Question :
91. When accounting for a cash flow hedge of an recognized : 1230346
91. When accounting for a cash flow hedge of an recognized asset or liability, which of the following is/are true?
A. If the derivative is not highly effective in neutralizing the gain or loss on the hedged item, then the firm must reclassify the ineffective portion to net income immediately and not wait until the gain or loss on the hedged items affects net income.
B. The firm reports the hedged asset and liability and the hedging instrument separately on the balance sheet and the cumulative amount of net changes in fair value of the hedging instrument in accumulated other comprehensive income.
C. The firm removes the hedged asset or liability and its related derivative from the accounts at the time of settlement
D. The firm reclassifies gains and losses from other comprehensive income to net income when the gain or loss on the hedged item affects net income.
E. all of the above.
92. U.S. GAAP requires firms to disclose which of the following information with respect to derivatives?
A. A description of the firm’s risk management strategy and how particular derivatives help accomplish the firm’s hedging objectives.
B. For fair value and cash flow hedges, firms must disclose the net gain or loss recognized in earnings resulting from the hedge’s ineffectiveness.
C. For cash flow hedges, firms must describe the transactions or events that will result in reclassifying gains and losses from accumulated other comprehensive income to net income and the
estimated amount of such reclassifications during the next 12 months.
D. The net amount of gains and losses recognized in earnings because a hedged firm commitment no longer qualifies as a fair value hedge or a hedged forecasted transaction no longer qualifies as a cash flow hedge.
E. all of the above
93. Which of the following is/aretrue?
A. Both U.S. GAAP and IFRS provide for the option of reporting selected financial assets and financial liabilities at fair value and recognizing gains and losses in net income as fair values change.
B. Once elected, the fair value option is irrevocable for the instrument to which the firm applies it.
C. Both U.S. GAAP and IFRS require measurement at fair value with changes included in income for three items: (1) trading securities, (2) fair value hedges, (3) derivatives not designated as hedges.
D. Firms can elect the fair value option for the following items: (1) bonds held to maturity, (2) available-for-sale securities, and (3) cash flow hedges.
E. all of the above
94. Firms can elect the fair value option for the following items: (1) bonds held to maturity, (2) available-for-sale securities, and (3) cash flow hedges. Which of the following is/aretrue?
A. Applying the fair value option to investments in debt securities classified as held to maturity results in accounting for the investments as if they were a trading security, with changes in fair value recognized in income each period.
B. Applying the fair value option to available-for-sale securities results in reporting unrealized gains and losses from remeasurement to fair value in net income as fair value changes, instead of initially in other comprehensive income.
C. Applying the fair value option to cash flow hedges results in reporting unrealized gains and losses from remeasurement to fair value in net income as fair value changes, instead of initially in other comprehensive income.
D. all of the above
E. none of the above
95. Which of the following can be a counterparty in a derivative transaction?
A. investment bank
B. commercial bank
C. major supplier
D. all of the above
E. none of the above
96. To be classified as a current asset, marketable securities must be readily convertible into cash and
A. traded on the New York Stock Exchange
B. must be sold prior to the longer of 6 months or the number of months until fiscal year-end
C. have a short-term maturity
D. management must intend to convert the securities to cash when necessary
E. be issued by the U.S. Treasury
97. Kerry Corporation acquires the publicly traded debt of Jett Corporation on December 31, Year 1 as a temporary investment of excess cash. The securities mature in 4 years. How will the securities be recorded on Kerry’s December 31, Year 1 financial statement?
A. as long-term investment in marketable equity securities
B. as current assets-marketable securities
C. as bonds payable
D. as short-term investment in marketable equity securities
E. in a reserve account for future operating cash needs
98. Which of the following is not a derivative?
A. an option to purchase a share of stock
B. a commitment to purchase a certain amount of foreign currency in the future
C. interest rate, foreign exchange rate, and commodity price hedges
D. debt securities available for liquidation
E. all of the above
99. Which of the following items appears in the balance sheet at amortized acquisition cost?
A. debt securities held to maturity
B. trading securities
C. available-for-sale securities
D. derivatives
E. securities available for liquidation
100. According to U.S. GAAP,firms holding debt and equity securities for short-term profit potential
A. report the investments on the balance sheet at market value
B. initially record the investments at acquisition cost
C. report unrealized holding gains and losses on the investments in the income statement
D. all of the above
E. none of the above
