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Topic 6 Solutions Q1-2

Topic 6 Solutions Q1-2 - AF3110 Intermediate Accounting 1...

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1 AF3110 Intermediate Accounting 1 2009/10 Semester 2 Topic 6 Suggested Solutions Question 1 (a) Dr (\$) Cr (\$) 1 February Available-for-Sale Financial Assets 500,000 Interest Receivable * 20,000 Cash 520,000 *(4/12 x .12 x \$500,000 = \$20,000) 1 April Cash 30,000 Interest Receivable (\$500,000 x .12 x 4/12) 20,000 Interest Revenue (\$500,000 x .12 x 2/12) 10,000 1 July Available-for-Sale Financial Assets 200,000 Interest Receivable * 1,500 Cash 201,500 *(1/12 x .09 x \$200,000 = \$1,500) 1 September Cash 104,000 [(\$100,000 x 99%) + (\$100,000 x .12 x 5/12)] Loss on Sale of Financial Assets 1,000 Available-for-Sale Financial Assets 100,000 Interest Revenue 5,000 (5/12 x .12 x \$100,000 = \$5,000) 1 October Cash 24,000 [(\$500,000 \$100,000) x .12 x 6/12] Interest Revenue 24,000 1 December Cash (\$200,000 x 9% x 6/12) 9,000 Interest Receivable (\$200,000 x 9% x 1/12) 1,500 Interest Revenue 7,500

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2 31 December Interest Receivable 13,500 Interest Revenue 13,500 (3/12 x \$400,000 x .12 = \$12,000) (1/12 x \$200,000 x .09 = \$1,500) (\$12,000 + \$1,500 = \$13,500) Investment Revaluation Reserve 34,000 Fair Value Adjustment - AFS 34,000 Portfolio of Available-for-Sale Financial Assets Security Cost Market Unrealised Gain (Loss) Vanessa Williams Co. Chieftains, Inc.
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