1. What factor is important in classifying an investment at fair value through profit or loss?

a. Whether the instrument has a set maturity date.

b.What is the business model within which the investments are held?

c.Whether the instrument is a debt, equity or derivative instrument.

ACE Inc has the following investments at December 31, 2020:

	Historical cost	Fair value Sept 30, 2019	Fair value Sept 30, 2020	Fair value Dec 31, 2020
Shares of DEF	25,000	15,000	27,000	30,000
Bonds of Brooke (purchased at par value)	10,000	12,000	11,000	12,500
Shares of CooksTown	12,000	18,000	16,000	16,000
Shares of Daisy	18,000	16,500	19,500	20,500

4..If ACE classifies its investment in DEF at fair value through profit or loss, what amount will be reported in income for the three months ended December 31, 2020 pertaining to this investment?

	a	$3,000 gain.
b		$5,000 gain.
c		$3,000 loss.
d		$0

d.Whether the instrument generates dividends.

2. What should an investment in a debt investment be classified as when management has not specifically identified the classification? That is to say, in the absence of an election, what is the default category?

		a.At fair value through OCI.
b		Amortized cost
c		Associate.
d		At fair value through profit or loss.

3. Fisher Corporation has the following investments at September 30, 2020:

	Historical cost	Fair value Sept 30, 2019	Fair value Sept 30, 2020
Shares of ABC	$25,000	$15,000	$25,000
Bonds of Brooke	10,000	12,000	11,000
Shares of CooksTown (Fisher holds 35% of the outstanding voting shares of CooksTown)	12,000	18,000	16,000
Shares of Davenport	18,000	20,000	19,000

What method of accounting can Fisher not use to account for its investment in Cookstown?

		a.Fair value through other comprehensive income.
b		Fair value through profit or loss.
c		Equity method.
d		Amortized cost.

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