Question 1

（a）

A B C D E
Interest Bonds
Cash Interest Interest Discount Unamortized
Period- carrying
Paid expense Amortization discount
End amount
2018.1.1 $10,152 $189,848
2018.6.30 $8,000 $9,492 $1,492 $8,660 $191,340
2018.12.31 8,000 9,567 1,567 7,093 192,907
2019.6.30 8,000 9,645 1,645 5,448 194,552
2019.12.31 8,000 9,728 1,728 3,720 196,280

（b）

Jan.1 Cash 189,848

Discount on Bonds Payable 10,152
Bonds Payable 200,000
Sold bonds at a discount on their issue date

(c)
Jun. 30 Bond Interest Expense 9,492
Discount on Bonds Payable 1,492
Cash 8,000
To record semiannual interest and discount amortization
(using effective interest method)

(d)
Interest Computation
Six payments of $8000 $48,000
(6 pymts*($200000*0.08*0.5 yr)
Plus discounts 10,152
 $58,152

(e)
Jan.1 Bonds Payable 200,000
Discount on Bonds Payable 3,720
Gain on Bond Retirement 6,280
Cash 190,000
To record retirement of bonds before maturity

（f）
1. The bond does not affect the company's owner's control over the company. Unlike the issuance
of stocks, the stock holders are the owners of the company, and the executors need to follow the
recommendations of the stock holders. But the bond owner is not the owner of the company, so it
will not affect the company's decision-making
2. Bonds can increase the return on equity, thereby enabling the company to obtain higher returns

Question 2

Part 1

(1)
Long-Term Investments—AFS(Apple
Mar.1 106,050
Tech)
Cash 106,050
Purchased 7000 ordinary shares in Apple Tech(7000*$15+1050)as AFS investment

Mar.31 Long-Term Investments—AFS(QQ Game) 361,800

Cash 361,800
Purchased 30000 ordinary shares in QQ Game(30000*$12+1800)as AFS investment

Jun. 20 Long-Term Investments—Worldwide Telecom 301,500

Cash 301,500
Purchased 20000 ordinary shares in Worldwide Telecom(20000*$15+1500)

Sep.10 Short-Term Investment—B2C online 273,360

Cash 273,360
Purchased 8500 ordinary shares in B2C Online(8500*$32+1360) as HFT investment

Oct.21 Cash 73,630

Realized Gain on Investment(P&L) 13,030
Long-Term Investments-AFS(Apple
60,600
Tech)
Recorded sales of AFS investments in Apple Tech at a gain
(The original cost is 106050*4/7)
 Dec.31 Long-Term Investments—Worldwide Telecom 20,000
Earnings from Long-Terms Investments 20,000
To record 40% equity in investee earnings(50000*0.4)

(2)
Dec.31 Fair Value Adjustment—Apple Tech 8,550
Unrealized Gain on Investment(OCI) 8,550
Recorded adjustment to fair values of AFS investments in Apple Tech
The original cost of the rest of the shares:106050*3/7=45450
The fair value of the rest of the shares:18*3000=54000
The gain:54000-45450=8550

Dec.31 Unrealized Loss on Investments 4,800

Fair Value Adjustment-AFS(QQ Game) 4,800
Recorded adjustment to fair values of AFS investments in QQ Game
The original cost :361800
The fair value of the shares:11.9*30000=357000
The Loss:361800-357000=4800

(3)
Dec.31 Short-Term Investments-B2C Online 13,940
Gain on Investments-B2C Online 13,940
Recorded unrealized gain

(4)
Jan.28 Cash 9,000
Long-Term Investments-Worldwide Telecom 9,000
To record share of dividends paid by Worldwide
Telecom

Feb.15 Cash 296,015

Short-Term Investments-B2C Online 273,360
Gain on Sale of Short-Term Investments 22,655
Recorded shares of investments at a gain

(5)
Dec.31 Fair Value Adjustment—Apple Tech 6,000
Unrealized Gain on Investment(OCI) 6,000
 Recorded adjustment to fair values of AFS investments in Apple Tech
The fair value of the rest of the shares in 2018:54000
The fair value of the rest of the shares:20*3000=60000
The gain:60000-54000=6000

Dec.31 Unrealized Loss on Investments 21,000

Fair Value Adjustment-AFS(QQ Game) 21,000
Recorded adjustment to fair values of AFS investments in QQ Game
The fair value of the shares in 2018:357000
The fair value of the shares:11.2*30000=336000
The Loss:357000-336000=21000

Part 2
（1）
Any changes in unrealized returns of Held-for-Trading investments securities must be reflected in
the income statement. However, companies cannot list the realized gains or losses of the securities
available-for-sale on the income statement but on the equity part of the balance sheet.

（2）
Such securities should be accounted and reported in accordance with the equity method. First, it
should be accounted for at cost when it is acquired. When an investment object reports profit, the
investor should record his share of the profit in the investment account. At the end of the period,
its balance should be settled to the profit and loss summary account. Because under the equity
method, cash dividends are not income, but the target profit share they deserve. The cash dividend
should be regarded as a conversion of assets