Problem #1

On January 01, 2021, ABC Co. purchased 25% interest in the ordinary shares of XYZ Co. for 4,000,000. XYZ's assets and
liabilities approximate their fair values except for inventories with a carrying amount of P1,000,000 and fair value of P200,000
and depreciable assets with a carrying amount of P6,000,000 and fair value of P10,000,000. The remaining useful life of the
depreciable asset is 10 years. XYZ's net identifiable assets have a book value (carrying amount) of P10,000,000 on January 1,
2021. XYZ reported P2,400,000 profit and declared and paid cash dividends of P1,000,000 in 2021.

26. Compute for the goodwill/ (negative goodwill)?

27. Compute for the share in the associate's profit in (2021)?
28. Compute for the carrying amount of the investment on December 31, 2021?

Problem #2
SHAWANA Corp., a real estate company, had a building with a carrying amount P1,000,000 on December 31, 2022. This
building was used as offices of the entity's administrative staff. On this date, the entity intended to rent out the building to
external parties. The staff will be moved to a building purchased early in 2022. The original building has a fair value of
P2,500,000.

Also, on December 31, 2022, the entity had land was held for sale in the ordinary course business. The land has a carrying
amount of P2,000,000 and a fair value of P5,000,000 December 31, 2022. The entity decided to hold the land for capital
appreciation.

29. Using cost model, what amount should be recognized as gain on transfer of classification of building to be
reported in profit or loss on December 31, 2022?
30. Using fair value model, what amount should be recognized as gain on transfer of classification of land to be
reported in profit or loss on December 31, 2022?
Problem #3
On January 1, 2021, Botswana Company purchased 2,000 units of Ghana Company's 8%, P1,000 par value debt instruments
paying interest semi-annually every June 30 and December 31. The debt instruments have a maturity date of January 1,
2026. The purchase price of the securities was based on a yield of 12%, which was the prevailing rate of interest in the
market.

On July 1, 2022, Botswana Company sold 1⁄2 of its Investment in Ghana Company's debt instruments for 1,120,000.

On January 1, 2023, Botswana Company decided to reclassify its remaining available-for-sale portfolio into held-to-
maturity securities.

The prevailing interest rates that determine the market value of the debt securities are as follows:

Date: Interest Rate:

January 01, 2021 12%

December 31, 2021 9%

December 31, 2022 7%

31. The amount initially recorded under Available-for-sale securities (debt securities) is?
32. The interest income to be included in the 2906 income statement of Botswana Company is?
33. The net unrealized gain(loss) to be reported in Botswana Company's December 31, 20021 balance sheet is?
34. The gain or loss arising from the sale of the available-for-sale securities in 2022?
35. The total interest income in 2022 is?
Problem #4

On November 1, 2022, Draco Company bought 15,000 Crabbe Company shares acquired at a total cost of P180,000. Draco
Company intends to profit from the short-term price fluctuations of the above- mentioned securities and appropriately
classifies them as held for trading.

On November 15, 2022, Draco Company acquired 12,000 common shares and all the 5,000, 8%, P100 par value preferred
stocks of Goyle Company for a lump sum price of P680,000. At the date of acquisition, the common stocks were quoted at
P20 per share, while the preferred were selling at P102. Draco Company classified these securities as available-for-sale.

On December 31, 2022, Draco Company determined the following information in relation to the quoted prices of the stocks
in the market: Crabbe company common, P13 per share; Goyle Company common, P15 per share; Goyle Company
preferred P96 per share.

On January 4, 2023, Draco Company was able to sell all its Crabbe Company shares for P14.80 each. The proceeds were used
to acquire 100,000 Neville Company shares and were classified as trading securities.

In February 2023 Goyle Company declared and distributed a cash dividend to all its shareholders totalling P240,000. Goyle
Company had 100,000 outstanding common shares when the dividends were declared.

Draco Company, on March 12, 2023, exchanged its preferred stock investment in Goyle Company for a paper copier, which
has a carrying amount of P377,000, At the time of exchange, Goyle Company's preferred stocks were quoted at P94) The
copier has an estimated useful life of 5 years, no salvage value and to be depreciated using the straight-line method.

On March 31, 2023, the quoted prices of the equity investments were as follows: Neville Company common, P2.45 per
share; Goyle Company common shares P18 per share.

44. The amount of unrealized gain/loss to be presented in Draco Company's 2022 balance sheet is?
45. The amount reported as dividend income in Draco Company's quarterly income statement ending March
31, 2023 is?
46. The amount initially capitalized as the cost of the paper copier included in Draco Company's property,
plant and equipment account are.
47. The net effect to net income (increase/decrease) brought about by Draco Company's investment in
equity securities for the quarter ending March 31, 2023, is?
Problem #5

Tokyo Co., a real estate entity, provides the following information on December 31, 2022:
 Land held for long-term capital appreciation, P100,000
 Land held for sale in the ordinary course of business, 200,000.
 Land held for undetermined use, 300,000.
 Land held for future factory site, 400,000.
 Building held for administrative use, 500,000.
 Building leased out under an operating lease, 600,000.
 Building leased out under finance lease, 700,000.
 A building that is held for dual use; 30% is owner-occupied.
and the 70% is to earn rentals,
 Building owned by Tokyo Co. for which the entity provides security and maintenance services to the
occupants, 900,000.
 Building owned by Tokyo Co. for which significant ancillary services are provided to occupants,
1,000,000.
 Building is held under a finance lease and leased out under an operating lease, 1,100,000.
 Vacant building held to be leased out under an operating lease, 1,200,000.
 Building in another location leased out under finance lease, 1,300,000.
 Property being constructed for future use as investment property, 1,400,000.
 Property being constructed for sale in the ordinary course of business, 1,500,000.
 Property held for future use as owner-occupied property, 1,600,000.
 Property held for use in production, 1,700,000.
 Properties occupied by employees. The employees pay rent on the property they occupied,
1,800,000.
 A property occupied by employees who do not pay rent on the property they occupied, 1,900,000.
 Equipment leased to an external party under an operating lease, 2,000,000.

48. What total amount should be considered as investment property?

49. What total amount should be considered as owner-occupied property?

Problem #6

Case 1: The objective of the company's business model is to sell such bonds in the near term to take advantage of
fluctuations in fair value for short-term profit taking.
52. Based on the company's business model, what amount shall the investment be presented on
December 31, 2023?
53. How much is the interest income for the year 2022?

Case 2: The business model for this investment is to hold and collect contractual cash flows that are solely payments of
interest and principal.
54. At what amount shall the investment be presented on December 31, 2022?
55. How much should be reported as unrealized gain/(loss) on fair value changes for 2022?

Case 3: The business model for this investment is to collect contractual cash flows that are solely payments of interest and
principal and to sell the bonds in the open market.
56. How much shall be reported as cumulative unrealized gain on fair value on December 31, 2023?
57. How much is the gain or loss on sale of investment to be reported in profit or loss on April 30, 2024?
Problem #7
Venn Corporation acquired a building on January 1, 2022, for P180 million. At that date, the building had a useful life of
40 years.

On December 31, 2022, and December 31, 2023, the fair value of the building was P192 million and
P188 million, respectively. The building was classified as an investment property.

Case 1: The building is accounted for under cost

model.

58. What amount should be recognized in profit or loss for

2022?

Case 2: The building is accounted for under fair value

model.

59. What amount should the building be reported on December 31,

2023?

60. What amount of expense in relation to the investment property should be recognized for 2023?