| Course | ACC-6010 Intermediate Accounting III |
|---|---|
| Module | Module 1 |
| Paper type | Written Assignment 1: accounting for investments |
| Length | About 788 words, 5 pages |
| Format | APA 7 student paper |
| School | Thomas Edison State University |
| Program | M.S. in Management in Accounting |
| Updated | October 2026 |
Free sample paper for ACC 6010 Module 1
Palisades Optical Corp.: Premium Bonds, a 25% Stake With Excess Cost and an IFRS 9 Comparison
Student Name
M.S. in Management in Accounting, Thomas Edison State University
ACC-6010: Intermediate Accounting III
Mentor Name
Month Day, Year
Palisades Optical Corp.: Premium Bonds, a 25% Stake With Excess Cost and an IFRS 9 Comparison
Introduction
Palisades Optical Corp. had $4 million of surplus cash at the start of 2026 and used it three ways: a bond for income, a strategic stake in a supplier and a small holding in a customer's stock. Kieso et al. (2012) organize investment accounting around the investor's intent and influence, and each of the three investments falls under a different model. Interest, dividends and value changes therefore reach the statements by different routes.
Problem 1: A Bond Bought at a Premium
Palisades bought $1,000,000 face of five-year, 6% bonds on January 1, 2026, paying $1,043,295, a price that works out to a 5% yield, with coupons arriving every December 31.
Interest revenue for 2026 is $1,043,295 x 5% = $52,165, and the $7,835 by which the $60,000 coupon exceeds it reduces the premium, leaving a carrying amount of $1,035,460. At December 31 the bonds' fair value is $1,028,000.
Palisades intends to hold the bonds to maturity and can do so, so held to maturity applies, and premium amortization is the only adjustment.
The classification has consequences beyond this year. Selling a held-to-maturity bond early, outside the few excused cases such as a collapse in the issuer's creditworthiness, would cast doubt on every hold-to-maturity claim Palisades has made and could force the remaining portfolio into available-for-sale. Management should therefore choose the category with its realistic plans in mind.
| Price computation at 5% for 5 years | Factor | Present value |
|---|---|---|
| Principal of $1,000,000 | 0.783526 | $783,526 |
| Coupons of $60,000 a year | 4.329477 | 259,769 |
| Purchase price | | $1,043,295 | |
| Classification | Balance sheet amount | Treatment of the change |
| Held to maturity | $1,035,460, amortized cost | Not recognized; disclosed in the notes |
| Available for sale | $1,028,000, fair value | $7,460 unrealized loss in other comprehensive income |
| Trading | $1,028,000, fair value | $7,460 loss in net income |
Problem 2: An Equity Method Stake With Excess Cost
On January 2, Palisades paid $2,400,000 for 25% of Hudson Thin Films, Inc., whose net assets had a book value of $8,000,000. Palisades' share of book value is $2,000,000, so it paid $400,000 more. Of the excess, $150,000 relates to equipment worth more than its carrying amount, with ten years of remaining life, and the remaining $250,000 is goodwill.
Investment income is $285,000. Any goodwill inside the carrying amount stays unamortized and is never tested by itself; instead the entire stake is tested when its value seems to have dropped for more than a passing spell.
| Equity method carrying amount | Amount |
|---|---|
| Cost, January 2 | $2,400,000 |
| Share of Hudson's 2026 net income of $1,200,000 at 25% | 300,000 |
| Amortization of excess cost on equipment: $150,000 / 10 | (15,000) |
| Dividends received: 25% of $400,000 | (100,000) |
| Carrying amount, December 31 | $2,585,000 |
Problem 3: A Small Equity Holding
Palisades bought 10,000 shares of a drone maker that buys its lenses for $310,000. At year end the shares are worth $334,000. Under U.S. GAAP, a stock holding too small to give influence is carried at market, and every swing in that market goes straight to earnings, so Palisades books its $24,000 paper gain in income (Financial Accounting Standards Board [FASB], 2016).
Had the drone maker's shares not traded on an exchange, Palisades could elect the measurement alternative: carry the investment at cost less impairment, adjusted up or down when an orderly transaction in identical or similar shares reveals a new price. That election avoids estimating fair value every quarter but requires a qualitative impairment assessment at each reporting date.
