Multiple Choice

1-

Morley Manufacturing has notes receivable that have a fair value of $810,000 and a carrying amount of $620,000. Morley decides on December 31, 2011, to use the fair value option for these recently-acquired receivables. Which of the following statements is correct regarding the election of the fair value option by Morley?

a. Morley can elect to use the fair value option or amortized cost at each statement of financial position date.

b. Morley reports the receivables at fair value, with any unrealized holding gains and losses reported as a separate component of comprehensive income.

c. The unrealized holding gain is the difference between the fair value and the carrying amount.

d. All of the choices are correct regarding the fair value option.

2-

Under IFRS Morley Manufacturing will derecognize its receivables in all of the following cases except

a. When Morley elects to use the fair value option for a receivable.

b. When the contractual rights to the cash flows of the receivable no longer exist; for example when one of Morley's customers declares bankruptcy.

c. When Morley collects a receivable when due.

d. All of the choices require Morley Manufacturing to derecognize its receivables.

3-

On December 31, 2011, Hunter Corporation has elected to use the fair value option for one of its notes receivable. The note was accepted in late September, 2011 from a customer who was unable to pay its accounts receivable. The transaction with the customer had been delivery of accounting services valued at 25,000. The customer made a partial payment, resulting in a carrying value for the note of 22,000. At year-end, Hunter Corporation estimates the fair value of the note to be 17,500. Which of the following is incorrect regarding this note?

a. Hunter will report the note on its statement of financial position at 17,500.

b. Hunter will report an unrealized loss of 7,500 in its income statement for the year ended December 31, 2011.

c. Hunter will be required to use the fair value option for this note for the duration of its existence.

d. In 2012, Hunter will calculate the unrealized holding gain or loss as the net change in the fair value of the receivable from 2011 to 2012, exclusive of interest revenue recognized but not recorded.

4-

IFRS requires all of the following when classifying receivables except

a. Indicate the receivables classified as current and non-current in the statement of financial position.

b. Disclose any receivables pledged as collateral.

c. Disclose all significant concentrations of credit risk arising from receivables.

d. All of the choices are required by IFRS when classifying receivables.

5-

Which of the following is correct regarding differences between IFRS and U.S.GAAP with regard to receivables?

a. Under IFRS de-recognition of a receivable is determined by using lack of control as the primary criterion.

b. U.S.GAAP permits the reversal of impairment losses, with the reversal limited to the asset's amortized cost before the impairment.

c. Under IFRS the fair value option is subject to certain qualifying criteria not in U.S.GAAP.

d. All of the choices are differences between IFRS and U.S.GAAP for receivables.