Financial Asset at Fair Value 1: (2020)

Unrealized loss – TS 60,000

Chapter 15 Trading Securities 60,000
If the market or fair value is less than the cost, then it is a
EQUITY INVESTMENT loss.
In this problem, the market value of 770,000 is less than
Held for trading - Not held for trading - the total cost which is 830,000.
FVPL OCI
Acquisition: Acquisition: Original Cost Market
Trading Securities Financial Asset - FVOCI (2020) Value
Expense Cash
Cash A ordinary – 4,000 shares 330,000 300,000
Increase in fair value: Increase in fair value: B ordinary – 1,000 shares 200,000 160,000
Trading Securities Financial Asset - FVOCI C preference - 2,000 shares 300,000 310,000
Unrealized gain – TS Unrealized gain – OCI 830,000 770,000
Decrease in fair value: Decrease in fair value:
Unrealized loss – TS Unrealized loss – OCI 2: (2021)
Trading Securities FA - FVOCI Cash 140,000
Sale of security: Sale of security: Loss on sale of TS 20,000
(gain) (GAIN) Trading securities 160,000
Cash Cash If the cash receivved is less than the market value of
Trading securities FA - FVOCI shares, then it is a loss.
Gain on sale of TS Retained earnings
In this case, the cash received is 140,000 which is less
than the market value of B ordinary shares, 160,000.
Unrealized Gain - OCI
Retained earnings
Thus, 20,000 is recorded as loss.

(loss) (loss) 3: (2021)

Cash Cash Trading Securities 70,000
Loss on sale of TS Retained earnings Unrealized gain – TS 70,000
Trading securities FA - FVOCI
Original New New
Cost Cost Market
Retained earnings
(2020) (2021) Value
Unrealized loss – OCI
A ordinary – 4,000 shares 330,000 300,000
B ordinary – 1,000 shares 200,000 160,000
C preference - 2,000 shares 300,000 310,000
830,000 770,000
A ordinary – 4,000 shares 300,00 320,000
0
C preference - 2,000 shares 310,00 360,000
0
610,00 680,000
0
To find the new market value:
No. of shares x quoted price

A ordinary 4,000 x 80 = 320,000

C preference 2,000 x 180 = 360,000
In 2021, your basis for the increase or decrease in market
value is the new cost or the market value from the year
2020, not the original cost because orignal cost was
Problems: already disclosed last year.
Problem 15-1
Held for trading – FVPL (Journal Entries)
It is not necessary to record the acquisition of shares.
if the year stated in the problem is the end of Problem 15-2
reporting period.. Held for trading – FVPL (Journal Entries)
(2020, January) In 2021, your basis for the increase or decrease in market
Trading Securities 1,450,000 value is the new cost or the market value from 2020.
Cash 1,450,000 Problem 15-3
There is a journal entry since the date stated is January Mixed – FVPL and FVOCI (Journal Entries)
not December. (2020, December)
Add the costs of all shares purchased. Trading Securities 500,000
Unrealized gain – TS 500,000
(2020, December) If the market or fair value is greater than the cost, then it
Unrealized loss – TS 200,000 is a gain.
Trading Securities 200,000 In this problem, the market value of 2,500,000 is greater
If the market or fair value is less than the cost, then it is a than the cost which is 2,000,000.. Thus 500,000 is
loss. recorded as gain.
In this problem, the market value of 1,250,000 is less
than the total cost which is 1,450,000. Original Cost Market Value
(2020)
Original Cost Market Trading securities 2,000,000 2,500,000
(2020) Value (2020)
Aura Company 600,000 650,000
ordinary Unrealized loss – OCI 100,000
Bora Company 200,000 Financial Asset - FVOCI 100,000
350,000
preference
If the market or fair value is less than the cost, then it is a
Cara Company bonds 400,000
500,000 loss.
In this problem, the market value of 2,900,000 is less
1,450,000 1,250,000
than the cost which is 3,000,000. Thus 100,000 is
recorded as loss.
(2021, October)
Cash 375,000 Original Cost Market value
Trading securities 325,000 (2020)
Gain on sale of TS 50,000 Not held for trading
If the cash is greater than the market value of shares, 3,000,000 2,900,000
(2020)
then it is a gain.
In this case, the cash received is 375,000 which is (2021, December)
greater than the ½ marekt value of Aura Company Unrealized loss – TS 300,000
shares, 325,000. Thus, 50,000 is recorded as gain. Trading Securities 300,000
If the new market or fair value is less than the new cost,
(2021, December) then it is a loss.
Unrealized loss - TS 125,000 In this problem, the new market value of 2,200,000 is
Trading securities 125,000
less than the new cost which is 2,500,000. Thus 300,000
is recorded as loss.
Original New New
Cost Cost Market
Original New Cost New
(2020) (2021)
Cost (2021) Market
Aura Company 600,000 650,000
(2020)
ordinary
Trading securities 2,000,00 2,500,000
Bora Company 200,000
350,000 (2020) 0
preference
Cara Company bonds 400,000 Trading securities 2,500,000 2,200,000
500,000 (2021)
1,450,000 1,250,000
Aura Company Unrealized loss – OCI 600,000
325,000
ordinary Financial Asset - FVOCI 600,000
Bora Company If the new market or fair value is less than the new cost,
200,000
preference then it is a loss.
Cara Company bonds 400,000 In this problem, the new market value of 2,300,000 is
925,000 800,000 less than the new cost which is 2,900,000. Thus 600,000
is recorded as loss.
Aura Company has 325,000 shares left since the other
half was already sold. Original New Cost New
 Cost (2021) Market In 2021, your basis for the increase or decrease in market
(2020) value is the new cost or the market value from the year
Not held for
3,000,000 2,900,000
2020, not the original cost because orignal cost was
trading (2020) already disclosed last year.
Not held for
2,900,000 2,300,000
trading (2021)

