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

5 months ago

2 million shares acquired on July 18, 20X0.

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Maddie

6 months ago

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

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Adela

6 months ago

I think the AFS classification is spot on!

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Tawny

6 months ago

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

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Izetta

6 months ago

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

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Dottie

6 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

7 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

7 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

7 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

7 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

8 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

8 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

8 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

8 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

8 months ago

Option C all the way!

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Marti

8 months ago

It's definitely tricky!

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Yuette

8 months ago

But C seems right to me!

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An

8 months ago

You think so? I might lean towards B.

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Georgeanna

9 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

8 months ago

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

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Sherell

10 months ago

That makes sense, thanks for explaining.

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Ronald

10 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

8 months ago

I think the answer is Option C as well.

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Candra

10 months ago

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

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Sherell

10 months ago

Why do you think it's Option C?

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Kirk

10 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

8 months ago

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

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Audra

9 months ago

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

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Angella

10 months ago

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

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Candra

10 months ago

I disagree, I believe it should be Option C.

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Dion

10 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

10 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

11 months ago

I think the answer is Option A.

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