ACC 214A - Intermediate Accounting I - A 21

Semi-Final Examination

Semi-Final Examination
Submissions
Here are your latest answers:

Question 1
On January 1, 2018, A Company purchased bonds with face amount of 5,000,000. The entity paid 4,600,000 plus transaction cost of 142,000. The bonds mature on
December 31, 2020 and pay 6% interest annually on December 31 of each year with 8% effective yield. The bonds are quoted at 105 on December 31,2018 and 110 on
December 31, 2019. The business model in managing the financial asset is to collect contractual cash flows that are solely payments of principal and interest and also
to sell the bonds in the open market.

What amount of unrealized gain should be reported as component of other comprehensive income in the statement of changes in equity for 2019?

Response: 164,291

Score: 0 out of 1 No

Question 2
On July 1, 2019, A Co. purchased, as a long-term investment, 500,000 face amount, 8% bonds of R Corp. for 461,500 to yield 10% per year. The bonds pay interest
semiannually on January 1 and July 1.

On December 31, 2019 balance sheet, what amount should A Company report as Accrued Interest Receivable?

Response: 23,075

Score: 0 out of 1 No

Question 3
If an entity uses a calendar year period and reports on an annual basis changes its business model for managing financial assets on August 1, 2018, the reclassification
date is on

Response: January 1, 2019

Score: 1 out of 1 Yes

Question 4
On January 1, 2018, A Co. purchased bonds with face amount of 5,000,000. The entity paid 4,500,000 plus transaction cost of 168,600. The bonds mature on
December 31, 2021 and pay 6% interest annually on December 31 of each year with 8% effective yield. The bonds are quoted at 105 on December 31, 2018 and 110 on
December 31, 2019. The business model in managing the financial asset is to collect contractual cash flows and also to sell the bonds in the open market. The has
entity not elected the fair value option. On December 31, 2019, the entity changed the business model to collect only contractual cash flows. On December 31, 2020,
the bonds are quoted 115 and the market rate of interest is 10%.
What is the interest income for 2020?

Response: 500,000

Score: 0 out of 1 No

Question 5
On January 1, 2018 A Co. purchased 12% bonds with face amount of 5,000,000 for 5,500,000 including transaction cost of 100,000. The bonds provide an effective
yield of 10%. The bonds are dated January 1, 2018 and pay interest annually on December 31 each year. The bonds are quoted at 115 on December 31, 2018. The
entity has irrevocably elected the fair value option.

What total amount of income form the investment should be reported in the income statement for 2018?

Response: 950,000

Score: 1 out of 1 Yes

Question 6
When the interest payment dates of a bond are May 1 and November 1, and a bond is purchased on June 1, the amount of cash paid by the investor would be

Response: Increased by accrued interest from May 1 to June 1.

Score: 1 out of 1 Yes

Question 7

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What is the carrying amount of investment in bonds on December 31, 2020?

Response: 6,036,802

Score: 0 out of 1 No

Question 8

What is the carrying amount of the bond investment on December 31, 2018?

Response: 7,540,704

Score: 0 out of 1 No

Question 9
Which statement is true if the property is partly investment and partly owner-occupied?
I. If the investment and owner-occupied portions could be sold or leased out separately, the portions shall be accounted for separately as investment property and
owner-occupied property.

II. If the investment and owner-occupied portions could not be sold or leased out separately, the property is investment property if the portion is significantly held for
manufacturing or administrative purposes.

Response: I only

Score: 1 out of 1 Yes

Question 10
On January 1, 2018, A Co. purchased bonds with face amount of 5,000,000. The entity paid 4,500,000 plus transaction cost of 168,600. The bonds mature on
December 31, 2021 and pay 6% interest annually on December 31 of each year with 8% effective yield. The bonds are quoted at 105 on December 31, 2018 and 110 on
December 31, 2019. The business model in managing the financial asset is to collect contractual cash flows and also to sell the bonds in the open market. The has
entity not elected the fair value option. On December 31, 2019, the entity changed the business model to collect only contractual cash flows. On December 31, 2020,
the bonds are quoted 115 and the market rate of interest is 10%.
What amount of unrealized gain should be reported as component of OCI for 2019?

