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Unformatted text preview: 's purpose is collecting cash flows.
C. Investor cannot renegotiate, sell, or settle the debt to minimize losses due to deteriorating credit
D. Investment is actively managed internally on a fair value basis but doesn't qualify for FV-OCI.
128.Which of the following is not a characteristic of "simple" debt?
A. Investor's purpose is collecting cash flows.
B An amount of principal (adjusted for premium or discount) is transferred to the borrower at issuance
. that will be returned to the debt holder when the debt matures.
C. The debt instrument is not a derivative.
D The debt cannot be prepaid or settled in a way that the investor does not recover substantially all of its
. original investment unless that is what the investor chooses.
129.If a debt instrument is viewed as complex, which of the following is most likely not true?
A. The debt is always classified as FV-NI.
B. The investor will recognize large unrealized losses in the period in which fair value of the debt
C. The debt may be accounted for at FV-OCI, depending on the investor's business purpose for holding
D. The debt may be a derivative.
130.Brown, Inc., purchased an equity investment for the purposes of maximizing its return on investment.
How should Brown account for the investment?
A. Amortized cost.
D. Cost method.
131.Cortez Associates purchased a debt investment that meets the characteristics of a simple debt instrument.
Cortez intends to hold the debt for purposes of maximizing its return on investment. How should Cortez
account for the investment?
A. Amortized cost.
D. Cost method. 132.Jackson & Sons purchased a debt investment that meets the characteristics of a simple debt instrument.
Jackson is holding the debt for resale in the near future. How should Jackson account for the investment?
D. Amortized cost.
Cost method. 133.Cain Corporation owns $10,000 of IBM bonds. Some bonds are held for immediate sale, but others are
held in te...
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- Spring '09
- Balance Sheet