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Supplementary objective test questions

CHAPTER 3 – FINANCIAL INSTRUMENTS

3.1 YZ has acquired a debt instrument and is holding it for trading purposes.
How should the financial instrument be classified?

A Loans and receivables

B Fair value through profit or loss

C Held to maturity

D Available for sale

3.2 Which one of the following is not a characteristic of a derivative?

A It is settled at a future date

B It requires little or no initial investment

C It results in favourable terms to the entity

D Its value changes in response to changes in the underlying item

3.3 Elsa Ltd acquired a forward contract on 1st December 20X4 to sell wheat at
$10m in 3 months. The fair value of the forward contract as at 31st December
20X4 was valued at a gain of $1m. Elsa does not intend to take delivery of the
wheat.

What will be the double entry required in relation to the forward contract
as at the year-end 31st December 2014?

A Dr Financial asset $1m

Cr Other comprehensive income $1m

B Dr P/L $1m

Cr Financial liability $1m

C Dr Other comprehensive income $10m

Cr Financial liability $10m

D Dr Financial asset $1m

Cr P/L $1m

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