Statements Of Financial Position And Changes In Equity; Disclosure Notes

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The Framework for Financial Reporting
Accounting Judgements
Statements of Income and Comprehensive Income
Statements of Financial Position and Changes in Equity; Disclosure Notes
The Statement of Cash Flows
Revenue Recognition
Financial Assets: Cash and Receivables
Cost-Based Inventories and Cost of Sales
Long-Lived Assets
Depreciation, Amortization, and Impairment
Financial Instruments: Investments in Bonds and Equity Securities

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Question 1

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The accounting classification of a financial instrument is determined by its tax status.

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Question 2

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Induced conversions of convertible debt arise when the debtor offers a "sweetener" to encourage the creditor to promptly convert the debt.

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Question 3

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When stock rights are issued to current shareholders,it may require more than one such right to later acquire one additional share of the stock covered by the rights.

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Question 4

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The measurement date of a compensatory stock option must precede the date of grant.

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Question 5

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General debt carries a firm commitment to interest payments and repayment of capital at maturity.

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Question 6

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Options are ONLY for the purpose of buying or selling financial instruments.

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Question 7

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If a financial instrument is an equity instrument in substance,but its legal form is debt,any periodic payments made to investors will be accrued on the company's financial statements as interest expense.

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Question 8

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If cash payments to investors are dependent on one or more future events,the instrument in question would be considered equity.

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Question 9

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When interest is repayable to investors at a fixed amount per share,the financial instrument in question would be considered debt.

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Question 10

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Retractable preferred shares are those which can be redeemed only at the investor's discretion.

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Question 11

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When preferred shares are classified as debt,their dividends are deducted from Retained Earnings,thus bypassing earnings.

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Question 12

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Securities issued as debt,but intended by the issuing corporation to be exchanged for shares by the investors at some time prior to maturity,are known as "hybrid securities".

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Question 13

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Perpetual Debt is accounted for as equity.

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Question 14

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Management of a company that has convertible bonds outstanding would likely force conversion of its bonds of the fair market value of the shares upon conversion exceeds the fair value of the bonds.

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Question 15

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The conversion option attached to convertible bonds,which have a floating conversion price per share,has an intrinsic value which is based on the fair market value of the shares at the time.

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Question 16

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A financial instrument is any contract that gives rise to a financial asset of one party and a financial liability or equity instrument of another party.

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Question 17

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Stock options have no intrinsic value when the market price of the share exceeds its conversion price.

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Question 18

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The proceeds of any bonds sold with detachable stock warrants must be pro-rated between the bonds and the warrants.

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Question 19

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Share-based payments to suppliers are valued at the value of the goods or services received.

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Question 20

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Assume that a company wishes to grant stock options to a supplier in exchange for services rendered.The company chose to value this exchange at the going market rate charged by the suppliers' competitors.This is an example of a Level 2 Fair Value Hierarchy application.

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