ACCOUNTING FOR INVESTMENTS THEORIES
1. It is any contract that gives gives rise to both both a financial financial asset of one entity entity and and a financial liability or an equity instrument of another entity a. Financial instrument b. Equity in instrument c. Debt instrument d. Derivative instrument 2. A financial financial asset is is any asset asset that is (choose (choose incorrect incorrect answer answer a. !ash b. !ontractual !ontractual right right to receive receive cash cash or or another another financial asset from another entity c. A contractual contractual right right to e"change e"change financial instruments instruments under under conditions conditions that are #otentially unfavorable d. An equ equity ity of ano anothe therr entit entity y $. It is any contract that evidences evidences residual residual interest interest in the assets of of an entity entity after deducting all of its liabilities a. Equi Equity ty ins instr trum umen entt b. Debt Debt inst instru rume ment nt c. %oan %oan and and rec recei eiva vabl ble e d. %oan %oans s rec recei eiva vabl ble e &. Financi Financial al assets assets include include all all of the followin following g e"ce#t e"ce#t a. 're#aid e"#enses b. !ash on ban c. )rade accounts receivable d. %oans receivable *. A financial financial liability liability is any any liability liability that that is a contractua contractuall obligation obligation I. II. II. a. b. c. d.
)o deli delive verr cas cash h or or oth other er fina financ ncia iall ass asset et to anot anothe herr ent entit ity y )o e"c e"cha hang nge e fina financ ncia iall inst instru rume ment nts s wit with h anot anothe herr enti entity ty und under er conditions that are #otentially unfavorable I only II only +oth oth I an and II II ,eit ,eithe herr I and and II II
-. )hese )hese are assets assets held by an enter# enter#rise rise for the the accretion accretion of wealth wealth for ca#ital ca#ital a##reciation or for other benefits accruing to the investing enter#rise a.
Investments
b. Inventories c. 'ro#erty #lant and equi#ment d. !urrent !urrent assets assets /. 0hen 0hen curre current nt invest investmen ments ts are are carrie carried d at maret maret value value a. nrea nrealili ed gain gains s or loss losses es are are not rec recog ogn nied ied b. nrealied gains and losses are recognied and included in equity c. nrealied gains and losses are recognied and included in determination of income d. !urrent !urrent assets assets 3. %ong %ong4t 4ter erm m inves investme tment nts s are are a. Acquired Acquired #rimarily #rimarily for accretion accretion of wealth b. 5eadily realiable c. !lassified !lassified as current current assets assets d. Intended to be held for more than one year 6. 7#ecifical 7#ecifically ly these securities securities re#resent re#resent ownersh ownershi# i# shares shares such such as common stoc stoc #referred stoc and other ca#ital stoc a. b. c. d.
Equity securities Debt securities securities 8aretable securities !urrent investments
19. It is the date on which the stoc and transfer boo of the cor#oration is closed for registration. :nly those stocholders registered as of this date are entitled to rreceive eceive dividends a. Date Date of declaration b. Date Date of record c. Date Date of #ayment d. Date Date of mailing
CHAIN PROBLEMS
PROBLEM NO. 1
OnJanuar y2,2014,Choc oCompanyac qui r ed20% oft he400, 000 share sofout st andi ngcommonst ockofMi l kCorpor at i onf orP30per share.Thepur chasepr i cewasequalt oMi l k’ sunder l yi ngbookval ue. Cho copl anst oho l dt hi ss t o c kt oi nflue nc et heac t i v i t i e sofMi l k. Thef ol l owi ngdat aar eappl i cabl ef or2014and2015: Mi l kdi vi dends( pai dOct .31) Mi l kearni ngsMi l kst ockmarketpri ceat y ear end 2014P40, 000140, 00032 2015P48, 000160, 00031 OnJanuar y2,2016,ChocoCompanys ol d20, 000shar esofMi l kst oc k f orP31pershar e.Dur i ng2016,Mi l kr epor t edneti ncomeofP120, 000, andonOct ober31,2016,Mi l kpai ddi vi dendsofP20, 000.AtDec ember 31,2016,af t e ras i g ni fic ants t o c kde c l i ne ,whi c hi se x pe c t e dt obe t e mpo r ar y ,Mi l k’ ss t oc kwass e l l i ngf o rP22pe rs har e .Af t e rs e l l i ngt he 20, 000shares ,Chocodoesnotexpectt oexer ci sesi gni ficanti nfluence o v erMi l k,andt hes har e sar ec l as s i fie dasa v ai l abl ef ors al e . QUESTIONS:
Basedont heaboveandt her esul tofyouraudi t ,det ermi net hef ol l owi ng: 1.
