Scribd
Upload
16 views

Divs and Investments

The document contains 7 problems involving the accounting for financial assets. The problems cover topics such as initial recognition, fair value adjustments, gains and losses on sale, dividends, and investments measured at cost. Solutions are required for amounts related to unrealized and realized gains/losses, investment balances, and income statement impacts.

Uploaded by

rarangangelleslie648
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
16 views

Divs and Investments

The document contains 7 problems involving the accounting for financial assets. The problems cover topics such as initial recognition, fair value adjustments, gains and losses on sale, dividends, and investments measured at cost. Solutions are required for amounts related to unrealized and realized gains/losses, investment balances, and income statement impacts.

Uploaded by

rarangangelleslie648
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 2

Problem 1.

R company acquired a financial asset at the market value of P3,200,000. Broker fees of P200,000
were incurred in relation to the purchase.

At what amount should the financial asset initially be recognized if it is classified as

1. At fair value through profit or loss?


2. At fair value through other comprehensive income?

Problem 2.

Entity E made the following transactions in the ordinary shares of an investee classified as FA at
FVTPL:

June 16, 2019 – Purchased 10,000 shares at P45 per share.


June 28, 2020 – Sold 2,000 shares for P51 per share.
May 18, 2021 – Sold 2,500 shares for P33 per share.

The end of year market prices for the shares were as follows:

December 31, 2019 – P47 per share.


December 31, 2020 – P39 per share.
December 31, 2021 – P31 per share.

3. How much should be recognized as fair value adjustment gain or loss (unrealized gain/loss)
in the entity’s profit or loss in 2019?
4. How much should be recognized as fair value adjustment gain or loss (unrealized gain/loss)
in the entity’s profit or loss in 2020?
5. How much should be recognized as fair value adjustment gain or loss (unrealized gain/loss)
in the entity’s profit or loss in 2021?
6. How much should be the gain or loss on sale on June 28, 2020?
7. How much should be the gain or loss on sale on May 18, 2021?

Problem 2.

Entity E made the following transactions in the ordinary shares of an investee classified as FA at
FVTOCI:

June 16, 2019 – Purchased 10,000 shares at P45 per share.


June 28, 2020 – Sold 2,000 shares for P51 per share.
May 18, 2021 – Sold 2,500 shares for P33 per share.

The end of year market prices for the shares were as follows:
December 31, 2019 – P47 per share.
December 31, 2020 – P39 per share.
December 31, 2021 – P31 per share.

1. How much should be recognized as fair value adjustment gain or loss (unrealized gain/loss)
in the entity’s OCI in 2019?
2. How much should be recognized as fair value adjustment gain or loss in the entity’s OCI in
2020?
3. How much should be recognized as fair value adjustment gain or loss in the entity’s OCI in
2021?
4. How much should be the gain or loss on sale on June 28, 2020?
5. How much should be the gain or loss on sale on May 18, 2021?

Problem 3.

On July 1, 2021, Entity I purchased 10,000 shares of an investee,10% of total ordinary shares
outstanding, at a price of P6 per share. The shares are held for trading. The investment had earnings
of P3,000 per month during 2021 and paid dividends of P10,000 on March 1, 2021 and P12,500 on
December 1, 2021. The market value of investee’s share was P6.50 per share on December 31, 2021.

6. What would be the total effect on Entity I’s profit or loss for the year ended December 31,
2021?
7. Assuming, fair value is not available in this type of investment, how much would be the
investment balance as of December 31, 2021?

Problem 4.

On January 2, 2021 Entity H purchased as a long term investment 10,000 ordinary shares of an
investee for P70 per share, which represents a 1% interest. On July 1, the investee declared its
annual dividend on its ordinary shares of P5 per share payable on August 1 to shareholders of record
at July 25, 2021. July 20, 2021, Entity H sold all 10,000 shares for P100 per share.

8. For the year ended December 31, 2021, Entity H should report on its income statement a
gain on disposal of?

Problem 5.

Kirk Hammet Co. holds 20,000, P10 par value, shares of 4Horsement, Inc, as investment in unquoted
equity securities measured at cost. On April 1, 2021, Kirk received 5% share dividends from
4Horsement. The carrying amount of the investment on this date is P2,310,000, equal to the original
acquisition cost. Kirk sold the share dividends for P224 on April 30.

Provide all the journal/memo entries. (1pt each entry)

You might also like