Response: 500,000

Score: 0 out of 1 No

Question 11
On January 1, 2018, A Co. purchased bonds with face amount of 5,000,000. The entity paid 4,500,000 plus transaction cost of 168,600. The bonds mature on
December 31, 2021 and pay 6% interest annually on December 31 of each year with 8% effective yield. The bonds are quoted at 105 on December 31, 2018 and 110 on
December 31, 2019. The business model in managing the financial asset is to collect contractual cash flows and also to sell the bonds in the open market. The has
entity not elected the fair value option. On December 31, 2019, the entity changed the business model to collect only contractual cash flows. On December 31, 2020,
the bonds are quoted 115 and the market rate of interest is 10%.
What is the carrying amount of the investment on December 31, 2020?

Response: 5,750,000

Score: 0 out of 1 No

Question 12
Transaction costs on trading bond investment are

Response: Part of the initial carrying amount

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Score: 0 out of 1 No

Question 13
When an entity reclassifies a financial asset from FVPL to amortized cost, the initial measurement of the reclassified financial asset is

Response: Fair value on reclassification date.

Score: 1 out of 1 Yes

Question 14
On October 1, 2019, A Company purchased 200,000 face value 12% bonds for 98 plus accrued interest and
brokerage fees and classified them as amortized cost assets. Interest is paid semiannually on
January 1 and July 1. Brokerage fees for this transaction were 700.

At what amount should A Company record the bonds on acquisition date?

Response: 196,700

Score: 1 out of 1 Yes

Question 15
On January 1,2018, A Co. purchased bonds with face amount of 2,000,000. The bonds are dated January 1, 2018 and mature on January 1, 2022. The interest on the
bonds is 10% payable semiannually every June 30 and December 31. The prevailing market rate of interest on the bonds is 12%. (Round PVs to two decimal places).

What is the present value of the bonds on January 1, 2018 of A Co.?

Response: 1,360,000

Score: 0 out of 1 No

Question 16
On January 1, 2018, A Company purchased bonds with face amount of 8,000,000 for 7,679,000 as a long-term investment. The stated rate on the bonds is 10% but the
bonds are acquired to yield 12%. The bonds mature at the rate of 2,000,000 annually every December 31 and the interest is payable annually also every December 31.
The entity used the effective interest method of amortizing discount.

What is the interest income for 2018?

Response: 960,000

Score: 0 out of 1 No

Question 17
On January 1, 2018, A Company purchased bonds with face amount of 5,000,000. The entity paid 4,600,000 plus transaction cost of 142,000. The bonds mature on
December 31, 2020 and pay 6% interest annually on December 31 of each year with 8% effective yield. The bonds are quoted at 105 on December 31,2018 and 110 on
December 31, 2019. The business model in managing the financial asset is to collect contractual cash flows that are solely payments of principal and interest and also
to sell the bonds in the open market.
What is the interest income for 2018?

Response: 379,360

Score: 1 out of 1 Yes

Question 18
A Co. purchased an investment property on January 1, 2016 for 2,200,000. The property had a useful life of 40 years and on December 31,218 had a fair value of
3,000,000. The entity used the cost model to account for the investment property.

What is the carrying amount of Investment Property on December 31, 2018 for A Co.?

Response: 2,035,000

Score: 1 out of 1 Yes

Question 19

What amount
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Response: 6,500

Score: 1 out of 1 Yes

Question 20

Write the letter of your answer in the blank. Do not put period (.) on your answer.

_____

Response: a

Score: 1 out of 1 Yes

Question 21
A Co. acquired a building on January 1, 2018 for 9,000,000. At that date, the building had a sueful life of 30 years. On Decmeber 31, 2018, the fair value of the
building was 9,600,000 and on December 31, 201, the fair value was 9,900,000. The building was classified as investment property and accounted for under fair value
model?

What amount should A Co. reported as depreciation expense on December 31, 2018?

Response: 300,000

Score: 0 out of 1 No

Question 22
Accrued interest on bonds that are purchased between interest dates

Response: Increases the amount a buyer must pay.

Score: 1 out of 1 Yes

Question 23

Write the letter of your answer in the blank. Do not put period (.) in your answer.

_____

Response: c

Score: 1 out of 1 Yes

Question 24

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What amount should reported as Investment Property?