IFRS Application
Two differences stand out. IFRS 9 classifies debt by business model and cash flow characteristics rather than management's stated intent, though the result here would match. And IFRS lets Palisades choose to keep the drone maker's price swings out of profit permanently, which U.S. GAAP does not allow; if Palisades views the holding as strategic, that election would make reported earnings less volatile. In a study of companies in 21 countries, Barth et al. (2008) reported that adopters of international standards booked losses sooner and smoothed profits less than comparable firms that stayed on domestic rules, a reminder that classification choices like these shape what investors see.
| Investment | U.S. GAAP | IFRS 9 |
|---|---|---|
| Bond held to collect contractual cash flows | Held to maturity at amortized cost | Amortized cost under the business model test, with expected credit losses from day one |
| Same bond held to collect and sell | Available for sale, changes in OCI, recycled on sale | Fair value through OCI, recycled on sale |
| Small equity holding | Fair value through net income | Fair value through net income, unless Palisades makes an irrevocable election at purchase to present changes in OCI, never recycled |
| 25% stake | Equity method | Equity method under IAS 28, with similar mechanics |
References
Barth, M. E., Landsman, W. R., & Lang, M. H. (2008). International accounting standards and accounting quality. Journal of Accounting Research, 46(3), 467-498. https://doi.org/10.1111/j.1475-679X.2008.00287.x
Financial Accounting Standards Board. (2016). Financial instruments, overall (Subtopic 825-10): Recognition and measurement of financial assets and financial liabilities (Accounting Standards Update No. 2016-01).
Kieso, D. E., Weygandt, J. J., & Warfield, T. D. (2012). Intermediate accounting (14th ed.). John Wiley & Sons.
ACC 6010 Module 1 instructions, in plain terms
Nine written assignments make up 60 percent of ACC-6010, more than any other component, and each is marked with the course's written assignment rubric. The syllabus says eight of them combine exercises, problems and IFRS application assignments, and the ninth is a short paper. Written Assignment 1 covers Module 1, investments, using Kieso, Weygandt and Warfield's Intermediate Accounting. Expect to compute bond premiums and discounts with the effective interest method, classify debt and equity securities, apply the equity method with excess purchase price, record fair value changes and compare U.S. GAAP with IFRS. These problems were written for this sample; it is set at one invented company that later assignments reuse.
Inside the ACC 6010 Module 1 example
The assignment introduces the company's three investments and the principle that intent and influence decide the accounting. Problem 1 prices the bond in a factor table, computes the first year's interest and premium amortization and shows the same bond under three classifications. Problem 2 builds the equity method carrying amount line by line, including amortization of excess cost on equipment and the treatment of embedded goodwill. Problem 3 applies fair value through net income to a small holding. The IFRS application compares all four treatments in a table and explains the two differences that matter most, including an election that would change reported profit.
Where the marks sit in the ACC 6010 Module 1 rubric
Investment problems open a set of nine assignments that together decide 60 percent of the ACC-6010 grade. On an investments assignment, mentors check effective interest computations, correct classification of debt and equity securities, equity method income adjusted for excess cost amortization and dividends treated as returns of investment. IFRS answers should identify real differences, such as the business model test and the equity election, rather than claiming the frameworks match or differ everywhere. Explanations of why each treatment applies, alongside complete computations, earn more than numbers alone, and organized tables make the work easy to verify. Amortization tables that tie the bond's carrying value to its face amount at maturity, and an equity method schedule that tracks the $400,000 excess over book value, make the work easy to verify.
ACC 6010 Module 1 help: mistakes that cost marks
Students often amortize a premium by the straight-line method when the problem calls for effective interest, or forget that premium amortization reduces interest revenue below the coupon. In equity method problems, remember to amortize the excess cost assigned to depreciable assets and to leave goodwill unamortized. Dividends reduce the investment rather than increasing income. For IFRS comparisons, check the current standard, IFRS 9, since older textbook editions describe IAS 39. For each investment, write the classification first, then the measurement basis, then where gains and losses appear; most errors happen when a step is skipped. Send your own Module 1 set and a first worked sample comes back free.
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ACC 6010 Module 1 questions, answered
Where can I find a free ACC 6010 Module 1 sample paper?
Palisades Optical's investment assignment is worked above: a premium bond under three classifications, an equity method stake with excess cost, a small equity holding and an IFRS 9 comparison.
How is excess cost handled under the equity method?
The price paid above the investor's slice of book value goes first to assets carried below their worth, written off against investment income over their lives, and whatever is left stays as unamortized goodwill.
How does IFRS 9 classify debt investments?
By the business model for managing them and whether contractual cash flows are solely principal and interest: amortized cost, fair value through OCI or fair value through profit or loss.
Can equity investments go through OCI under IFRS?
Yes. IFRS 9 allows an irrevocable election at purchase to present fair value changes on equity investments not held for trading in OCI, never recycled to profit.
What happens to a bond premium under the effective interest method?
Multiply the opening carrying amount by the 5% yield to get interest revenue; whatever the coupon pays beyond that figure shrinks the premium.