In 2021, your basis for the increase or decrease in market

value is the new cost or the market value from the year
2020, not the original cost because orignal cost was
already disclosed last year.

Problem 15-4
Not held for trading - FVOCI (Journal Entries)
(2020, December)
Unrealized loss – OCI 150,000 Problem 15-5
Financial Asset - FVOCI 150,000 Not held for trading - FVOCI (Journal Entries)
If the market or fair value is less than the cost, then it is a 1: (2020, December)
loss. Unrealized loss – OCI 100,000
In this problem, the market value of 1,050,000 is less Financial Asset - FVOCI 100,000
than the total cost which is 1,200,000.. Thus 150,000 is There is a loss of 600,000. But only 100,000 is recorded
recorded as loss. since 500,000 was already recorded at the beginning of
the current year.
Original Cost Market value
(2020) 2: (2021, July)
Moon Company 200,000 120,000 Cash 2,100,000
Star Company 400,000 280,000 Financial asset – FVOCI 2,000,000
Sun Company 600,000 650,000 Retained Earnings 100,000
1,200,000 1,050,000 If the cash receivved is greater than the market value of
shares, then it is a credit in the retained earnings.
In this case, the cash received for the share of ABC is
(2021, December)
2,100,000 which is greater than the market value of ABC
Financial Asset – FVOCI 50,000
ordinary shares, 2,000,000. Thus, 100,000 is recorded as
Unrealized gain – OCI 50,000
credit in the retained earnings.
If the market or fair value is greater than the cost, then it
is a gain.
Retained Earnings 500,000
In this problem, the new market value of 1,100,000 is
Unrealized loss – OCI 500,000
greater than the new total cost which is 1,050,000.. Thus
As a rule, on the sale of an asset, the previous recognized
50,000 is recorded as gain.
in other comprehensive income is also transferred to
retained earnings. (Pg. 419). Take note that only gain or
Original New Cost New
Cost (2020) (2021) Market
loss related to sold shares will be transferred. This only
Moon Company 200,000 120,000
applies to FVOCI.
Star Company 400,000 280,000
Cost Market Value
Sun Company 600,000 650,000
1,200,000 1,050,000 ABC ordimary share 2,500,000 2,000,000
Moon Company 120,000 220,000
Star Company 280,000 300,000
3: (2021, December)
Sun Company 650,000 580,000
Unrealized loss – OCI 250,000
Financial Asset - FVOCI 250,000
1,050,000 1,100,000
If the new market or fair value is less than the new cost,
then it is a loss.
 In this problem, the new market value of 1,150,000 is
less than the total cost which is 1,400,000. Thus 250,000 (2021 Sale)
is recorded as loss. Cash 1,000,000
Trading securities 700,000
Gain on sale of TS 300,000
Original New New If the cash is greater than the market value of shares,
Cost Cost Market then it is a gain.
(2020) (2021) Value In this case, the cash received is 1,000,000 which is
XYZ ordinary share 1,000,0 1,200,0 greater than the ½ marekt value of Security One,
00 00 700,000.
ABC ordinary share 2,500,0 2,000,0
00 00 Cash 1,300,000
RST preference share 500,000 200,000 Financial asset – FVOCI 1,250,000
4,000,0 3,400,0 Retained Earnings 50,000
00 00 If the cash is greater than the market value of shares,
XYZ ordinary share 1,200,0 1,000,0 then it is a credit in the retained earnings..
00 00
In this case, the cash received is 1,000,000 which is
RST preference share 200,00 150,000
greater than the ½ marekt value of Security One,
0
700,000. Thus 300,000 is recorded as credit in the
1,400,0 1,150,0
00 00 retained earnings..

