A+ Answers of the following Questions

1. What are some real-life scenarios where you can apply the time value of money? Present two or three scenarios. Briefly explain your rationale. 

2. Explain some of the key risks associated with bonds.

3. What are some of the features of zero-coupon bonds that make them attractive to certain investors? Which type of investors will be most interested in these bonds? 

4. (TCO 1) Can you provide some examples of recent, well-known unethical behavior cases? Explain the situation in one or two sentences.

1. Development costs have been capitalized on the statement of financial position and are being amortized to profit or loss over three years, but deducted as an expense for tax purposes as incurred. 

2. An entity borrows money and pays a transaction fee on the amount borrowed. The transaction costs are added to the debt and amortized using the effective interest method for financial reporting purposes, although they were deducted when they were paid for tax purposes. 

3. Pension expense is charged to profit or loss each period although tax legislation allows entities to deduct only the contributions to the pension trustee to be deducted for tax purposes. Expenses have always exceeded the contributions. 

4. Investment property is measured according to the revaluation model for financial reporting purpose, resulting in valuations in excess of original cost. This method is not permitted for tax purposes. 
For each situation described above, indicate whether the company has a deductible or a taxable temporary difference and whether it will result in the recognition of a deferred tax asset or a tax liability.

1. In a share based payment transaction where the entity has settlement choice:

a. if a present obligation does not exist, the entity has a choice of classification as an equity or cash settled share based payment transaction.

b. the entity has a present obligation to settle in cash where it has a past practice or stated policy of settling in cash.

c. the entity must settle in equity unless there is no commercial substance to the transaction.

d. if an entity elects to settle in cash the settlement is accounted for as an expense.

2. A share-based payment transaction in which the entity acquires goods or services by incurring liabilities to the supplier for amounts that are based on the value of the entity's shares or other equity instruments of the entity is classified as

a. an equity-settled share-based payment transaction

b. a cash-settled share-based payment transaction

c. a liability-settled share-based payment transaction

d. an "other" share-based payment transaction

3. Which of the following is not within the scope of IFRS 2 Share-based Payment?

a. Transactions in which the entity receives or acquires goods or services as part of the net assets acquired in a business combination to which IFRS 3 Business Combinations applies.

b. Equity instruments granted to employees of the acquire in a business combination in their capacity as an employee.

c. Cancellation, replacement or other modification of share-based payment arrangements because of a business combination.

d. Cancellation, replacement or other modification of share-based payment arrangements because of other equity restructuring.

1. Which of the following statements is correct regarding modifications to the terms and conditions on which equity instruments were granted as part of an employee share scheme?

a. a reduction in the exercise price of options will reduce the fair value of the share options

b. a reduction in a performance hurdle relating to profitability targets will reduce the fair value of the options

c. a shortening of the vesting period will increase the fair value of the share options

d. an increase in the number of equity instruments granted is not an example of a modification

2. A share-based payment transaction in which the entity acquires goods or services by incurring liabilities to the supplier for amounts that are based on the value of the entity's shares or other equity instruments of the entity is classified as

a. an equity-settled share-based payment transaction

b. a cash-settled share-based payment transaction

c. a liability-settled share-based payment transaction

d. an "other" share-based payment transaction

3. In a share based payment transaction where the entity has settlement choice:

a. if a present obligation does not exist, the entity has a choice of classification as an equity or cash settled share based payment transaction.

b. the entity has a present obligation to settle in cash where it has a past practice or stated policy of settling in cash.

c. the entity must settle in equity unless there is no commercial substance to the transaction.

d. if an entity elects to settle in cash the settlement is accounted for as an expense.

1. Callie was admitted to the Adams & Beal Partnership four years ago. The partnership has a deficiency at year end for the current year. How could this deficiency be accounted for?

2. The following is the priority sequence in which liquidation proceeds will be distributed for a partnership

3. Which of the following statements is correct regarding a partner's debit capital balances?