1.) On January 1, 2020, RED Company purchased 12% bonds with face amount of 5,000,000 for 5,500,000 which included a transaction cost of 100,000. The bonds provide an effective yield of 10%. The bonds are dated January 1, 2020, mature on January 1, 2025 and pay interest annually on December 31 of each year. The bonds are quoted at 115 on December 31, 2020. The entity irrevocably elected to use the fair value option. What amount of gain from change in fair value should be reported for 2020?

a. 750,000

b. 250,000

c. 350,000

d. - 0 -

2.) ORANGE Co. factored 3,000,000 of accounts receivable without recourse. The factor required an assessment fee of 10% of the accounts factored and a holdback of 15% of the accounts factored for possible sales returns and allowances. The accounts factored had a related allowance for doubtful accounts of 200,000. What amount of loss on factoring should be recognized? *

a. 300,000

b. 650,000

c. 100,000

d. 750,000

3.) On July 1, 2020, GREEN Company acquired 20% of the outstanding ordinary shares of another entity for 5,000,000. The carrying amount of the acquired shares was 4,000,000. The excess of cost over the carrying amount was attributable to an identifiable intangible asset which was undervalued on the investees statement of financial position and which had a remaining useful life of 5 years. The investee reported net income of 6,000,000 for 2020 and paid cash dividends of 1,000,000 on ordinary shares and issued 10% stock dividend on December 31, 2020. What amount of investment income should be reported by GREEN for 2020? *

a. 500,000

b. 1,000,000

c. 300,000

d. 800,000

4.) On July 1, 2020, GREEN Company acquired 20% of the outstanding ordinary shares of another entity for 5,000,000. The carrying amount of the acquired shares was 4,000,000. The excess of cost over the carrying amount was attributable to an identifiable intangible asset which was undervalued on the investees statement of financial position and which had a remaining useful life of 5 years. The investee reported net income of 6,000,000 for 2020 and paid cash dividends of 1,000,000 on ordinary shares and issued 10% stock dividend on December 31, 2020. What is the carrying amount of the investment in associate on December 31, 2020? *

a. 5,800,000

b. 5,400,000

c. 5,900,000

d. 5,300,000

5.) On December 28, 2020, INDIGO Company purchased goods costing 500,000. The terms were FOB destination. Some of the costs incurred in connection with the sale and delivery of the goods were packaging for shipment 10,000, shipping15,000, and special handling charges 25,000. These goods were received on December 31, 2020. On December 31, 2020, what total cost for these goods should be included in inventory? *

a. 500,000

b. 550,000

c. 510,000

d. 525,000