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CIMAPRA19-F02-1 Exam - Topic 2 Question 114 Discussion

KL acquired 2 million $1 equity shares in MN on 18 July 20X0 for $1.65 a share and classified this investment as available for sale (AFS) in accordance with IAS 39 Financial instruments: Recognition andMeasurement.KL paid a 0.5% transaction fee to its broker on this transaction. MN's shares were trading at $1.78 on 31 December 20X0.Which of the following journals records the subsequent measurement of this investment at 31 December 20X0?
A) Option
B) Option
C) Option

CIMAPRA19-F02-1 Exam - Topic 2 Question 114 Discussion

Actual exam question for CIMA's CIMAPRA19-F02-1 exam
Question #: 114
Topic #: 2
[All CIMAPRA19-F02-1 Questions]

KL acquired 2 million $1 equity shares in MN on 18 July 20X0 for $1.65 a share and classified this investment as available for sale (AFS) in accordance with IAS 39 Financial instruments: Recognition andMeasurement.

KL paid a 0.5% transaction fee to its broker on this transaction. MN's shares were trading at $1.78 on 31 December 20X0.

Which of the following journals records the subsequent measurement of this investment at 31 December 20X0?

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Suggested Answer: A

by Coral at Jul 14, 2025, 04:53 PM

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Antonio
7 months ago
2 million shares acquired on July 18, 20X0.
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Maddie
7 months ago
Not sure if the AFS method is the best choice here...
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Adela
8 months ago
I think the AFS classification is spot on!
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Tawny
8 months ago
Wait, shares are at $1.78 now? That's a nice gain!
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Izetta
8 months ago
KL paid $1.65 per share plus a 0.5% fee.
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Dottie
8 months ago
I think the fair value is based on the market price at the reporting date, but I can't recall if we need to adjust for the transaction fee again.
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Laurel
8 months ago
I feel a bit confused about whether we should recognize the gain in profit or loss or just in other comprehensive income. I hope I remember the right treatment!
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Shonda
9 months ago
This question reminds me of a practice one where we had to adjust the carrying amount based on market price. I think we might need to journalize the unrealized gain.
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Casey
9 months ago
I remember we discussed how to calculate the fair value of AFS investments, but I'm not sure if we include the transaction fee in the measurement.
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Ettie
9 months ago
I'm a bit confused about the transaction fee. Does that get capitalized as part of the cost of the investment or expensed separately? I'll have to review the IAS 39 guidance on that.
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Cordell
9 months ago
Okay, I've got this. The key is to recognize the fair value change in other comprehensive income, not profit or loss. I'll double-check my answer before submitting.
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Tess
9 months ago
Hmm, I'm a bit unsure about the correct journal entry here. Let me re-read the details carefully and think through the steps.
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Dylan
9 months ago
This question seems straightforward. I just need to remember the accounting treatment for available-for-sale investments under IAS 39.
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Page
10 months ago
Option C all the way! Unless, of course, you're some kind of accounting wizard who can navigate these IAS regulations with their eyes closed.
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Theron
10 months ago
Option C all the way!
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Marti
10 months ago
It's definitely tricky!
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An
10 months ago
You think so? I might lean towards B.
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Georgeanna
11 months ago
Ah, the age-old debate of Profit and Loss vs. Other Comprehensive Income. I'm just glad I don't have to deal with these accounting technicalities in my day-to-day life. Pass the coffee, please!
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Ashlyn
10 months ago
I know, accounting can get so complicated sometimes. Here's your coffee.
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Sherell
11 months ago
That makes sense, thanks for explaining.
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Ronald
11 months ago
This question is a no-brainer. Of course, the answer is Option C! Didn't they teach us this in Accounting 101?
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Doyle
10 months ago
I think the answer is Option C as well.
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Candra
11 months ago
Because the investment is classified as available for sale, so it should be measured at fair value.
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Sherell
11 months ago
Why do you think it's Option C?
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Kirk
12 months ago
Option B seems more logical to me. The investment is measured at fair value, so the change in fair value should be recorded in the Profit and Loss account.
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Sherly
10 months ago
User3: I also think Option B is the correct journal entry.
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Audra
11 months ago
User2: I disagree, I believe Option B is the right choice.
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Angella
11 months ago
User1: I think Option A is the correct journal entry.
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Candra
12 months ago
I disagree, I believe it should be Option C.
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Dion
12 months ago
I think the correct answer is Option C. The investment is classified as available-for-sale, so the subsequent measurement at fair value should be recorded in the Other Comprehensive Income account.
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Fausto
11 months ago
I agree with you, Option C is the correct answer. The fair value adjustment for available-for-sale investments goes to Other Comprehensive Income.
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Sherell
1 year ago
I think the answer is Option A.
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