F5

Question 1

Treatment of loss in case of FV less than Present value as well as amortized value

Answer 1

Incase of calculating loss , if FV is less than PV then the diff between pv and fv will be unrealies loss in OCI, and the loss above PV will be taken loss recorded in NI

Question 2

For held to amturity the loss will be

Answer 2

Difference between present value and amortised value

Question 3

For Avaialable for sale the loss will be

Answer 3

the loss is limited to the fair value below the amortized cost

Question 4

Sale of debt security gain and loss

Answer 4

Sale of debt security gain and loss is always recorded in net income for the period

Question 5

marketable debt securities should be valued

Answer 5

at fair value and holding gains and losses to be recognised in NI

Question 6

Decision to elect fair value option for financial asset and liability

Answer 6

it must be applied to entire instrument, not to specific risk

Question 7

unrealised gain and loss on available for sale debt security to fair value change

Answer 7

are treated as other comprehensive item

Question 8

Unrealised gain and loss in trading debt securities due to fair value

Answer 8

taken in earnings of the current period and the investment is recorded at fair value in the financial statement

Question 9

Goodwill for equity method is calculated by

Answer 9

Subtracting the fair value from the purchase cost
say 200000 is purchase price for 30%
NBV of the investee 500000
NBV for 30% is 150000
FV for the net asset of investee com 600000
FV For 30% is 180000
then goodwill:-200000-180000=20000

Question 10

in case of fair value representing equipment is more than the carrying value in the investee financial statement

Answer 10

The excess value over the varrying value will be amortized with the usedul life of asset and would reduce the equity earning.
say 40% holding in investee company
net income by investee company is 150000
adn the equipment fair value exceeds the carrying value by 100000 and its useful life is 5 years
then the eearning in equity method will be as below
15000040%=60000
LEss the amortisation for the fair value in escess of carrying value of the equipment
(100000/5)=20000
so the amount reduced from earning will be
2000040%=8000
thus earning will be 52000

Question 11

if the carrying amount of investment is reduced to zero in case of equity method then

Answer 11

The application of equity method is suspended and only resumes when the investee company resumes earning and it surpasses the loss incurred by the investor company during the suspended period

Question 12

entry in case of dividend recei ved from investment which is treated by equity methid byu the investor

Answer 12

By memorandum entry that reduces the unit cost of all investee company stock owned

Question 13

Invvestment income in case of equity method

Answer 13

INvestment income will be the percent of holding mulptilied to the earning of investment company
the dividned recd will not impact the investment income, it will reduce the investment value.

Question 14

Goodwill in case of equity method

Answer 14

Neither the goodwilll is amortized or tested for impairment

Question 15

in case of purchase of additional share to increase the percentage of investment to more than 20% the equity method will be taken as follow

Answer 15

The equity method is adopted from the date and going forward, retroactive adjustment is not required, and the earning will also be recognised from the date on which he acquired the significant interest.

Question 16

Supplmental disclosure in indirect cash flow method

Answer 16

Supplemental disclosure for tax paid and net interest payment is required.

Question 17

Incase of separate cash flow provided for operating , investing and financing, then

Answer 17

additional information relating to any of it not to be incorportated, for instance if gain or net proceed for land is given then that need not to be taken in the calculation, since it is already taken in the calculation.

Question 18

IF question says traing seccurities is to be treated as operating activity for cash flow

Answer 18

then the gain on trading securities should not be subtracted from net income , and decrease in trading securities to be added to net income to get the operating cashflo

Question 19

Collection of note receivable treatment in cash flow

Answer 19

Collection of note receivable is treated in investing activity since it is considered as loan given to outsider.

Question 20

in case of purchase of asset in finance with a downpayment and the principal payment is done in installment then

Answer 20

The downpayment will be taken in cash flow from investing activities, and the installment payment will be taken as cash dlow from financing acitvity since its the payment of loan or note payable