In 2021, your basis for the increase or decrease in market Unrealize gain – OCI 250,000
value is the new cost or the market value from the year Retained Earnings 250,000
2020, not the original cost because orignal cost was As a rule, the previous recognized in other
already disclosed last year. comprehensive income is also transferred to retained
earnings. (Pg. 419). Take note that only gain or loss
related to sold shares will be transferred. This only
applies to FVOCI.
Problem 15-6
Mixed – FVPL and FVOCI (Journal Entries)
(2020)
Trading securities 2,900,000 (2021, Recognition of new market value)
Financial asset – FVOCI 3,600,000 Trading Securities 300,000
Cash 6,500,000 Unrealized gain – TS 300,000
There is an entry for acquisition since the date stated is
2020 only. There is no month so we presume that it is Cost New Cost Market Value
January. Security 2,200,000 1,400,000
Add all trading securities as well as the asset for OCI. One
Security 700,000 1,000,000
Unrealized loss – TS 500,000 Two
Trading securities 500,000 2,900,000 2,400,000
Security 700,000 900,000
Cost Market Value for One
2020 Security 1,000,000 1,100,000
Security One 2,200,000 1,400,000 Two
Security Two 700,000 1,000,000 1,700,000 2,000,000
2,900,000 2,400,000
Unrealized gain – OCI 50,000
Financial asset – FVOCI 400,000 Retained Earnings 50,000
Unrealized gain – OCI 400,000
Cost Market Value
Cost Market Value for
Security 1,600,000 1,500,000
2020
Three
Security Three 1,600,000 1,500,000
Security 2,000,000 2,500,000
Security Four 2,000,000 2,500,000
Four
3,600,000 4,000,000
 3,600,000 4,000,000 In this problem, the market value of 3,100,000 is greater
Security 1,500,000 1,600,000 than the cost which is 3,000,000. Thus 100,000 is
Three recorded as loss.
Security 1,250,000 1,200,000
Four Original Cost Market value
1,750,000 1,800,000 (2020)
Not held for trading
3,000,000 3,100,000
(2020)

(2021, December)
Trading securities 900,000
Unrealized gain – TS 900,000
If the new market or fair value is greater than the new
cost, then it is a gain.
In this problem, the new market value of 5,500,000 is
greater than the new cost which is 5,000,000. Thus
500,000 is recorded as loss.

Original New Cost New

Cost (2021) Market
(2020)
Trading securities 5,000,00 4,600,000
(2020) 0
Trading securities 4,600,000 5,500,000
(2021)

Financial Asset - FVOCI 200,000

Unrealized gain – OCI 200,000
If the new market or fair value is greater than the new
cost, then it is a gain.
In this problem, the new market value of 3,300,000 is
greater than the new cost which is 3,100,000. Thus
200,000 is recorded as loss.

Original New Cost New

Cost (2021) Market
Problem 15-7
(2020)
Mixed – FVPL and FVOCI (Journal Entries) Not held for
(2020, December) 3,000,000 3,100,000
trading (2020)
Unrealized loss - TS 400,000 Not held for
Trading Securities 400,000 3,100,000 3,300,000
trading (2021)
If the market or fair value is less than the cost, then it is a
loss. In 2021, your basis for the increase or decrease in market
In this problem, the market value of 4,600,000 is less value is the new cost or the market value from the year
than the cost which is 5,000,000.. Thus 400,000 is 2020, not the original cost because orignal cost was
recorded as loss. already disclosed last year.

