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Unformatted text preview: rms of long-term appreciation. Which of the following is true about how Cain should account
for this investment?
A. Cain should account for all the bonds as FV-NI.
B. Cain should account for all the bonds as FV-OCI.
CCain should determine the primary business purpose of the bonds, and account for the bonds according
. to that purpose, as all of a particular type of debt should be accounted for the same way.
D. Cain should determine the business purpose of each bond, and account for it according to that business
134.The Stevens Company purchased a debt investment that meets the characteristics of a simple debt
instrument. Stevens is holding the debt for purposes of managing risk. Might Stevens have to recognize
an impairment loss on the debt?
B.No, because the debt is accounted for at FV-NI, so any fair value changes are already recognized as
unrealized gains and losses.
C. No, because the debt is accounted for at amortized cost, so fair value changes are not included in
D. Insufficient information is available to answer this question.
135.Which of the following is not true about how the proposed ASU treats impairments?
A. The objective is to calculate expected losses of contractual cash flows.
B. Losses are discounted for the time value of money.
C. Different buckets capture differences in the deterioration of credit quality.
D. Losses always are estimated for the remaining life of the investment.
136.Bridges Inc. holds a debt investment from RiteCo and had viewed that investment as adversely affected
by particular events in the market for RiteCo's products, but without specific information about
deterioration of RiteCo's credit quality. However, Bridges just learned that RiteCo is entering bankruptcy.
As a result of receiving this information, what is Bridges likely to do with the RiteCo investment?
A. Transfer it from Bucket 1 to Bucket 2.
B. Transfer it from Bucket 2 to Bucket 3.
C. Transfer it from Bucket 3 to Bucket 2.
D. Transfer it from Bucket 2 t...
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This document was uploaded on 07/05/2013.
- Spring '09
- Balance Sheet