Question 1

The payment to executives from a performance-type plan is NEVER based on the

Accepted Answer

A) market price of the common shares. 
B) return on assets (investment). 
C) return on common shareholders' equity. 
D) sales. 
A) market price of the common shares. 
B) return on assets (investment). 
C) return on common shareholders' equity. 
D) sales.

Question 2

If a SAR is determined to be an equity instrument, it would be valued at

Accepted Answer

A) grant date and not revised at subsequent interim dates. 
B) each interim date. 
C) exercise date. 
D) grant date and revalued at exercise date. 
A) grant date and not revised at subsequent interim dates. 
B) each interim date. 
C) exercise date. 
D) grant date and revalued at exercise date.

Question 3

Bissau Ltd.issued $4,000,000, 5-year, 8% convertible bonds at par.Each $1,000 bond is convertible to 200 of Bissau's no par value common shares, which are currently trading at $25 each.The current market rate for similar non-convertible bonds is 10%.Assuming Bissau adheres to IFRS, the value to be recorded for the conversion option is

Accepted Answer

A) $ 0. 
B) $ 5,000. 
C) $100,000. 
D) $303,267. 
A) $ 0. 
B) $ 5,000. 
C) $100,000. 
D) $303,267.

Question 4

On April 1, 2017, Gamma Corp.purchases a call option for $500, which gives Gamma the right to buy 1,000 shares of Delta Inc.for $30 each until December 1, 2017.Delta Inc.shares are currently trading for $30.At June 30, 2017, the options are trading at $4,800 and the shares at $32 each.At December 1, 2017, the options expire with no value.The entry to record the purchase of the call option is  
D)No entry required.

Accepted Answer

The answer of On April 1, 2017, Gamma Corp.purchases a...

Question 5

An executive compensation plan in which the executive may receive compensation in cash, shares, or a combination of both, is known as

Accepted Answer

A) a nonqualified shares option plan. 
B) a performance-type plan. 
C) a stock appreciation rights plan. 
D) both a performance-type and a stock appreciation rights plan. 
A) a nonqualified shares option plan. 
B) a performance-type plan. 
C) a stock appreciation rights plan. 
D) both a performance-type and a stock appreciation rights plan.

Question 6

A common reason for issuing convertible bonds is

Accepted Answer

A) to obtain debt financing at cheaper rates. 
B) to avoid paying dividends on common shares. 
C) to give the purchaser the option of buying preferred shares. 
D) to reduce the debt-to-total assets ratio. 
A) to obtain debt financing at cheaper rates. 
B) to avoid paying dividends on common shares. 
C) to give the purchaser the option of buying preferred shares. 
D) to reduce the debt-to-total assets ratio.

Question 7

For convertible securities, the portion relating to the option should be classified as a(n)

Accepted Answer

A) liability. 
B) asset. 
C) reduction of contributed surplus. 
D) addition to contributed surplus. 
A) liability. 
B) asset. 
C) reduction of contributed surplus. 
D) addition to contributed surplus.

Question 8

A call option is a right to

Accepted Answer

A) force another party to buy the underlying security. 
B) repurchase a previously sold underlying security. 
C) sell the underlying security. 
D) buy the underlying security. 
A) force another party to buy the underlying security. 
B) repurchase a previously sold underlying security. 
C) sell the underlying security. 
D) buy the underlying security.

Question 9

Under IFRS, mandatorily redeemable preferred shares (term preferred shares)are treated as

Accepted Answer

A) a liability. 
B) equity. 
C) a contra-asset. 
D) either a liability or a contra-asset. 
A) a liability. 
B) equity. 
C) a contra-asset. 
D) either a liability or a contra-asset.

Question 10

A speculator's objective is to

Accepted Answer

A) reduce pre-existing risks. 
B) take delivery of the underlying. 
C) take advantage of information asymmetry. 
D) maximize potential returns by being exposed to greater risks. 
A) reduce pre-existing risks. 
B) take delivery of the underlying. 
C) take advantage of information asymmetry. 
D) maximize potential returns by being exposed to greater risks.

Question 11

On July 5, 2017, Alpha Corp.purchased a call option for $2,400, giving it the right to buy 1,000 shares of Omega Corp.for $40 per share.On August 18, 2017, when the option value is $12,000, Omega settles the option for cash.The entry on Alpha's books to record the settlement is

Accepted Answer

The answer of On July 5, 2017, Alpha Corp.purchased a...