Car r yi ngv al ueofI nv es t menti nMi l kaso fDec e mber31,2014a. P12, 020, 000c.P2, 420, 00 b 0 .P2, 500, 000d.P2, 388, 000
2.
Car r yi ngv al ueofI nv es t menti nMi l kasofDec e mber31,2015a. P2, 442, 400c.P12, 042, 400b.P2, 612, 000d.P2, 372, 000
3.
Gai norl os so ns al eo fI nv es t menti nMi l konJanuar y2,2016
a.
P2, 390, 600l ossc.P33, 000l oss
b.
P9, 400gai nd.P27, 000gai n 4.
Thei ncomef r om i nve s t me nti nBBB,I nc.i n2015i sa.P3, 000c.P4, 000 b.P24, 000d.P0
5.
Netunr eal i ze dl ossonavai l abl ef ors al esec ur i t i esasofDece mber31, 2016
a.P671, 800 b.P511, 800 c.P639, 000d.P459, 000 123 Suggested Solution: Question No. 1
Acqui si t i oncos t( 400, 000x20% xP30)Di vi dendsr ecei v e d( P40, 000x 20%)I nv es t menti ncome( P140, 000x20%)Car r yi ngval ue,12/31/04 Question No. 2
Carr yi ngval ue,12/31/04( seeno.1)Di vi dendsr ece i ve d( P48, 000x20%) I nve s t menti ncome( P160, 000x20%)Carr yi ngv al ue,12/31/05 Question No. 3
Sal espr oceeds( 20, 000xP31) Lesscarryi ngval ueofi nvest mentsol d ( P2, 442, 400x20/80)Gai nonsal eofi nve st ment Question No. 4
Di vi dendi ncome( P20, 000x15%* ) * [20% - (20,000/400,000 x 100%)] Question No. 5
P2, 400, 000( 8, 000)28, 000P2, 420, 000 P2, 420, 000( 9, 600)32, 000P2, 442, 400 P620, 000610, 600
P 9, 400P3, 000 P2, 442, 400610, 6001, 831, 8001, 320, 000P511, 800
Carr yi ngval ue,12/31/05Lesscarr yi ngval ueofi nves t mentsol dCarr yi ng v al ue ,12/31/06-bef or er e cl assi ficat i onFai rv al ueofAFS,12/31/06
[ ( 80, 000-20, 000)xP22]Unr eal i zedl osson AFS Answers: 1) C;2) A;3) B;4) A,5) B PROBLEM NO. 10
Youwer eabl et ogat hert hef ol l owi ngi nconnect i onwi t hy ouraudi tof Obando,I nc.OnDec ember31,2015,Obandor eport edt hef ol l owi ng av ai l abl ef ors al ese cur i t i e s: 124
ERAPCor p. ,10, 000shar esofco mmons t oc k ( a1% i nt er es t ) GMACor p. ,20, 000shar es ofc ommonst oc k ( a2% i nt er est ) FVR Corp. ,50, 000sharesof commons t oc k ( a10% i nt e r e s t )T ot al Addi t i onali nf or mat i on: Cost P250, 000 320, 000 1, 400, 000P1, 970, 000 Mar ket P220, 000 300, 000 1, 350, 000P1, 870, 000 Unr e al i z e dl o s s P30, 00020, 000
50, 000P100, 000
• €OnAp ri l1,2016,ERAPi ss ued10%
s t oc kdi vi dendwhent he
