8 According to IAS 39 and IFRS 9, which is true about the classification of financial assets and financial liabilities A Bonds payable should be classified as financial liability measured as fair value B Held to maturity investments should be classified as financial assets measured as fair value C Loans and receivables should be classified as financial assets measured as amortized cost D Deposits from customers should be classified as financial liabilities measured as fair value 9 Under IFRS, if an entity issues 5 preferred stock that gives shareholders the right to redeem the shares for cash equal to par value after 3 years How should this stock be accounted for on the books of the entity A Initially as equity and then reclassified as a liability when the redemption occurs B As equity or a liability at the option of the entity C As a liability since the entity cannot avoid settlement through delivery of cash if the holder demand redemption D As both equity and liability by split accounting 10 On January 1, Year 1, SC Inc granted 2,000 stock options to certain sales employees 50 of the options vest at the end of Year 1, and the remaining options vest at the end of Year 2 (graded vesting) The fair value of each option is $8 Under IFRS, what is the compensation expense from these options in Year 1 A $8,000 B $4,000 C $12,000 D $16,000 11 Manitoba Ltd Purchased 1,000 shares of Spectrum Company for $20 per share on January 1 Year 1 Manitobal chose to classify this equity investment as FVOCI On December 31, Year 1, the market price of Spectrums stock was $23 On March 1, Year 2, all 1,000 shares of Spectrums stock were sold for $24 per share Under IFRS, on December 31, Year 1, the journal entry for this equity investment would include A A credit to Other comprehensive income for $3,000 B A credit to Unrealized gain(I S) for $3,000 C A debit to Other comprehensive income for $3,000 D A credit to Other comprehensive income for $1,000 12 Manitoba Ltd Purchased 1,000 shares of Spectrum Company for $20 per share on January 1 Year 1 Manitobal chose to classify this equity investment as FVOCI On December 31, Year 1, the market price of Spectrums stock was $23 On March 1, Year 2, all 1,000 shares of Spectrums stock were sold for $24 per share Under IFRS, on March 1, Year 2, the journal entry for the sale of this equity investment would include A A debit to Other comprehensive income for $1,000 B A credit to Gains on sale of equity investment for $4,000 C A credit to Other comprehensive income for $1,000 D A credit to Gains on sale of equity investment for $1,000 13 Monterrey Properties enters into a 4 year lease for an automobile to be used in operation The agreement obligates the company to make lease payments of $10,000 at the end of every year Its useful economic life would be 8 years Assume that the companys borrowing rate is 6 The PV factor for 4 period, 6 , ordinary annuity is 3 4651 How much are the lease liability and leasehold asset under IFRS A Lease liability $30,000 Leasehold asset $34,651 B Lease liability $34,651 Leasehold asset $30,000 C Lease liability $34,651 Leasehold asset $34,651 D Lease liability $30,000 Leasehold asset $30,000 14 Monterrey Properties enters into a 4 year lease for an automobile to be used in operation The agreement obligates the company to make lease payments of $10,000 at the end of every year Its useful economic life would be 8 years Assume that the companys borrowing rate is 6 The PV factor for 4 period, 6 , ordinary annuity is 3 4651 What expenses will Monterrey record for the first year of the lease under IFRS A Depreciation expense for $10,000 B Lease expense for $10,000 C Depreciation expense for $8,663 and Interest expense for $10,000 D Depreciation expense for $8,663 and Interest expense for $2,079

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8. According to IAS 39 and IFRS 9, which is true about the classification of financial assets and financial liabilities? A. Bonds payable should be

8. According to IAS 39 and IFRS 9, which is true about the classification of financial assets and financial liabilities?

	A.	Bonds payable should be classified as financial liability measured as fair value
	B.	Held to maturity investments should be classified as financial assets measured as fair value.
	C.	Loans and receivables should be classified as financial assets measured as amortized cost.
	D.	Deposits from customers should be classified as financial liabilities measured as fair value.

9. Under IFRS, if an entity issues 5% preferred stock that gives shareholders the right to redeem the shares for cash equal to par value after 3 years. How should this stock be accounted for on the books of the entity?

	A.	Initially as equity and then reclassified as a liability when the redemption occurs.
	B.	As equity or a liability at the option of the entity
	C.	As a liability since the entity cannot avoid settlement through delivery of cash if the holder demand redemption.
	D.	As both equity and liability by split accounting.

10. On January 1, Year 1, SC Inc. granted 2,000 stock options to certain sales employees. 50% of the options vest at the end of Year 1, and the remaining options vest at the end of Year 2 (graded vesting). The fair value of each option is $8. Under IFRS, what is the compensation expense from these options in Year 1:

	A.	$8,000
	B.	$4,000
	C.	$12,000
	D.	$16,000

11. Manitoba Ltd. Purchased 1,000 shares of Spectrum Company for $20 per share on January 1 Year 1. Manitobal chose to classify this equity investment as FVOCI. On December 31, Year 1, the market price of Spectrums stock was $23. On March 1, Year 2, all 1,000 shares of Spectrums stock were sold for $24 per share.

Under IFRS, on December 31, Year 1, the journal entry for this equity investment would include:

	A.	A credit to Other comprehensive income for $3,000.
	B.	A credit to Unrealized gain(I/S) for $3,000.
	C.	A debit to Other comprehensive income for $3,000.
	D.	A credit to Other comprehensive income for $1,000

12. Manitoba Ltd. Purchased 1,000 shares of Spectrum Company for $20 per share on January 1 Year 1. Manitobal chose to classify this equity investment as FVOCI. On December 31, Year 1, the market price of Spectrums stock was $23. On March 1, Year 2, all 1,000 shares of Spectrums stock were sold for $24 per share.

Under IFRS, on March 1, Year 2, the journal entry for the sale of this equity investment would include:

	A.	A debit to Other comprehensive income for $1,000.
	B.	A credit to Gains on sale of equity investment for $4,000
	C.	A credit to Other comprehensive income for $1,000.
	D.	A credit to Gains on sale of equity investment for $1,000

13. Monterrey Properties enters into a 4-year lease for an automobile to be used in operation. The agreement obligates the company to make lease payments of $10,000 at the end of every year. Its useful economic life would be 8 years. Assume that the companys borrowing rate is 6%. The PV factor for 4 period, 6%, ordinary annuity is 3.4651.

How much are the lease liability and leasehold asset under IFRS?

	A.	Lease liability: $30,000; Leasehold asset: $34,651.
	B.	Lease liability: $34,651; Leasehold asset: $30,000.
	C.	Lease liability: $34,651; Leasehold asset: $34,651.
	D.	Lease liability: $30,000; Leasehold asset: $30,000.

14. Monterrey Properties enters into a 4-year lease for an automobile to be used in operation. The agreement obligates the company to make lease payments of $10,000 at the end of every year. Its useful economic life would be 8 years. Assume that the companys borrowing rate is 6%. The PV factor for 4 period, 6%, ordinary annuity is 3.4651.

What expenses will Monterrey record for the first year of the lease under IFRS?

	A.	Depreciation expense for $10,000.
	B.	Lease expense for $10,000.
	C.	Depreciation expense for $8,663 and Interest expense for $10,000.
	D.	Depreciation expense for $8,663 and Interest expense for $2,079.