Question 1

The president of XBC was granted a stock option for 1,000 common shares.On the grant date,the option price was $40 and the market value was $38 per share.Give the entry to record the option at the date of the grant.

Accepted Answer

The answer of The president of XBC was granted a...

Question 2

What is convertible debt? Why would a company issue convertible debt?

Accepted Answer

The answer of What is convertible debt? Why would a...

Question 3

Which of the following forms part of the definition of a financial liability?
A) Cash
B) An equity instrument of another entity
C) To deliver cash or another financial asset to another party
D) A contractual right to receive cash or another financial asset from another party

Accepted Answer

A financial liability involves an obligation to deliver cash or another financial asset to another party.

Question 4

At the end of 2014,interest on a perpetual loan is paid to the holder.The perpetual debt is shown as an equity instrument.Based on the above the interest is:
A) Deducted on the statement of retained earnings
B) Added to the statement of retained earnings
C) Deducted on the income statement
D) Added for income tax purposes

Accepted Answer

The answer of At the end of 2014,interest on a...

Question 5

List the criteria determining whether liability is a financial liability.Give an example of a financial liability and a non-financial liability.

Accepted Answer

The answer of List the criteria determining whether liability is...

Question 6

Match the brief description with the terms.

Accepted Answer

The answer of Match the brief description with the terms....

Question 7

An investor purchases a $10,000 bond convertible into common shares at a price of $50.How many shares are available for conversion?

Accepted Answer

The answer of An investor purchases a $10,000 bond convertible...

Question 8

A financial asset has any of the following characteristics except:
A) An equity instrument of another entity
B) A debt instrument of another entity
C) Cash
D) A contractual right to exchange financial instruments with another party under conditions that are potentially favourable

Accepted Answer

The answer of A financial asset has any of the...

Question 9

A company issues a financial instrument for $40,000 paying interest of $4,000 per year.How would the interest be treated if the instrument was determined to be equity?

Accepted Answer

The answer of A company issues a financial instrument for...

Question 10

List the criteria determining whether an asset is a financial asset.Give an example of a financial asset and a non-financial asset.

Accepted Answer

The answer of List the criteria determining whether an asset...

Question 11

If a financial instrument is determined to be in substance equity,what are the reporting implications?

Accepted Answer

The answer of If a financial instrument is determined to...

Question 12

KIM Corp.owned a major business building in a small Canadian city.The building has a $1,155,000 mortgage that is held by a Canadian financial institution (FI).KIM Corp.has had recent cash flow problems,in part,due to the low vacancy rates in the business buildings.Interest is 15 months in arrears and totals $132,000.After discussions with the FI,they agree to a financial reorganization that results in the FI accepting $800,000 from the shareholders who agree to inject this amount of cash into the business.
Required:
Prepare the journal entry to record the exchange.What is this called?

Accepted Answer

The answer of KIM Corp.owned a major business building in...

Question 13

Match the brief description with the terms.

Accepted Answer

The answer of Match the brief description with the terms....

Question 14

Derivatives may be described as:
A) Executed contracts
B) Promissory notes
C) Common shares
D) Executory contracts

Accepted Answer

Derivatives are contracts that derive their value from an underlying asset or security. They are classified as executory contracts because they are not settled immediately and require future execution or performance.

Question 15

A company issues a financial instrument for $40,000 paying interest of $4,000 per year.How would the repayment of the financial instrument be treated if it was determined to be debt?

Accepted Answer

The answer of A company issues a financial instrument for...

Question 16

At the end of 2014,interest on a perpetual loan is paid to the holder.The perpetual debt is shown as an equity instrument.Based on the above the interest is:
A) Deducted on the income statement
B) Added to the income statement
C) Deducted for income tax purposes
D) Added for income tax purposes

Accepted Answer

Interest on a perpetual loan treated as an equity instrument is not deductible for income tax purposes, as it is considered a distribution of profits rather than an interest expense.

Question 17

In substance,a complex financial instrument will be treated as debt if the answer is yes to two basic criteria.What are they?

Accepted Answer

The answer of In substance,a complex financial instrument will be...

Question 18

What are hybrid securities?

Accepted Answer

The answer of What are hybrid securities?...

Question 19

Elizabeth Corp.owned a major business building in a small Canadian city.The building has a $1,345,000 mortgage that is held by a Canadian financial institution (FI).Elizabeth Corp.has had recent cash flow problems,in part,due to the low vacancy rates in the business buildings.Interest is 15 months in arrears and totals $145,000.After discussions with the FI,they agree to a financial reorganization in that they accept $50 preferred shares at a value of $1,490,000,retractable in 15 years time at book value.The shares have first claim on the proceeds of the business building,should it be sold.
Required:
Prepare the journal entry to record the exchange.

Accepted Answer

The answer of Elizabeth Corp.owned a major business building in...

Question 20

Amanda Corp.owned a major business building in a small Canadian city.The building has a $1,555,000 mortgage that is held by a Canadian financial institution (FI).Amanda Corp.has had recent cash flow problems,in part,due to the low vacancy rates in the business buildings.Interest is 15 months in arrears and totals $132,000.After discussions with the FI,they agree to a financial reorganization in that they accept $50 preferred shares at a value of $1,490,000,retractable in 15 years time at book value.The shares have first claim on the proceeds of the business building,should it be sold.
Required:
Prepare the journal entry to record the exchange.

Accepted Answer

The answer of Amanda Corp.owned a major business building in...

Quiz 4: Statements of Financial Position and Changes in Equity; Disclosure Notes

The president of XBC was granted a stock option for 1,000 common shares.On the grant date,the option price was $40 and the market value was $38 per share.Give the entry to record the option at the date of the grant.

What is convertible debt? Why would a company issue convertible debt?

Which of the following forms part of the definition of a financial liability?

At the end of 2014,interest on a perpetual loan is paid to the holder.The perpetual debt is shown as an equity instrument.Based on the above the interest is:

List the criteria determining whether liability is a financial liability.Give an example of a financial liability and a non-financial liability.

Match the brief description with the terms.

An investor purchases a $10,000 bond convertible into common shares at a price of $50.How many shares are available for conversion?

A financial asset has any of the following characteristics except:

A company issues a financial instrument for $40,000 paying interest of $4,000 per year.How would the interest be treated if the instrument was determined to be equity?

List the criteria determining whether an asset is a financial asset.Give an example of a financial asset and a non-financial asset.

If a financial instrument is determined to be in substance equity,what are the reporting implications?

Match the brief description with the terms.

Derivatives may be described as:

A company issues a financial instrument for $40,000 paying interest of $4,000 per year.How would the repayment of the financial instrument be treated if it was determined to be debt?

At the end of 2014,interest on a perpetual loan is paid to the holder.The perpetual debt is shown as an equity instrument.Based on the above the interest is:

In substance,a complex financial instrument will be treated as debt if the answer is yes to two basic criteria.What are they?

What are hybrid securities?