Subsequent to their initial recognition, which financial assets with quoted market prices in an active market are measured at fair value?
Answer(s): C
Subsequent measurement of financial assets is normally at fair value. Thus, derivative, available-for-sale, and held-for-trading financial assets are measured at fair value. Loans and receivables and held-to-maturity investments are measured at amortized cost using the effective interest rate method. Unquoted equity instruments whose fair value is not reliably measurable are reported at cost.
Assuming an available-for-sale financial asset that is not part of a hedge is remeasured to fair value at the balance sheet, the gain or loss not arising from foreign exchange transactions or impairment
Answer(s): B
A gain or loss on an available-for-sale financial asset that is not part of a hedge is recognized directly in equity through the statement of changes in equity except for impairment losses and foreign exchange gains and losses. The accumulated remeasurement gain or loss is included in profit or loss when the asset is derecognized.
If bonds payable with a carrying amount equal to par value are refunded by use of a call provision, the call premium of the refunded issue should be
Answer(s): D
An entity should remove a financial liability from its balance sheet only when it is extinguished, for example. when the creditor is paid. The difference between the carrying amount and the amount paid should be included in profit or loss for the period.
An entity most likely may derecoginize a financial liability if it
Derecognition of a financial liabilityor a part) occurs only by means of extinguishment_ This condition is satisfied only when the debtor pays the creditor or is legally released from primary responsibility either by the creditor or through the legal process. An extinguishments and derecognition of the old debt and recognition of new debt occurs when the borrower and lender exchange debt instruments with II substantially different terms, that is, when the respective discounted cash flows differ by at least 10%.
An entity has a US $100, 000 liability on the books. In 12 months, US $110.000 will be due. including 10% interest. The entity negotiates settlement of the debt today by exchanging customer receivables with a carrying amount of US $90, 000. What is the journal entry today?
An entity may derecognize a financial liability when it is extinguished_ This condition is met when the debtor discharges the debt by paying the creditor, such as with cash. other financial assetse.g.. receivables). goods. or services. Consequently, the liability should be debited for its US $100.000 balance Receivables with a US $90.000 balance are given up. so that account should be credited. The difference is again.
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