Reference no: EM133029476

Questions -

Q1. On May 1, 2019, RED Company purchased a short-term 2,000,000 face value, 9% debt instruments for 1,860,000 including the accrued interest and classified it as a trading security. The debt instruments mature on January 1, 2022, and pay interest semi-annually on January 1 and July1. On December 31, the fair market value of the instruments is 98. On March 2, 2020, RED sold the trading securities for 1,980,000. How much should RED report the investment on December 31, 2019?

a. 1,800,000

b 1,860,000

c. 1,960,000

d. 1,980,000

Q2. On October 1, 2019, WHITE Corporation purchased a debt security having a face value of 3,000,000 with an interest rate of 10% for 3,200,000 inclusive of the accrued interest to be held as financial assets at amortized cost. A total of 50,000 was incurred and paid by WHITE in relation to the acquisition of the debt instrument. The bonds mature on January 1, 2024, and pay interest semi-annually on January 1 and July 1. On December 31, 2019, the bonds had a market value of 3,400,000. What amount should WHITE report for the investment in debt securities upon acquisition?

a. 3,175,000

b. 3,125,000

c. 3,200,000

d. 3,250,000

Q3. On January 1, 2019, BLUE Company purchased 4,000 of 1,000 face value, 10% bonds of PINK Company for 4,270,600. The company has a business model of holding the financial asset to collect contractual cash flows and to sell the financial asset. The bonds will mature on January 1, 2023 pay interest semi-annually on January 1 and July 1. Bonds effective interest rate is 8%. In its December 31, 2019 income statement, how much should BLUE report as interest income on the bonds?

a. 340,481

b. 170,824

c. 160,000

d. 169,657

Q4. On July 1, 2019, YELLOW Corporation acquired an investment at amortized cost in GREEN Company's 10-yr, 12% bonds, with face value of 5,000,000 for 5,386,300. Interest is payable semi-annually on January 1 and July 1. The bonds mature on July 1, 2024. Bonds effective rate is 10%. On December 31, 2020, YELLOW sold its debt instrument at 110. What amount of gain should YELLOW corporation recognize as a result of the disposal?

a. 210,434

b. 176,604

c. 245,956

d. 144,385

Q5. ORANGE Company acquired a building on January 1, 2019 for 9,000,000. At that date the building had a useful life of 30 years. On December 31, 2019, the fair value of the building was 9,600,000 and on December 31, 2020, the fair value is 9,800,000. The building was classified as an investment property and accounted for under the cost model. What amount should be carried in the statement of financial position for the year ended 2020?

a. 9,000,000

b. 8,700,000

c. 8,400,000

d. 9,800,000