marketpri ceofi t sst ockwasP24pershar e. • €OnS ept ember15,2016,ERAPpai dcas hdi vi dendofP0. 75per
s har e . • €OnAug ust30,2016,GMAi ssuedt oal lshar ehol der s,st ock
r i g ht sont hebas i so fo ner i g htpe rs har e .Mar ke tpr i c e satdat eofi s s ue wer eP13. 50pe rshar eofs t oc kandP1. 50perr i ght .Obandosol dal l r i ght sonDece mber1,2016f ornetpr oceedsofP37, 600. • €OnJ ul y1,2016,Obandopai dP3, 040, 000f or100, 000
addi t i onalshar esofFVR Corp. ’ scommonst ockwhi chr epre sent eda20% i nv e s t me nti nFVR.Thef ai rv a l ueofal lo fFVR’ si de nt i fiabl eas s e t sne to f l i abi l i t i e swase qualt ot he i rc ar r y i ngamo unto fP12, 700, 000.Asar e s ul t oft hi st r ansact i on,Obandoowns30% ofFVR andcanexe r ci se si gni ficanti nfluenceoverFVR’ soper at i ngandfinanci alpol i ci es. • €Ob ando’ si ni t i al10%
i nt er estof50, 000sharesofFVR’ scommon st ockwasacqui r edonJanuary2,2015f orP1, 400, 000.Att hatdat e,t he netasset sofFVR t ot al edP11, 600, 000andt hef ai rval uesofFVR‘ s i de nt i fiabl eas s e t sne tl i abi l i t i e swe r ee qualt ot he i rc ar r y i ngamount . • €Ma r ke tpr i c e spe rs har eoft hes e cur i t i e swhi c har eal ll i s t e di n
t hePhi l i ppi neSt ockExchange,ar easf ol l ows:ERAPCor p.–common GMACor p.–commonFVRCor p.–common 12/31/2016P23P22 12/31/2015
125 14153127 •
FVR r epor t edneti ncomeandpai ddi vi dendsof : Neti ncome
Di vi dendpershar eNoneNone
P1. 30
YearendedDecember31,2015Si xmont hsendedJune30,2016Si x mont hse ndedDe cember31,2016 ( di vi dendwaspai don10/1/2016) P700, 000400, 000 740, 000 • he T r ewe r enoot heri nt er companyt r ans ac t i onsbe t weenObandoand FVR.
QUESTIONS:
Basedont heaboveandt her esul tofyouraudi t ,det ermi net hef ol l owi ng: 1.Ne tunr e al i z e dg ai norl os sonav ai l abl ef ors al es ec ur i t i e sasof Dec ember31,2016a.P95, 000gai nc .P5, 000l o s b s .P37, 000l ossd. P55, 000l oss 2.
Ne tadj us t mentt oRe t ai nedEar ni ngsasofJanuar y1,2016asar es ul tof t hepur chaseofaddi t i onalsharesofst ockofFVR Corp. a.P70, 000c. P58, 000b.P210, 000d.P0
3.
Ne ti nve s t menti ncomef r om FVR Cor p.f ory earendedDe cember31, 2016a.P237, 500c.P262, 00 0b.P225, 000d.P305, 000
4.
