PROBLEM 1

An entity provided the following information at year-end:

Trading Non trading
Aggregate cost 3,600,000 5,500,000
Aggregate fair value 3,200,000 4,500,000
Aggregate lower of cost or market value applied individually 3,040,000 4,200,000

The costs of disposal are estimated at P100,000 for trading securities and P150,000 for non-trading
securities. The nontrading securities are designated as measured at FVOCI. What total amount should be
reported as unrealized loss in the income statement for the current year?

PROBLEM 2

On January 1, 2020, an entity purchased equity investments held for trading

Purchase price Transaction cost Market-12/31/2020

Security A 1,000,000 100,000 1,200,000
Security B 2,000,000 200,000 1,500,000
Security C 3,000,000 300,000 3,100,000

On July 1, 2021, the entity sold Security A for P1,900,000

1. What amount of unrealized loss should be recognized in the 2020 income statement?
2. What amount should be reported as gain on sale of trading securities in the 2021 income statement?

PROBLEM 3

On January 1, 2020, an entity purchased nontrading equity investments which are irrevocably designated at FVOCI.

Purchase price Transaction cost Market-12/31/2020

Security A 1,000,000 100,000 1,500,000
Security B 2,000,000 200,000 3,000,000
Security C 4,000,000 400,000 4,700,000

On July 1, 2021, the entity sold Security C for P5,200,000

1. What amount should be reported as unrealized gain or loss in 2020 as component of other comprehensive income?
2. What is the net adjustment to retained earnings as a result of the sale of investments in 2021?

PROBLEM 4

An entity received dividends from ordinary shares investments during the current year:

*A share dividend of 10,000 shares from A company when the market price of the share was P10.
*A cash dividend of P1,500,000 from B Company in which the entity owned a 15% interest
*5,000 shares of C Company in lieu of cash dividend of P20 per share. The market price of the share was P150.
The entity had 50,000 shares of C Company and owned 5% interest in C Company.
What amount of dividend income should be reported for the current year?

PROBLEM 5

An entity provided the following data pertaining to equity investments for the current year:
*On October 1, the entity received P600,000 liquidating dividend from A company. The entity owned a 10% interest in A company.
*On December 1, the entity received from C Company a dividend in kind of one share of D Company for every 4 C Company shares held.
The entity had 100,000 C Company shares which have a market price of P50 per share on December 1. The market price of D Company
share was P10.
What amount should be reported as dividend income for the current year?

PROBLEM 6

An entity owned 50,000 shares of another entity. These 50,000 shares were originally purchased for P100 per share. The investee distributed
50,000 rights to the entity. The entity was entitled to buy one share for P140 and five of these rights. Each share had a market value of P150 and each right
had a market value of P10 on the date of issuance.
The entity exercised all rights. The share rights are accounted for separately and measured initially at fair value.
What total cost should be recorded for the new shares that are acquired by exercising the rights?
PROBLEM 7

An entity issued rights to subscribe to its share capital, the ownership of 4 shares entitling the shareholders to subscribe for 1 share at P100. An investor
owned 50,000 shares with total cost of P5,000,000. The share is quoted right-on at 125. The share rights are accounted for separately and measured initially
at fair value.
What is the cost of the new investment assuming all of the share rights are exercised by the investor?

PROBLEM 8

On January 1, 2020, an entity purchased as a long-term investment P5,000,000 face value at 8% bonds for P4,530,000. The bonds were purchased to yield 10% interest.
The bonds pay interest annually on December 31. The effective interest method of amortization is used.

1. What is the interest income for 2021?

2. What is the carrying amount of the investment in bonds on December 31, 2021?

PROBLEM 9

On January 1, 2020 an entity paid P5,990,000 for a 10% bond with face amount of P5,000,000. Interest is payable semiannually on June 30 and December 31.
The bond was purchased to yield 8%. The effective interest method is used.

1. What is the interest income for 2020?

2. What is the carrying amount of the bond investment on December 31, 2020?

PROBLEM 10

At the beginning of current year, an entity purchased 12% bonds with face amount of P5,000,000 for P5,500,000 including transaction cost of P100,000.
The bonds provide an effective yield of 10%. The bonds are dated January 1 and pay interest annually on December 31 of each year. The bonds are quoted at 115
at year end. The entity has irrevovably elected to use the fair value option.

1. What is the carrying amount of the bond investment on December 31?

2. What amount of gain from change in fair value should be reported for the current year?
3. What amount of interest income should bre reported for the current year?

PROBLEM 11

On January 1, 2020, an entity purchased bonds with face amount of P5,000,000. The entity paid P4,500,000 plus transaction cost of P168,600. The bonds
mature on December 31, 2023 and pay 6% interest annually on December 31 of each year with 8& effective yield.
The bonds were quoted at 105 on December 31, 2020 and 110 on December 31, 2021.
The business model in managing the financial asset is to collection contractual cashflows that are soley payments of principal and interest and also to sell
the bonds in the open market.
The entity has not elected the fair value option.
On December 31, 2021, the entity changed the business model to collection only contractual cash flows.
On December 31, 2022, the bonds are quoted at 115 and the market interest rate is 10%.

1. What amount of unrealized gain should be reported as component of OCI in the statement of comprehensive income for 2020?
2. What amount of cumulative unrealized gain should be reported as component of OCI in the statement of changes in equity for 2021?
3. What amount of unrealized gain should bre reported as component of OCI in the statement of comprehensive income for 2021?
4. What is the interest income for 2022?
5. What is the carrying amount of the investment on December 31, 2022?