Question

Buyers of financial assets: a. Remove the assets from their balance sheet. b. Accounts for the losses or gains on their income statements C. Add the item purchased to their balance sheet. d. Add the item purchased to their income statements. 10. Seller of a futures contract: a. Agrees to receive the underlying futures price or to deliver the underlying asset. b. is said to be short futures. C. Is said to be long futures. d. Both (a) and (b). 11. The following is (are) advantage(s) of capital market instruments when compared to money market instruments: a. They are readily marketable. b. Higher resale value when interest rates fall. c. Higher expected rate of return. d. (b) and (c).

Answer 1

09. Buyers of financial assets:

a. Remove the assets from their Balance sheet - False  If an entity buys any financial assets never remove any assets from the Balance sheet.

b. Accounts for the losses or gains on their income statements - True It is treated as Fair value through profit or loss in the income statement. Change in Fair value recorded in the income statement only.

c. Add the items purchased on their balance sheet. False Balance sheet entry will be cash expense and profit or loss in the income statement.

d. Add the items purchased on their income statements. False income statements will depict only profit or loss from this transaction.