Car r yi ngamountofI nve s t menti nFVR Cor p.asofDecember31,2016a. P4, 674, 500c.P4, 577, 00 b 0 .P4, 677, 000d.P4, 540, 500 5.Gai nonsal eofst ockri ght sonDece mber1,2016 a.P0b.P2, 050 Suggested Solution: Question No. 1
c.P7, 600 d.P5, 600 Av ai l abl ef or sal esecur i t i es,1/1/06Recei ptofs t oc kr i ght sf r om GMA,
8/30 ( P300, 000x1. 5/15) Recl assi ficat i onofI nve st menti nFVR AFS,12/31/06 be f or emar kt omar ke t P1, 870, 000 ( 30, 000)( 1, 350, 000)490, 000
126 Fai rval ueofAFS,12/31/06: GMA[ ( 10, 000x1. 1)x23]P253, 000ERAP ( 20, 000x14)280, 000 Decr easei nunr eal i ze dl ossonAFSUnr eal i ze dl ossonAFS,12/31/05 ( P100, 000-P2, 000-P50, 000) (see note below)
Unr eal i ze dl oss,12/31/06-asadj ust ed P 533, 00043, 000 48, 0005, 000 Note: Alternatively, the unrealized loss on AFS can be computed by comparing the total fair value and total cost of AFS as of December 31, 2016. Incidentally, the journal entries to record the receipt of stock rights and reclassification of the investment in FVR follow:
St o c kr i g ht sP32, 000Av a i l abl ef o rs a l es e c ur i t i e s( P300, 000x1. 5/15) Unr eal i z edl ossonAFS( P20, 000x1. 5/15) P30, 0002, 000 I nv e s t me nti nas soc i at e Av ai l abl ef ors al es e cur i t i e s Unr eal i z edl ossonAFS Questions No. 2 to 4
Recl assi ficat i onofi nvest menti nFVR ( seeno.1)Ret r oact i veadj ust ment
( c os tt oequi t yme t hod) : Shar ei nNIf or2015( P700, 000x10%)Adj ust edbal ance,1/1/06Costof addi t i onal100, 000shares Neti nves t menti ncomef or2016: Shar ei nNIf orsi xmont hse nded6/30( P400, 000x10%) Shar ei nNIf orsi xmont hse nded12/31[ P740, 000x( 10%+20%) ] Di vi dendsr ecei ved[ ( 50, 000shar es+100, 000shares)x1. 3] P1, 400, 000P1, 350, 000 50, 000 P1, 400, 000 70, 0001, 470, 0003, 040, 000 262, 000 ( 195, 000)P4, 577, 000 (2) (3) (4)
Carr yi ngval ueofi nve st menti nFVR,12/31/06 P40, 000222, 000 Note: The excess of cost over the book value of net assets acquired will be attributed to Goodwill. Therefore, the excess will not affect the investment income and the carrying value of the investment since Goodwill is not amortized.
127 Question No. 5
Sal e spr o c ee ds Le s sc os to fs t o c kr i g ht s( s e eno .1)Gai no ns al eofs t o c k r i ght s
Answers: 1) C;2) A;3) C;4) C,5) D PROBLEM NO. 11
P37, 60032, 000P5, 600
PaombongCor por at i onpur c hase dP200, 0008% bondsf orP184, 557on Januar y1,2014.Paombongc l ass i fiedt hebondsasav ai l abl ef orsal e. Thebondswe r epur c hase dt oyi el d10% i nt er es t .I nt er es ti spayabl e se mi annual l yonJul y1andJanuar y1.Thebondsmat ur eo nJanuar y1, 2009.Paombonguse st heeffec t i v ei nt er es tmet hodt oamor t i z epr emi um ordi sc ount .OnJanuary2,2016,Paombongsol dt hebondsf or P185, 000af t e rr e ce i v i ngi nt e r e s tt ome e ti t sl i qui di t yne eds . Themar ke tv al ue soft hebondsar easf ol l ows: Dec ember31,2014P190, 449December31,2015186, 363 QUESTIONS:
Basedont heaboveandt her esul tofyouraudi t ,det ermi net hef ol l owi ng: 1.
I nt er es ti nco mef ort hey ear2014a.P14, 869c.P18, 51 7b.P16, 000d. P18, 456
2.
Unr eal i z edgai nonAFSasofDecember31,2014 a.P3, 436 b.P3, 375 3.I nt er esti ncomef ort heyear2015 a.P18, 775 b.P15, 272 c.P5, 892d.P0 c.P16, 000d.P18, 701
4.
