Financial Accounting

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ACTG 383
CHAPTER 17
APPENDICES A, B, C
REVIEW QUESTIONS

1. Welch Company purchased a put option on Reese common shares on January 7, 2010 for $215. The put option is for 300 shares, and the strike price is $51. The option expires on July 31, 2010. On March 31, 2010, the market value of Reese stock was $48 per share and the time value of the option was $120. The put option is not designated as a hedge. If the company has to prepare financial statements on March 31, 2010, what would the entry be? A debit to the Put Option and a

a. credit to Unrealized Holding Gains/Losses – Income $805. b. credit to Unrealized Holding Gains/Losses – Equity $805. c. credit to Unrealized Holding Gains/Losses – Income $95 d. credit to Unrealized Holding Gains/Losses – Equity $95 e. None of the above

2. Gains or losses on cash flow hedges are

a. ignored completely.
b. recorded in equity, as part of other comprehensive income. c. reported directly in net income.
d. reported directly in retained earnings.
e. None of the above

3. The accounting for fair value hedges records the derivative at its

a. amortized cost.
b. carrying value.
c. fair value.
d. historical cost.
e. None of the above

4. Which of the following is a financial instrument under U.S. GAAP?

a. a consolidated investee
b. an equity method investment
c. buildings and land
d. treasury stock
e. None of the above

5. How are derivative financial instruments valued on the balance sheet?

a. historical cost
b. amortized cost
c. fair value
d. depends on the valuation of the underlying asset/liability e. None of the above

6. Which of the following is not a financial instrument under IFRS?

a. Bonds issued by the reporting entity
b. Available-for-sale security investments
c. Equity method investments
d. Held-to-maturity investments
e. All of the above are financial instruments under IFRS

7. How does electing the fair value option under U.S....
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