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2. C
3. D
4. B
5. A
6. B
7. Solutions:
Case #1:
Answer: (120 – 35) = 85
Case #2:
The most advantageous market is determined as follows:
Active market #1 Active market #2
Market price 100 120
Transaction costs (5) (5)
Transport costs (10) (35)
Amount received from sale 85 80
1
8. Answer: ₱2.00 level 2 input x 1,000 shares = ₱2,000
9. B
10. B
11. Solutions:
Requirement (a):
1/1/x1
Held for trading securities (12,000 x 3) 36,000
Commission expense 1,800
Cash 37,800
12/31/x1
Held for trading securities [(12,000 x 5) – 36,000] 24,000
Unrealized gain – P/L 24,000
1/6/x1
Cash [(12,000 x 8) – 4,800] 91,200
Held for trading securities (12,000 x 5) 60,000
Realized gain 31,200
Requirement (b):
1/1/x1
Held for trading securities (12,000 x 3) 36,000
Commission expense 1,800
Cash in bank 37,800
12/31/x1
Fair value adjustment [(12,000 x 5) – 36,000] 24,000
Unrealized gain – P/L 24,000
1/6/x1
Cash [(12,000 x 8) – 4,800] 91,200
Fair value adjustment 24,000
Held for trading securities (12,000 x 3) 36,000
Realized gain – P/L 31,200
Requirement (c):
1/1/x1
Investment in FVOCI securities [(12,000 x 3) + 1,800] 37,800
Cash in bank 37,800
12/31/x1
Investment in equity securities - FVOCI 22,200
Unrealized gain – OCI [(12,000 x 5) – 37,800] 22,200
2
1/6/x1
Investment in equity securities - FVOCI 31,200
Unrealized gain – OCI 31,200*
12. Solutions:
Requirement (a):
2001
Dec. 31 Unrealized Loss – P/L 20,000
Held for Trading Securities 20,000
2002
Dec. 31 Held for Trading Securities 4,000
Unrealized Gain – P/L 4,000
Requirement (b):
Effect on 2001 profit (loss):
Recognized decline in value of held for trading securities ₱(20,000)
3
PROBLEM 3: EXERCISES
1. Solutions:
Requirement (a):
1/1/x1
Held for trading securities (2,000 x 10) 20,000
Commission expense 1,000
Cash 21,000
12/31/x1
Unrealized loss – P/L [(2,000 x 6) – 20,000] 8,000
Held for trading securities 8,000
1/6/x1
Cash [(2,000 x ½ x 3) – 150] 2,850
Realized loss 3,150
Held for trading securities (2,000 x ½ x 6) 6,000
Requirement (b):
1/1/x1
Held for trading securities (2,000 x 10) 20,000
Commission expense 1,000
Cash 21,000
12/31/x1
Unrealized loss – P/L [(2,000 x 6) – 20,000] 8,000
Fair value adjustment 8,000
1/6/x1
Cash [(2,000 x ½ x 3) – 150] 2,850
Fair value adjustment (8,000 x ½) 4,000
Realized loss 3,150
Held for trading securities (2,000 x ½ x 10) 10,000
Requirement (c):
1/1/x1
Investment in equity securities - FVOCI [(2,000 x 10) + 1,000] 21,000
Cash 21,000
12/31/x1
Unrealized loss – OCI [(2,000 x 6) – 21,000] 9,000
Investment in equity securities - FVOCI 9,000
1/6/x1
Unrealized loss – OCI 3,150
Investment in equity securities - FVOCI 3,150*
4
**[(21,000 - 9,000) x ½] – 3,150 = 2,850
2. Solutions:
Requirement (a): 10,000 x 13 = 130,000
Requirement (d): 0
3. Solution:
Held for trading securities 7,000
Unrealized Gain on Trading Securities 7,000
5
PROBLEM 4: CLASSROOM ACTIVITIES
ACTIVITY #1:
Solution:
Investment in PLDT shares (FVPL) 47,280
Unrealized gain – P/L 47,280
ACTIVITY #2:
Solutions:
Requirement (a):
FVPL – because ABC’s business model is neither “hold to collect” nor “hold
to collect and sell.”
Requirement (b):
Held for trading securities 1,910.10*
Unrealized gain – P/L 1,910.10
Requirement (c):
SYMBOL SHARES PRICE PAID ACQUISITION COST
GLO 250 2,350.00 587,500.00
JFC 1,000 208.80 208,800.00
BDOPBF:PM 10 1,554.67 15,546.70
ABS 10,000 65.20 652,000.00
SNLFMNY:PM 10,000 1.228 12,280.00
1,476,126.70
Requirement (d):
1,478,036.80 (given on the print screen, “VALUE” column)
Requirement (e):
SYMBOL TYPE
GLO EQUITY
JFC EQUITY
BDOPBF DEBT
ABS EQUITY
SNLFMNY DEBT
6
Requirement (f):
(250 x 2,400 x 95%) net proceeds – (250 x 2,372) carrying amount = (23,000)
loss
ACTIVITY #3:
1. A
2. A
3. D
4. C
5. A
6. C
7. A
7
PROBLEM 6: MULTIPLE CHOICE: COMPUTATIONAL
1. C
Solution:
Market A B
Quoted Price 76 74
Transaction Costs (5) (2)
Net price 71 72
2. C
Solution:
Market New York London
Quoted Price 103 106
Transaction Costs (1) (5)
Net price 102 101
8
18. A 360K – 320K = 40,000 unrealized loss in P/L for FVPL ; no fair value
change is recognized in P/L for the investment in FVOCI
19. C [(2,000 sh. x 14) – 1,400] = 26,600 net proceeds – 29,500 fair value on
Dec. 31, 20x1 = 2,900 realized loss
20. B (240K fair value Dec. 31, 20x2 – 180K fair value Dec. 31, 20x1 =
60,000 unrealized gain in OCI;
(240K fair value Dec. 31, 20x2 – 200K original cost) = 40K accumulated
OCI