Question 5

Debt securities include

Answer 5

Corporate bonds

REDEEMABLE preferred stock

government securities

Convertible debt

Commercial paper

Question 6

Types of debt securities

Answer 6

AFS

TS

HTM

Question 7

Trading Securities

Answer 7

CF from operations

Fair Value

Gain or loss directly to income statement

Question 8

AFS securities

Answer 8

CF from investing

Measured at fair value

unrealized gain or loss in OCI

realized gain or loss on income statement

Question 9

HTM securities

Answer 9

CF from investing

Measured at amortized cost

Intent and ability to hold to maurity

CANNOT BE STOCK SINCE STOCK DOES NOT MATURE

Question 10

Unreadlized gains and losses

Answer 10

TS and AFS only

Valuation account and unrealized gain/loss

Question 11

Realized gains and losses where are they recognized

Answer 11

income statement

Question 12

Which debt securities report imapirment

Answer 12

AFS and HTM

Question 13

Impairment of HTM

Answer 13

current excepted credit loss

PV - amortized cost

Write down to the PVFCF

should be reported at the present value of principal and interest

Credit loss is the difference between present value and amortized cost

Question 14

Impairment entry to HTM

Answer 14

Credit loss

Allowance for credit loss

Question 15

Impairment of AFS

Answer 15

change to FMV is gain/loss

loss recognized to the extent of ECL (PV-amortization)

if the loss exceeds ECL, the rest goes to OCI

Question 16

Sale of TS

Answer 16

selling price - CV is gain or loss

Question 17

Sale of AFS

Answer 17

Selling price - original cost

Question 18

Equity securities

Answer 18

PS
CS
Not Redeemable PS

Question 19

common stock has no significant influence if

Answer 19

less than 20%

Question 20

Common stock has significant influence if

Answer 20

20-50%

Question 21

common stock has control if

Answer 21

greater than 50%

Question 22

Entry from non liquidating equity security

Answer 22

Dr. Cash

Cr. Dividend income

Question 23

entry from liquidating security

Answer 23

Div > RE

Dr Cash
CR. dividend income (to extent Div does not exceed RE)
CR. Investment

Question 24

Type of account for investment in investee

Answer 24

Return on Capital

Question 25

Required disclosures for debt securities

Answer 25

FV/Amortized cost
Realized versus unrealized gains and losses
Impairment charges
Concentration/credit risk

Question 26

Required disclosures for equity securities

Answer 26

total net g / l
- realized g / l
= unrealized g / l