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

Actual exam question for CIMA's CIMAPRA19-F02-1 exam

Question #: 114
Topic #: 2

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?

AOption

BOption

COption

Show Suggested Answer

Suggested Answer: A

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

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Antonio

9 months ago

2 million shares acquired on July 18, 20X0.

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Maddie

9 months ago

Not sure if the AFS method is the best choice here...

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Adela

9 months ago

I think the AFS classification is spot on!

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Tawny

9 months ago

Wait, shares are at $1.78 now? That's a nice gain!

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Izetta

10 months ago

KL paid $1.65 per share plus a 0.5% fee.

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Dottie

10 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

10 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

10 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

10 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

11 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

11 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

11 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

11 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

12 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

11 months ago

Option C all the way!

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Marti

11 months ago

It's definitely tricky!

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An

11 months ago

You think so? I might lean towards B.

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Georgeanna

1 year 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

12 months ago

I know, accounting can get so complicated sometimes. Here's your coffee.

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Sherell

1 year ago

That makes sense, thanks for explaining.

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Ronald

1 year 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

12 months ago

I think the answer is Option C as well.

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Candra

1 year ago

Because the investment is classified as available for sale, so it should be measured at fair value.

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Sherell

1 year ago

Why do you think it's Option C?

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Kirk

1 year 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

12 months ago

User3: I also think Option B is the correct journal entry.

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Audra

1 year ago

User2: I disagree, I believe Option B is the right choice.

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Angella

1 year ago

User1: I think Option A is the correct journal entry.

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Candra

1 year ago

I disagree, I believe it should be Option C.

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Dion

1 year 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

1 year 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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