Question 12

Use the following information for questions.
On April 1, 2017, Gamma Corp.purchases a call option for $500, which gives Gamma the right to buy 1,000 shares of Delta Inc.for $30 each until December 1, 2017.Delta Inc.shares are currently trading for $30.At June 30, 2017, the options are trading at $4,800 and the shares at $32 each.At December 1, 2017, the options expire with no value.
-The time value of the option at April 1, 2017 is

Accepted Answer

A) $ 0. 
B) $ 500. 
C) $ 4,800. 
D) $30,000. 
A) $ 0. 
B) $ 500. 
C) $ 4,800. 
D) $30,000.

Question 13

If a company enters into a hedging contract to swap a floating interest rate for a fixed rate, by the end of the contract the interest rate incurred by the company will equal

Accepted Answer

A) the difference between the fixed and the floating rate. 
B) the floating rate. 
C) the fixed rate. 
D) whichever rate is highest. 
A) the difference between the fixed and the floating rate. 
B) the floating rate. 
C) the fixed rate. 
D) whichever rate is highest.

Question 14

Using IFRS, hedge accounting allows the gain or loss on the hedge transaction to

Accepted Answer

A) be booked through net income. 
B) be booked through other comprehensive income. 
C) not be booked. 
D) not be booked until the hedge closes. 
A) be booked through net income. 
B) be booked through other comprehensive income. 
C) not be booked. 
D) not be booked until the hedge closes.

Question 15

Compensation expense resulting from a compensatory stock option plan (CSOP)is generally recognized

Accepted Answer

A) in the period of exercise. 
B) at the grant date. 
C) in the periods in which the employee performs the service. 
D) over the periods of the employee's service life to retirement. 
A) in the period of exercise. 
B) at the grant date. 
C) in the periods in which the employee performs the service. 
D) over the periods of the employee's service life to retirement.

Question 16

Use the following information for questions.
On July 1, 2017, Casablanca Ltd.issued $6,000,000 (par value), 9%, ten-year convertible bonds at 98 plus accrued interest.The bonds were dated April 1, 2017 with interest payable quarterly on July 1, October 1, January 1 and April 1.If the bonds had NOT been convertible, they would have sold for 96.1 plus accrued interest.The bond discount is amortized on a straight-line basis.On April 1, 2018, $1,200,000 of these bonds were converted into 500 no par common shares.Accrued interest was paid in cash at the time of conversion.
-What was the effective interest rate on the bonds when they were issued?

Accepted Answer

A) 9% 
B) above 9% 
C) below 9% 
D) cannot determine from the information given 
A) 9% 
B) above 9% 
C) below 9% 
D) cannot determine from the information given

Question 17

Under IFRS, a convertible debt security is recorded as a debt instrument

Accepted Answer

A) with the equity feature ignored. 
B) with the equity feature described in a note. 
C) and an equity component. 
D) with the conversion component credited to the Common Shares account. 
A) with the equity feature ignored. 
B) with the equity feature described in a note. 
C) and an equity component. 
D) with the conversion component credited to the Common Shares account.

Question 18

Derivatives should be valued at

Accepted Answer

A) historical cost. 
B) fair value or historical cost. 
C) fair value. 
D) discounted cost. 
A) historical cost. 
B) fair value or historical cost. 
C) fair value. 
D) discounted cost.

Question 19

Dakar Inc.has $3,000,000 (par value), 8% convertible bonds outstanding.Each $1,000 bond is convertible into thirty no par value common shares.The bonds pay interest on January 31 and July 31.On July 31, 2017, the holders of $900,000 worth of bonds exercised the conversion privilege.On that date the market price of the bonds was 105, the market price of the common shares was $36, the carrying value of the common shares was $18 and the Contributed Surplus-Conversion Rights account balance was $450,000.The total unamortized bond premium at the date of conversion was $210,000.Using the book value method, Dakar should record, as a result of this conversion,

Accepted Answer

A) a credit of $135,000 to Contributed Surplus-Conversion Rights. 
B) a debit of $135,000 to Contributed Surplus-Conversion Rights. 
C) a credit of $63,000 to Bonds Payable. 
D) a debit of $210,000 to Bonds Payable. 
A) a credit of $135,000 to Contributed Surplus-Conversion Rights. 
B) a debit of $135,000 to Contributed Surplus-Conversion Rights. 
C) a credit of $63,000 to Bonds Payable. 
D) a debit of $210,000 to Bonds Payable.