Original Cost Market Value

(2020)
Trading securities 5,000,000 4,600,000
Problem 15-8
(2020)
Held for trading – FVPL (unrealized gain in income
Financial Asset - FVOCI 100,000 statement)
Unrealized gain – OCI 100,000
If the market or fair value is greater than the cost, then it Security Cost New Cost Market Value
is a gain. A 600,000
B 450,000
 C 800,000
1,850,000 1,650,000 Security Cost Market Value
A 700,000 X 2,100,0
B 400,000 00
C 900,000 Y 1,850,0
1,650,000 2,000,000 00
Unrealized 350,000 Z 1,050,0
gain 00
5,000,0 4,800,000
The answer would be 350,000. Be mindful of what’s 00
been asked. Unrealized loss 200,000
(2020
Problem 15-9 Security New Cost New Market
Not held for trading – FVOCI (unrealized loss in X 1,600,000
equity) Y 2,000,000
Z 900,000
4,800,000 4,500,000
Original Market
300,000
Cost value
(2020)
Equity Investment 3,000,00 2,600,000 The answer would be 1,500,000. Why? The question is
0 what unrealized loss should be recognize in the changes
Unrealized loss (400,000) in equity (Pg.419). Add the loss in 2021 and 2020.
(2020)
New Cost New Problem 15-11
Market Held for trading – FVPL (unrealized loss in income
Trading securities 2,600,000 1,200,000 statement)
(2021) If the fair value is less than the cost of investment, then it
Unrealized loss (1,400,000) is a loss.
(2021)
In this problem, the market or fair value of 320,000 is
less than the cost which is 360,000. Thus, 40,000 is
Difficulty or impairment of the issuer will have no effect recognized as loss.
to the investment (pg. 423). No impairment loss on
equity investmest measured at fair value whether Why 4,000? Because the question is aking about the
through profit or loss, or through other comprehensive unrealized loss in income statement which only applies
income. to those investment in trading. It doesn’t ask about
unrealized loss as component of other comprehensive
The answer would be 1,800,000. Why? Be mindful of income which is for nontrading (Pg. 414).
what’s been asked. The question is what unrealized loss
should be recognize in the changes in equity and not
Problem 15-12
unrealized loss recognized in the comprehensive income
(Pg.419). This means you need to add the unrealized loss Not held for trading – FVOCI (unrealized loss in
in 2020 and 2021. equity)
Simply offset the unrealized losses to the unrealized
gains. 260,000 – 40,000 is equal to 220,000.

Net realized gains is not included since it is already

realized which means that it is now a retained earnings.

Problem 15-10
Not held for trading – FVOCI (unrealized loss in
equity)
 Problem 15-13 Held for trading – FVPL (loss on the trading
Not held for trading – FVOCI (retained earnings) securities)
Cash 1,100,000
Security Cost Market Loss on sale of TS 500,000
Value Trading securities 1,600,000
A – 1,000 shares 300,000 350,000 If the cash receivved is less than the market value of
B – 10,000 shares 1,700,000 1,550,000 shares, then it is loss.
C - 20,000 shares 3,150,000 2950,000 In this case, the cash received for the security of B is
5,150,000 4,850,000 1,6000,000 which is less than the market value of
security B, 1,100,000. Thus, 500,000 is recorded as loss
Cash 1,450,000 on sale of trading securities.
Retained Earnings 100,000
Financial asset – FVOCI 1,550,000 Be mindful of what’s been asked. The question is asking
If the cash receivved is less than the market value of about the total loss not loss on sale so we need to include
shares, then it is a debit in the retained earnings. the decrease in market value during 2021.
In this case, the cash received for the share of B shares is
1,450,000 which is less than the market value of B Cost Market Value
shares, 1,550,000. Thus, 100,000 is recorded as retained
Security A 900,000 1,000,000
earnings in the debit side.
Security B 1,000,000 1,600,000
Retained Earnings 150,000 New Cost New Market
Unrealized loss – OCI 150,000 Security A 1,000,000 600,000
As a rule, on the sale of an asset, the previous recognized Unrealized 400,000
in other comprehensive income is also transferred to loss
retained earnings. (Pg. 419). Take note that only gain or
loss related to sold shares will be transferred. This only Add the loss on sale of TS and the unrealized loss to get
applies to FVOCI. the total loss in 2021.

Add all the retained earnings. So, 250,000 would be the

correct answer.

Problem 15-14
Not held for trading – FVOCI (Gain on sale)
The answer would be zero. Why? Since the entity uses
FVOCI and there is no recognized gain on sale when it
comes to OCI. On the sale of an investment using
FVOCI, the gain or loss is recognized as retained
earnings (Pg. 419).

Problem 15-15