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:
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$22,000 |
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$20,000 |
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$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:
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Lower under the temporal method and unaffected under the current rate method |
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Unaffected under the temporal method and lower under the current rate method |
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Higher under the temporal method and unaffected under the current rate method |
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