Response: 4,800,000

Score: 0 out of 1 No

Question 25
Use of effective-interest method in amortizing bond premiums and discounts results in

Response: A varying amount being recorded as interest income from period to period

Score: 1 out of 1 Yes

Question 26
On January 1, 2019, A Co. acquires 5-year, 1,000, 10% P5,000 bonds for P4,639,522. The bonds were classified as subsequently measured at fair value through other
comprehensive income. Interest is payable annually. On December 31, 2019, the bonds are quoted at 98.

How much is the interest income in 2019 of A Co.?

Response: 463,952

Score: 0 out of 1 No

Question 27
On January 1, 2019, A Co. purchased, as investment measured at amortized cost, 1,000,000 of P, Inc.’s 8% bonds for 946,000, including accrued interest of 40,000.
The bonds were purchased to yield 10% interest. The bonds mature on December 31, 2025, and pay interest annually on December 31. Effective interest method is
used for amortization.

On December 31, 2019 balance sheet, what amount should A Co. report as Investment in Bonds?

Response: 960,600

Score: 1 out of 1 Yes

Question 28
Bonds usually sell at a discount when investors are willing to invest in bonds

Response: Because a capital gain is expected

Score: 0 out of 1 No

Question 29

What is the market price or purchase price of the bonds?

Response:
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Score: 0 out of 1 No

Question 30
On January 1, 2018, A Company purchased bonds with face amount of 8,000,000 for 7,679,000 as a long-term investment. The stated rate on the bonds is 10% but the
bonds are acquired to yield 12%. The bonds mature at the rate of 2,000,000 annually every December 31 and the interest is payable annually also every December 31.
The entity used the effective interest method of amortizing discount.

What is the carrying amount of the investment on bonds on December 31, 2019?

Response: 5,759,250

Score: 0 out of 1 No

Question 31
Which statement best describes investment property?

Response: Property held to earn rentals or for capital appreciation

Score: 1 out of 1 Yes

Question 32

Write the letter of your answer in the blank. Do not put period (.) on your answer.

_____

Response: a

Score: 1 out of 1 Yes

Question 33
A Co. owns an office building that is being leased out to various companies. A Co. is required to provide security and maintenance services under the lease contracts.
The building was acquired two years ago for a total cost 6,000,000. The accumulated depreciation at the beginning of the year is 480,000. A Co. uses the cost model
and straight-line method of depreciation.

How much would be shown as investment property in A Co.’s year-end financial statements?

Response: 5,520,000

Score: 0 out of 1 No

Question 34
A Co. purchased 8,000, P1,000 face amount, 9% bonds to yield 10%. The carrying amount of the bonds on January 1, 2019 was P7,800,000. The bonds mature on June
30, 2022 and pay interest semiannually on June 30 and December 31. The entity sold 4,000 bonds on March 1, 2019 for P3,920,000 after the interest has been received.

What amount should A Co. recognize as gain on sale of bonds?

Response: 20,000

Score: 0 out of 1 No

Question 35
The effective interest method of amortizing premium provides for

Response: Decreasing amortization and decreasing interest income

Score: 0 out of 1 No

Question 36
Investment property includes all of the following, except

Response: Property held for sale in the ordinary course of business

Score: 1 out of 1 Yes

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 Write the letter of your answer in the blank. Do not put period (.) on your answer.

BLANK

Response: C

Score: 1 out of 1 Yes

Question 38
On January 1, 2018 A Co. purchased 12% bonds with face amount of 5,000,000 for 5,500,000 including transaction cost of 100,000. The bonds provide an effective
yield of 10%. The bonds are dated January 1, 2018 and pay interest annually on December 31 each year. The bonds are quoted at 115 on December 31, 2018. The
entity has irrevocably elected the fair value option.

What amount of interest income should be reported for 2018?

Response: 550,000

Score: 0 out of 1 No

Question 39

What is the interest income for 2020?

Response: 517,174

Score: 0 out of 1 No

Question 40
Which statement is false concerning property leased to an affiliate?
I. From the perspective of the individual entity that owns it, the property leased to an affiliate is considered an investment property.
II. From the perspective of the affiliates as a group and for the purpose of consolidated financial statements, the property is treated as owner-occupied property.

Response: Both I and II

Score: 0 out of 1 No

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