Unr eal i z edgai norl os sonAFSasofDecember31,2015
a.
P8, 053gai nc .P3, 351gai n
b.
P3, 486l ossd.P1, 806l os s
5.
Real i z edg ai norl os sonsal eofAFSonJanuar y2,2016
a.
P6, 861l oss
b.
P4, 714l oss c.P4, 849l oss d.P9, 416gai n 128 Suggested Solution: Question No. 1 The following amortization schedule will be useful in computing for the requirements:
Dat e01/01/0407/01/0412/31/0407/01/0512/31/0507/01/06 12/31/0607/01/0712/31/0707/01/0812/31/08 Effe c t i v eNo mi nali nt e r e s ti nt e r e s t P9, 228P8, 0009, 2898, 0009, 3548, 0009, 4218, 0009, 4928, 0009, 567 8, 0009, 6458, 0009, 7288, 0009, 8148, 0009, 9058, 000 Di scountamort i zat i on P1, 2281, 2891, 3541, 4211, 4921, 5671, 6451, 7281, 8141, 905 Carr yi ngval ue P184, 557185, 785187, 074188, 428189, 849191, 341192, 908194, 553 196, 281198, 095200, 000 P9, 2289, 289P18, 517
1/1/04t o6/30/04( se eamor t i z at i onsc hedul e)7/1/04t o12/31/04( se e amo r t i z a t i o ns c he dul e )T o t ali nt e r e s ti nc o mef o r2014 Note: PAS 39 par. 55(b) states that a gain or loss on an available-for-sale financial asset shall be recognized directly in equity, through the statement of changes in equity, except for impairment losses and foreign exchange gains and losses, until the financial asset is derecognized, at which time the cumulative gain or loss previously recognized in equity
shall be recognized in profit or loss. However, interest calculated using effective interest method shall be recognized in profit or loss. Question No. 2
Fai rval uet hebonds,12/31/04Carr yi ngval ue,12/31/04( see amort i zat i onschedul e)Unr eal i z edgai nonAFS,12/31/04 Question No. 3
1/1/05t o6/30/05( se eamor t i z at i onsc hedul e)7/1/05t o12/31/0( se e amo r t i z a t i o ns c he dul e )T o t ali nt e r e s ti nc o mef o r2015 P190, 449187, 074P3, 375 P9, 3549, 421P18, 775 129 Question No. 4
Fai rval uet hebonds,12/31/05Carr yi ngval ue,12/31/05( see amort i zat i onschedul e)Unr eal i ze dl ossonAFS,12/31/05 Incidentally, the adjusting entry on 12/31/05 follows:
P186, 363189, 849
( P 3, 486)
Unr eal i z edgai nonAFSUnr eal i ze dl ossonAFS Av ai l abl ef ors al es ec ur i t i e s Question No. 5
Sal espr oceedsUnr eal i zedl ossonAFSNet Carryi ngval ue,12/31/05( f ai r v al ue )Re al i z edl ossonsal eofAFS P3, 3753, 486 P6, 861P185, 000
(( P 3, 486)181, 514186, 363 4, 849) Note: PAS 39 par. 26 states that on derecognition of a financial asset in its entirety, the difference between (a) the carrying amount and (b) the sum of the consideration received and any cumulative gain or loss recognized directly in equity, shall be recognized in profit or loss. Incidentally, the journal entry to record the sale is:
CashReal i zedl ossonsal eofAFS Av ai l abl ef ors al es ec ur i t i e sUnr e al i z e dl ossonAFS Answers: 1) C;2) B;3) A;4) B,5) C PROBLEM NO. 12
P185, 0004, 849 P186, 3633, 486 OnJune1,2015,PandiCor por at i onpur c hase dasal ongt er m i nves t ment4, 000oft heP1, 000f aceval ue,8% bondsofVi ol et Corporat i on.Thebondswer epur chasedt oyi el d10% i nt er est .I nt er esti s payabl es e mi annual l yonDec ember1andJune1.Thebondsmat ur eon June1,2011.Pandiusest heeffect i v ei nt e r es tme t hodofamor t i z at i on. OnNovember1,2016,Pandisol dt hebondsf orat ot alconsi der at i onof P3, 925, 000.Pandii nt endedt ohol dt hesebondsunt i lt heymat ur ed,so y ear t oy earmar ke tfluct uat i onswe r ei gnor edi naccount i ngf orbonds. 130 QUESTIONS:
Basedont heaboveandt her esul tofyouraudi t ,det ermi net hef ol l owi ng: (Round off present value factors to four decimal places)
1.
