Reference no: EM133039241

Questions -

Q1. On February 14, 2020, Peaches Company purchased marketable equity securities to be held as trading for 5,000,000. The entity also paid commission, taxes and other transaction costs amounting to 200,000. The securities had a market value of 5,500,000 on December 31, 2020. No securities were sold during 2020. The transaction costs that would be incurred on the disposal of the investment are estimated at 100,000. What amount of unrealized gain or loss on these securities should be reported in the 2020 income statement?

a. 500,000 unrealized loss

b. 400,000 unrealized gain

c. 500,000 unrealized gain

d. 400,000 unrealized loss

Q2. Apples Corporation bought 2,000 shares of Oranges Corporation on January 2, 2020 at 150 per share and paid 2,250 as brokerage fee and 1,500 non-refundable tax. The investment is measured at fair value through other comprehensive income. Prior to the date of acquisition, information revealed that on December 8, 2019, Oranges Corporation declared a 10 cash dividend to shareholders on record as of January 31, 2020 payable on April 30, 2020. There were no other transactions in 2020 affecting the investment in Oranges Corporation. What is the historical or acquisition cost of the investment account?

a. 302,250

b. 303,750

c. 300,000

d. 283,750

Q3. Grapes Corporation purchased 50,000 shares (5% ownership) of Berries Company as non-current investment on January 2, 2020. Grapes received a share dividend of 15% on March 31, 2020 when the market price of the share is 40. On November 30, Grapes paid 20 per share special assessment on the shares. On December 15, 2020, Berries paid a cash dividend of 8 per share. In the December 31, 2020 income statement of Grapes , what amount should be reported as dividend income?

a. 460,000

b. 60,000

c. 400,000

d. 150,000

Q4. Melon Company acquired 50,000 ordinary shares of Banana Company on September 30, 2020 for 8,250,000 and classified the investment to be measured at fair value through profit or loss. On October 31, the shares were split up into 2:1. On November 30, 2020, Banana distributed 10% ordinary share dividends when the market price of the share was 250 per share. On December 31, 2020, Melon sold 6,000 of its Banana shares for 600,000. For the year ended December 31, 2020, how much should Melon report as gain on sale of investment?

a. 200,000

b. 105,000

c. 250,000

d. 0

e. 150,000

Q5. At the beginning of the current year, Lemon Company purchased 40% of the outstanding ordinary shares of an investee paying 2,560, 000 when the carrying amount of the net assets of the investee equaled 5,000,000. The difference was attributed to building which had a carrying amount of 1,000,000 and a fair market value of 1,600,000, and to machinery with a carrying amount of 1,200,000 and fair market value of 2,000,000. The remaining useful life of the machinery and building was 4 years and 12 years, respectively. During the current year, the investee reported net loss of 1,600,000 and paid dividends of 1,000,000. What is the carrying amount of the investment in associate at year end?

a. 2,550,000

b. 2,700,000

c. 1,420,000

d. 1,270,000

Q6. 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. 1,960,000

b. 1,860,000

c. 1,800,000

d. 1,980,000

Q7. 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. 3,125,000

b. 3,250,000

c. 3,200,000

d. 3,175,000

Q8. 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. 160,000

c. 169,657

d. 170,824

Q9. 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. 176,604

b. 245,956

c. 144,385

d. 210,434

Q10. 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. 8,400,000

b. 9,800,000

c. 8,700,000

d. 9,000,000