MGT401 Final Term Notes

Chapter – 7 · Short Term Investment · Sr. No

114-Short Term Investment - Equity and Debt Instrument 115-Measurement Of Investment - Equity Instrument 116-Measurement Of Investment - Equity Instrument Practice

MCQs:

Q1. Which of the following types of instruments are short-term investment options?

1. Equity Instruments
2. Debt Instruments
3. Both
4. and
5. None of the above

Answer: c) Both a) and b)

Q2. How financial assets are initially measured when investing in equity instruments?

1. At cost
2. At amortized cost
3. At fair value
4. At historical cost

Answer: c) At fair value

Q3. In normal circumstances, what is considered as the fair value of a financial asset when investing in equity instruments?

1. Transaction price
2. Amortized cost
3. Historical cost
4. Market value on the reporting date

Answer: a) Transaction price

Q4. What is the treatment of transaction costs incurred in the process of investing in equity instruments?

1. Recognized as income in SOPL
2. Recognized as a liability in the balance sheet
3. Recognized as an expense in SOPL
4. Recognized as an intangible asset

Answer: c) Recognized as an expense in SOPL

Q5. How is dividend income recognized for equity instruments in the financial statements?

1. Dividend received is recognized as a reduction in the investment's carrying amount
2. Dividend received is recognized as income in the Statement of Profit or Loss (SOPL)
3. Dividend income is not recognized until the shares are sold
4. Dividend received is recognized as a liability in the balance sheet

Answer: b) Dividend received is recognized as income in the Statement of Profit or Loss (SOPL)

Q6. In Sample Co.'s investment in equity shares of Symbol Ltd., what was the initial measurement of the investment?

1. Historical cost
2. Fair value
3. Market value
4. Transaction price

Answer: b) Fair value

Q7. How much did Sample Co. incur as broker's fee for the investment in equity shares of Symbol Ltd.?

1. Rs. 200,000
2. Rs. 40,000
3. Rs. 20,000
4. Rs. 350,000

Answer: c) Rs. 20,000