Thepur c hasepr i ceoft hebondsonJune1,2015i sa.P3, 645, 328c. P3, 696, 736b.P3, 691, 132d.P3, 624, 596
2.
Thei nt er es ti nc omef ort hey ear2015i sa.P215, 850c.P212, 82 9b. P215, 521d.P211, 612
3.
Thecar r yi ngv al ueoft hei nv es t menti nbondsasofDec ember31,2015 i s
a.
P3, 725, 919c.P3, 719, 986
b.
P3, 649, 541d.P3, 671, 490 4.
Thei nt er es ti nc omef ort hey ear2016i s a.P306, 607c.P311, 218b. P310, 715d.P304, 748
5.
Theg ai nons al eo fi nve s t menti nbondsonNov ember1,2016i s a.P21, 196 b.P80, 235 Suggested Solution: Question No. 1
PVofpri nci pal( P4, 000, 000x0. 5568) PVofi nt er est[ ( P4, 000, 000x4%)x 8. 8633]Pur chasepr i ce Question No. 2
June1t oNov .30( P3, 645, 328x10% x6/12)Dec .1t oDe c.31 a 1 ( P3, 667, 594 x 0% x1/12)Tot ali nt er e s ti ncomef or2015 a
Computation of carrying value,12/1/05:
Carr yi ngval ue,6/1/05Adddi scountamort i zat i on, 6/1/05t o11/30/05: Effec t i vei nt er es t( P3, 645, 468x10% x6/12) Nomi nali nt er es t( P4, 000, 000x8% x6/12) Carr yi ngval ue,12/1/05 c.P27, 632d.P104, 045 P2, 227, 2001, 418, 128P3, 645, 328 P182, 26630, 563P212, 829
P182, 266160, 000 P3, 645, 328
22, 266P3, 667, 594
131 Question No. 3
Carr yi ngval ue,12/1/05( seeno.2)Adddi scountamort i zat i on, 12/1/05t o12/31/05: Effec t i vei nt er es t( P3, 667, 594x10% x1/12) Nomi nali nt er es t( P4, 000, 000x8% x1/12) Carr yi ngval ue,12/31/05 Question No. 4
Jan.1t oMay31( P3, 667, 594x10% x5/12)June1t oNov .1 b ( P3, 690, 974 x10% x5/12)Tot ali nt er es ti nc omef or2016 b
Computation of carrying value,6/1/06:
Carr yi ngval ue,12/1/05Adddi scountamort i z at i on, 12/1/05t o5/31/06Effec t i vei nt er es t( P3, 667, 594x10% x6/12) Nomi nali nt er es t( P4, 000, 000x8% x6/12) Carr yi ngval ue,6/1/06 Question No. 5
Tot alpr oceedsLessac cr uedi nt er es t( P4, 000, 000x8% x5/12)Sal es pr oceedsLesscarr yi ngval ue,11/1/06( seebel ow) Gai nonsal eon i nve st menti nbonds Computation of carrying value,11/1/06:
Carryi ngval ue,6/1/06( seeno.4)Adddi scountamort i zat i on, 6/1/06t o11/1/06Effec t i vei nt er es t( P3, 690, 974x10% x5/12)Nomi nal i nt er est( P4, 000, 000x8% x5/12) Carr yi ngval ue,11/1/06Answers: 1) A;2) C;3) D;4) A,5) B P3, 667, 594P30, 563
26, 667 3, 896P3, 671, 490
P152, 816153, 791P306, 620 P3, 667, 594P183, 380
160, 000 P3, 925, 000133, 3333, 791, 6673, 711, 43280, 235 23, 380P3, 690, 974
P
132 P153, 791133, 333 P3, 690, 974 20, 468P3, 711, 432 PROBLEM NO. 13