Question 20

Which of the following is NOT a characteristic of a non-compensatory employee stock option plan (ESOP)?

Accepted Answer

A) The plan is generally available to all employees. 
B) There is only a small discount from the market price. 
C) The plan requires the employee to pay an upfront premium. 
D) The plan is accounted for as compensation expense. 
A) The plan is generally available to all employees. 
B) There is only a small discount from the market price. 
C) The plan requires the employee to pay an upfront premium. 
D) The plan is accounted for as compensation expense.

The payment to executives from a performance-type plan is NEVER based on the

If a SAR is determined to be an equity instrument, it would be valued at

An executive compensation plan in which the executive may receive compensation in cash, shares, or a combination of both, is known as

A common reason for issuing convertible bonds is

For convertible securities, the portion relating to the option should be classified as a(n)

A call option is a right to

Under IFRS, mandatorily redeemable preferred shares (term preferred shares)are treated as

A speculator's objective is to

On July 5, 2017, Alpha Corp.purchased a call option for $2,400, giving it the right to buy 1,000 shares of Omega Corp.for $40 per share.On August 18, 2017, when the option value is $12,000, Omega settles the option for cash.The entry on Alpha's books to record the settlement is

If a company enters into a hedging contract to swap a floating interest rate for a fixed rate, by the end of the contract the interest rate incurred by the company will equal

Using IFRS, hedge accounting allows the gain or loss on the hedge transaction to

Compensation expense resulting from a compensatory stock option plan (CSOP)is generally recognized

Under IFRS, a convertible debt security is recorded as a debt instrument

Derivatives should be valued at

Which of the following is NOT a characteristic of a non-compensatory employee stock option plan (ESOP)?

The Canadian Financial Reporting Environment

Conceptual Framework Underlying Financial Reporting

The Accounting Information System and Measurement Issues

Reporting Financial Performance

Financial Position and Cash Flows

Revenue Recognition

Cash and Receivables

Inventory

Investments

Property, Plant, and Equipment: Accounting Model Basics

Depreciation, Impairment, and Disposition

Intangible Assets and Goodwill

Non-Financial Andcurrent Liabilities

Long-Term Financial Liabilities

Shareholders Equity

Earnings Per Share

Income Taxes

Pensions and Other Employee Future Benefits

Leases

Accounting Changes and Error Analysis

Statement of Cash Flows

Other Measurement and Disclosure Issues

Filters

Exam 16: Complex Financial Instruments

The payment to executives from a performance-type plan is NEVER based on the

If a SAR is determined to be an equity instrument, it would be valued at

An executive compensation plan in which the executive may receive compensation in cash, shares, or a combination of both, is known as

A common reason for issuing convertible bonds is

For convertible securities, the portion relating to the option should be classified as a(n)

A call option is a right to

Under IFRS, mandatorily redeemable preferred shares (term preferred shares)are treated as

A speculator's objective is to

On July 5, 2017, Alpha Corp.purchased a call option for $2,400, giving it the right to buy 1,000 shares of Omega Corp.for $40 per share.On August 18, 2017, when the option value is $12,000, Omega settles the option for cash.The entry on Alpha's books to record the settlement is

If a company enters into a hedging contract to swap a floating interest rate for a fixed rate, by the end of the contract the interest rate incurred by the company will equal

Using IFRS, hedge accounting allows the gain or loss on the hedge transaction to

Compensation expense resulting from a compensatory stock option plan (CSOP)is generally recognized

Under IFRS, a convertible debt security is recorded as a debt instrument

Derivatives should be valued at

Which of the following is NOT a characteristic of a non-compensatory employee stock option plan (ESOP)?

The Canadian Financial Reporting Environment

Conceptual Framework Underlying Financial Reporting

The Accounting Information System and Measurement Issues

Reporting Financial Performance

Financial Position and Cash Flows

Revenue Recognition

Cash and Receivables

Inventory

Investments

Property, Plant, and Equipment: Accounting Model Basics

Depreciation, Impairment, and Disposition

Intangible Assets and Goodwill

Non-Financial Andcurrent Liabilities

Long-Term Financial Liabilities

Shareholders Equity

Earnings Per Share

Income Taxes

Pensions and Other Employee Future Benefits

Leases

Accounting Changes and Error Analysis

Statement of Cash Flows

Other Measurement and Disclosure Issues

Filters