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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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