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1、LESSON3SuggestedsolutionsQuestion1(20marks)Multiplechoice(2markseach)a)2)Thebrokeragefeesarebeingexpensed;therefore,thisisaheld-for-tradinginvestment.b)2)Thefirstisrecordedatthestatedsaleprice;thesecondisrecordedatitsdiscountedpresentvalue.c)4)€3,500
2、+€480=€3,980Thisisaheld-tomaturityinvestmentsobrokeragecostsarerecordedaspartofthecostoftheinvestment;paymentismadetoday,althoughfromborrowedfunds,sothepurchasepriceisnotdiscounted;interestcostsareexpensed.1)€3,302[ThisisthePVof€3,500in1yearat6%inter
3、est]3)€3,710[ThisistheFVof€3,5001yearat6%interest]d)4)Thisisalump-sumpurchasescenario.Held-for-tradinginvestmentsarecarriedatfairvalue.AtAhn’sAwnings’December31,20X5year-endtheinvestmentaccountwouldhavebeenrevaluedtofairvalue.Thus,thebalanceintheacco
4、untwouldbe€247,000[(3,000+2,500+4,000)×€26pershare].Thirtypercentofthesharesweresold;theinvestmentaccountwouldbecreditedintheamountof€74,100[€247,000×30%]Theamountsfordistractors1,2,and3arecalculatedasfollows:1)€62,700(€22×2,850)2)€67,450[((€22+23+26
5、)÷3)*[(3,000+2,500+4,000)30%]=(€23.67×2,850)3)€69,450[(€66,000+57,500+108,000)×30%]e)1)Investmentsinassociatesarestrategicinvestmentsinequitysecuritiesthataretobereportedusingtheequitymethodofaccounting.f)4)Itisnotnecessarythattherebeanactivemarketin
6、asecurityforittobeclassifiedasaheld-to-maturityinvestment.IntermediateAccountingIISuggestedsolutions3¨7a)3)Opponentsofthefairvaluemethodofaccountingforinvestmentsarguethatthefairvaluemethodresultsinrecognitionofrevenuespriortoanactualexchangetransact
7、ion.Opponentsalsoarguethatthefairvaluemethodviolatesthecostprinciple.b)2)Adebittotheaccountinvestmentinassociaterecordstheinvestor’sshareoftheinvestee’sprofits.c)3)Revaluationtofairvalueisnotrequiredforassetsclassifiedasheld-to-maturity.d)3Whenanimpa
8、irmentlossisreversedtheinvestmentaccountcannotbewrittenuptoanamountgreaterthantheaccountbalancewouldhavebeenhadtheimpairmentlossnotbeenrecorded.Question2(20marks)YangtzeConsumerSuppliesandServicesClassifyInvestments—March31,20X5InvestmentsStrategicor
