Dr. D is a big fan of D&G and he purchased a bond with face value of $20,000 on January 1, 2015. Dr. D intended to hold the bond until maturity at amortized cost. At the fiscal and calendar year-end of 2015, the price of the bond went up to $22,000. The bond has a maturity term of three years and an annual coupon of $1,200 paid on December 30th each year. Suppose the market interest rate is constant at 6%, the balance that Dr. D would report on the investment at the end of 2015 under effective interest method of IFRS would be closest to:

	$22,000
	$20,000
	$21,200

Suppose Abercrombie Ltd. operates under U.S. GAAP and it owns a subsidiary in Japan. The company accounts for its inventory using LIFO. For the current year, the subsidiary reports current ratio of 1.5:1 and net profit margin of 20%. Throughout the year, yen has appreciated substantially against the U.S. dollar. After translation, the two ratios (as compared to ratios calculated under local currency) would most likely be:

	Lower under the temporal method and unaffected under the current rate method
	Unaffected under the temporal method and lower under the current rate method
	Higher under the temporal method and unaffected under the current rate method

Answer rating: 100% (QA)

Dr D is a big fan of D G and he purchased a bond with face value of 20 000 on January 1 2015 Dr D intended to hold the bond until maturity at am ort i... View the full answer