Quiz – Financial Instruments

Question 1

If Company A purchases 100 shares in Company B for $1.00 each, and it plans to sell them for a quick gain.

1. What type of asset should Company A classify on the Balance Sheet?
2. If Company B’s share price then increases to $1.10, what should Company A record on its Income Statement and Cash Flow Statement?
3. If Company A sells Company B’s share at $1.10, what should Company A record on its Income Statement and Cash Flow Statement?

Question 2

Company A purchases 100 shares of Company B for $1.00 each, but it does not plan to sell those shares quickly.

1. What type of asset should Company A classify on the Balance Sheet?
2. If Company B’s share price increases to $1.10, and Company A has not yet sold anything, what happen to Income Statement, Cash Flow Statement and Balance Sheet?

Question 3

Company A buys $100 of Company B’s 10-year bonds and plans to hold them until the bonds mature in 10 years.

1. What type of asset should Company A classify on the Balance Sheet?
2. If the fair market value of these bonds increases from $100 to $110, what should Company A record on its Income Statement and Cash Flow Statement?
3. Upon maturity of the bond, if Company A were to sell these bonds for $110, what should Company A record on its Income Statement?

Here is the answer of this quiz.

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