OnMay1,2013,Pl ari delCorpor at i onacqui r edP1, 600, 000ofJ& B Corpor at i on9% bondsat97pl usaccruedi nt er est .I nt er estonbondsi s payabl es e mi annual l yonMar c h1andSept e mber1,andbondsmat ur e onSept ember1,2016.Pl ari deli nt endst ohol dt hesebondsunt i lt hey mat ur ed. Duet oani s ol at e de v e ntt hati sbe y ondPl ar i de l ’ sc ont r ol ,i sno nr ecurr i ngandcoul dnothavebeenr easonabl yant i ci pat edbyPl ari del ,t he companysol dbondsofP480, 000f or103pl usacc r uedi nt er es tonMay1, 2014. OnJul y1,2015,bondsofP640, 000wer ee xc hange df or90, 000shar esof J& B Cor por at i on,common,noparv al ue,quot e dont hemar ke tont hi s dat eatP8pershar e.I nt er estwasr ecei vedonbondst odat eofexchange.
OnSept ember1,2016,r emai ni ngbondswer er ede emedandacc r ued i nt e r e s twasr e c e i v e d. QUESTIONS:
Basedont heaboveandt her esul tofyouraudi t ,det ermi net hef ol l owi ng: (Use the straight line amortization method)
1.
To t ali nt er e s ti nco mef or2013i s a.P96, 000c.P105, 60 0b.P86, 400d.P106, 800
2.
Thecar r yi ngv al ueoft hei nv es t menti nbondsasofDec ember31,2013 i s a.P1, 561, 600c.P1, 562, 800b.P1, 540, 000d.P1, 564, 000
3.
Thegai nons al eoft hebondso nMay1,2014i s a.P0c.P2, 880b.P4, 320d.P24, 480
4.
Thegai none xc hanget hebondsonJul y1,2015i s a.P0c.P57, 92 b 0 .P86, 720d.P73, 280
5.
To t alc ashr ec ei v edbyt hec ompanyonSept ember1,2016i s a.P501, 60 0b.P523, 200c.P480, 000d.P508, 800
Suggested Solution: Question No. 1
Nomi nali nt er est( P1, 600, 000x9% x8/12)Di scountamort i zat i onf or 2013( P48, 000x8/40)Tot ali nt er esti ncomef or2013 Question No. 2
Carr yi ngval ue,5/1/03( P1, 600, 000x97%)Adddi scountamort i z at i on f or2013( seeno.1)Carryi ngval ue,12/31/03 Question No. 3
Se l l i ngpr i c e( P480, 000x1. 03)Le s sc ar r y i ngv al ueo fbo ndss o l d:
Faceval ueLessunamor t i z edbonddi sc ount ,5/1/04 t o9/1/06( P48, 000x480/1, 600x28/40)Gai nonsal eofi nv es t menti n bonds P96, 0009, 600P105, 600 P1, 552, 0009, 600P1, 561, 600 P494, 400 469, 920P24, 480
P480, 00010, 080 PAS 39 par. 52 states that whenever sales or reclassifications of more than an insignificant amount of held-to-maturity investments do not meet any of the conditions in par. 9, any remaining held-to-maturity investments shall be reclassified as available for sale. Since the sale of the bonds on May 1, 2014 is due to an isolated event that is beyond Plaridel’s control, is non-recurring and could not have been reasonably anticipated by Plaridel, the investment is not required to be reclassified as available for sale. Question No. 4
Fai rval ueofst ocksr ecei ved( P90, 000xP8)Lesscarr yi ngval ueofbonds exc hanged: Faceval ueLessunamor t i z edbonddi sc ount ,7/1/05 t o9/1/06( P48, 000x640/1, 600x14/40)Gai nonex c hangeofbonds Question No. 5
