Question-Keller Graduate School of Management AC555ON Financial 7 PassMaster CPA-00928 Type1 M/C A-D Corr Ans: A PM#1 F 7-01 1. CPA-00928 FARE R03 #4 Page 5 On November 2, 2001, Platt Co. entered into a 90-day futures contract to purchase 50,000 Swiss francs when the contract quote was $.70. The purchase was for speculation in price movement. The following exchange rates existed during the contract period: 30-day futures Spot rate November 2, 2001 $0.62 $0.63 December 31, 2001 0.65 0.64 January 30, 2002 0.65 0.68 What amount should Platt report as foreign currency exchange loss in its income statement for the year ended December 31, 2001? CPA-00930 Type1 M/C A-D Corr Ans: D PM#3 F 7-01 2. CPA-00930 FARE C98 #1 Page 3 Fair value disclosure of financial instruments may be made in the: CPA-00931 Type1 M/C A-D Corr Ans: B PM#4 F 7-01 3. CPA-00931 FARE C98 #2 Page 3 Disclosures about the following kinds of risks are required for most financial instruments. CPA-00933 Type1 M/C A-D Corr Ans: B PM#5 F 7-01 4. CPA-00933 FARE C98 #3 Page 3 Which of the following assets are financial instruments? CPA-00934 Type1 M/C A-D Corr Ans: D PM#6 F 7-01 5. CPA-00934 FARE C98 #4 Page 3 Which of the following must be disclosed for most financial instruments? CPA-00936 Type1 M/C A-D Corr Ans: A PM#7 F 7-01 6. CPA-00936 FARE C98 #5 Page 4 In order for a financial instrument to be a derivative for accounting purposes, the financial instrument must: I. Have one or more underlyings. II. Require an initial net investment. CPA-00938 Type1 M/C A-D Corr Ans: C PM#8 F 7-01 7. CPA-00938 FARE C98 #6 Page 4 The determination of the value or settlement amount of a derivative involves a calculation which uses: I. An underlying. II. A notional amount. CPA-00941 Type1 M/C A-D Corr Ans: B PM#9 F 7-01 8. CPA-00941 FARE C98 #7 Page 6 On December 31, 199X, the end of its fiscal year, Smarti Company held a derivative instrument which it had acquired for speculative purposes during November, 199X. Since its acquisition the fair value of the derivative had increased materially. On December 31, how should the increase in fair value of the derivative instrument be reported by Smarti in its financial statements? CPA-00945 Type1 M/C A-D Corr Ans: C PM#11 F 7-01 9. CPA-00945 FARE C98 #9 Page 6 Gains and losses from changes in the fair value of a derivative designated and qualified as a fair value hedge should be: CPA-00948 Type1 M/C A-D Corr Ans: A PM#12 F 7-01 10. CPA-00948 FARE C98 #10 Page 5 Qualified derivatives may be used to hedge the cash flow associated with an/a: CPA-00951 Type1 M/C A-D Corr Ans: C PM#13 F 7-01 11. CPA-00951 FARE C98 #11 Page 6 A change in the fair value of a derivative qualified as a cash flow hedge is determined to be either effective in offsetting a change in the hedged item or ineffective in offsetting such a change. How should the effective and ineffective portions of the change in value of a derivative which qualifies as a cash flow hedge be reported in financial statements? 12. CPA-00954 FARE R96 #8 Page 4 Which of the following risks are inherent in an interest rate swap agreement? I. The risk of exchanging a lower interest rate for a higher interest rate. II. The risk of nonperformance by the counterparty to the agreement. CPA-00958 Type1 M/C A-D Corr Ans: C PM#15 F 7-01 13. CPA-00958 FARE R96 #9 Page 3 If it is not practicable for an entity to estimate the fair value of a financial instrument, which of the following should be disclosed? I. Information pertinent to estimating the fair value of the financial instrument. II. The reasons it is not practicable to estimate fair value. CPA-00965 Type1 M/C A-D Corr Ans: A PM#16 F 7-01 14. CPA-00965 FARE May 95 #4 Page 3 Disclosure of information about significant concentrations of credit risk is required for: CPA-04658 Type1 M/C A-D Corr Ans: B PM#17 F 7-01 15. CPA-04658 Released 2005 Page 3 Where in its financial statements should a company disclose information about its concentration o…
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