Exam 4: Complex Financial Instruments
Exam 1: Non-Financial and Current Liabilities91 Questions
Exam 2: Long-Term Financial Liabilities92 Questions
Exam 4: Complex Financial Instruments99 Questions
Exam 6: Income Taxes74 Questions
Exam 7: Pensions and Other Post-Employment Benefits106 Questions
Exam 8: Leases127 Questions
Exam 9: Accounting Changes and Error Analysis65 Questions
Exam 10: Statement of Cash Flows82 Questions
Exam 11: Other Measurement and Disclosure Issues56 Questions
Select questions type
Antigone Corp. issued bonds with detachable common stock warrants. Only the bonds had a known market value. Using the residual method, the value attributable to the warrants is reported as
(Multiple Choice)
4.8/5
(32)
On March 1, 2020, Rabat Corp. sold $ 300,000 (par value), 20 year, 8% bonds at 104. Each $ 1,000 bond was issued with 25 detachable warrants, each of which entitled the bondholder to purchase for $ 50 one of Rabat's no par value common shares. The bonds without the warrants would normally sell at 95. At this time, the market value of Rabat's common shares was $ 40 per share and the market value of each warrant was $ 2.00. Using the relative fair value method, what amount should Rabat record on March 1, 2020 as Contributed Surplus-Stock Warrants?
(Multiple Choice)
5.0/5
(42)
Under a (non-compensatory) employee stock option plan (ESOP), when an option is sold to an employee, the employer debits Cash and credits
(Multiple Choice)
4.9/5
(42)
Convertible bonds
Miron Construction Ltd. offers five-year, 8% convertible bonds (par $ 1,000). Interest is paid annually on the bonds. Each $ 1,000 bond may be converted into 100 common shares, which are currently trading at $ 8 per share. Similar straight bonds carry an interest rate of 10%. One thousand bonds are issued at 101.
Instructions
a) Assume Miron Construction Ltd. follows IFRS and decides to use the residual method and measures the debt first. Calculate the amount to be allocated to the bond and to the option.
b) Prepare the journal entry at the date of issuance of the bonds under IFRS.
c) Assume that after three years, when the carrying amount of the bonds was $ 965,290, half of the holders of the convertible debt decided to convert their convertible bonds before the bond maturity date. Prepare the journal entry to record the conversion.
d) How many shares were issued at the conversion?
e) Assume now that Miron follows ASPE and has chosen as an accounting policy to value the equity component at zero. Prepare the journal entry at the date of issuance of the bonds.
(Essay)
5.0/5
(37)
Fair value disclosure for financial instruments - IASB standards
What are the IASB rules regarding disclosure of financial instruments in the notes to the financial statements and why?
(Essay)
4.7/5
(41)
Use the following information for questions 47-49.
On July 2, 2020, Martineau Ltd. issued $ 6,000,000 (par value), 9%, ten-year convertible bonds at 98. The bonds were dated April 1, 2020 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. The bond discount is amortized on a straight-line basis. On April 1, 2021, $ 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 is the amount of the unamortized bond discount on April 1, 2021 relating to the bonds that were converted?
(Multiple Choice)
4.8/5
(40)
With regard to the measurement of hybrid/compound instruments,
(Multiple Choice)
4.9/5
(43)
Using IFRS, hedge accounting allows the gain or loss on the hedge transaction to
(Multiple Choice)
4.9/5
(29)
Stock options
Using a table format, compare and contrast employee stock option plans (ESOPs) and compensatory stock option plans (CSOPs).
(Essay)
4.9/5
(42)
On July 1, 2020, an interest payment date, $ 180,000 (par value) of Lusaka Corp. bonds were converted into 3,600 of their no par common shares. At this time, the unamortized discount on the bonds was $ 7,200. When the bonds were originally issued, the equity portion of the bond was valued at $ 1,700. Using the book value method, Lusaka would record
(Multiple Choice)
5.0/5
(45)
Use the following information for questions 47-49.
On July 2, 2020, Martineau Ltd. issued $ 6,000,000 (par value), 9%, ten-year convertible bonds at 98. The bonds were dated April 1, 2020 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. The bond discount is amortized on a straight-line basis. On April 1, 2021, $ 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?
(Multiple Choice)
4.9/5
(41)
Use the following information for questions 20-23.
On April 1, 2020, 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, 2020. Delta Inc. shares are currently trading for $ 30. At June 30, 2020, the options are trading at $ 4,800 and the shares at $ 32 each. At December 1, 2020, the options expire with no value.
-The time value of the option at April 1, 2020 is
(Multiple Choice)
4.8/5
(37)
Showing 21 - 40 of 99
Filters
- Essay(0)
- Multiple Choice(0)
- Short Answer(0)
- True False(0)
- Matching(0)