Faceval ueofr emai ni ngbonds( P1, 600, 000-P480, 000-P640, 000) P640, 0006, 720 P720, 000 633, 280P86, 720 P480, 00021, 600P501, 600
I nt er est ,3/1/06t o9/1/06( P480, 000x9% x6/12)Tot alcashr ecei ved, 9/1/06 Answers: 1) C;2) A;3) D;4) B,5) A 134
PROBLEM NO. 14
Pul i l anCompany’ saccount i ngr ecor dsshowedt hef ol l owi ngi nves t ment s atJanuary1,2016: Commonst oc k: JangCompany( 1, 000shar es)Geum Company( 5, 000 s har e s ) Parki ngl ot( l easedt oJewelCompany)TrademarkTot ali nves t ment s Addi t i onali nf or mat i on: P500, 0005, 000, 0002, 500, 0002, 000, 000P10, 000, 000
• €P ul i l anowns1%
ofJangand30% ofGe um.Dur i ngt hey ear endedDece mber31,2016,Pul i l anr ece i ve dcashdi vi dendsofP350, 000 f r om JangandP750, 000f r om Geum,whos e2016ne tear ni ngswer e P4, 000, 000andP10, 000, 000r espect i vel y . • T € h eJe well eas ewhi c hc ommencedonJanuar y1,2015i sf or5
y ear satanannualr ent alofP1, 250, 000.I naddi t i on,onJanuar y1, 2015,Jewelpai danonr ef undabl edeposi tofP400, 000aswel lasa s e c ur i t yde po si to fP250, 000,t ober e f unde dupo ne x pi r at i o no fl e as e . Pul i l anr ecei vedP1, 250, 000r entf r om Jeweli n2016. • T € h et r ademar kwasl i ce nsedt oPal ac eCompanyf orr oy al t i e sof
10% ofsal esoft het r ademarki t ems.Royal t i esarepayabl esemi annual l y onMarc h1,f orsal esi nJul yt hr oughDecemberoft hepri oryear ,andon Sept ember1,f orsal esi nJanuaryt hr oughJuneofsamey ear .OnMar ch 1,2015and2016,Pul i l anr ecei vedroyal t i esofP500, 000andP750, 000, r espect i vel y .OnSept ember1,2015and2016,Pul i l an r ecei vedr oyal t i es ofP1, 000, 000andP1, 500, 000r espect i vel y .Pal aceCompany’ ssal esof t het r ademar kedi t emst ot al edP4, 000, 000f ort hel asthal fof2016. sedont heaboveandt her esul tofyouraudi t ,det er mi ne QUESTIONS: Ba t hef ol l o wi ng:
1.T o t ali nc o mef r o mi nv e s t me nt si ne qui t ys e c ur i t i e s a.P3, 350, 000 b.P1, 100, 000 2.Renti ncomef or2016a.P1, 250, 000 b.P1, 330, 000 c.P4, 100, 000d.P3, 000, 000 c.P1, 650, 000d.P1, 380, 000 135 3.Royal t yi ncomef or2016a.P1, 500, 000 b.P2, 000, 000 Suggested Solution: Question No. 1
c.P2, 500, 000 d.P1, 900, 000 Di vi dendi ncomef r om JangI nv es t menti ncomef r om Geum ( P10, 000, 000 x30%)Tot ali ncomef r om i nv es t ment si nequi t ysecur i t i es Question No. 2
Annualr ent al Amor t i z at i onofl easebonus( P400, 000/5)Renti ncomef or 2016 Question No. 3
Januar yt oJune2016Jul yt oDecember2016( P4, 000, 000x10%) Royal t yi ncomef or2016 Answers: 1)A;2)B;3)D
);E:5IE7< 1. A 2. ! $. A &. A *. ! -. A /. ! 3. D 6. A 19. +
