L.V.

L UP ACCOUNTING TUTORIALS
CONTACT #0951 913 5318
FAR

TOPIC: RECEIVABLES M.LIMHEYA

ASSESSMENT RECEIVABLES

1. EE Company acquired trading equity instrument for P4,000,000 on April 30, 2018. The equity instrument is classified as
financial asset at fair value through profit or loss. The transaction cost incurred amounted to P700,000. On December 31,
2018, the fair value of the instrument was P5,500,000. What amount of gain should be recognized in the income statement
for the year ended December 31, 2018?
A. 0 B. 700,000 C. 800,000 D. 1,500,000

2. EE Company acquired non-trading equity instrument for P4,000,000 on April 30, 2018. The equity instrument is classified as
financial asset at fair value through other comprehensive income. The transaction cost incurred amounted to P700,000. On
December 31, 2018, the fair value of the instrument was P5,500,000. What amount of gain should be recognized in other
comprehensive income for the year ended December 31, 2018?
A. 0 B. 700,000 C. 800,000 D. 1,500,000

Use the following information to answer items 3 and 4:

During 2018, LL Company purchased trading securities with the following cost and market value on December 31, 2018:

Security Cost Market value

X – 1,000 shares 200,000 300,000
Y – 10,000 shares 1,700,000 1,600,000
Z – 20,000 shares 3,100,000 2,900,000
5,000,000 4,800,000

The company sold 10,000 shares of Security Y on January 15, 2019, for P150 per share.

3. What amount of unrealized gain or loss should be reported in the income statement for 2018?
A. 200,000 loss B. 200,000 gain C. 300,000 loss D. 300,000 gain

4. What amount should be reported as gain or loss on sale of trading securities in 2019?
A. 100,000 gain B. 100,000 loss C. 200,000 gain D. 200,000 loss

Use the following information to answer items 5 to 7:

On December 31, 2018, SS Company appropriately reported a P100,000 unrealized loss. There was no change during 2019 in the
composition of the portfolio of non-trading equity securities held at fair value through other comprehensive income.

Security Cost Market value

December 31, 2019
A 1,200,000 1,300,000
B 900,000 500,000
C 1,600,000 1,500,000
3,700,000 3,300,000

5. What is the market value of the investment on December 31, 2018?

A. 3,500,000 B. 3,600,000 C. 3,700,000 D. 3,800,000

6. What amount of loss on these securities should be included in the statement of comprehensive income for the year ended
December 31, 2019 as component of other comprehensive income?
A. 0 B. 100,000 C. 300,000 D. 400,000

7. What cumulative amount of loss on these securities should be reported in the statement of changes in equity for the year
ended December 31, 2019 as component of other comprehensive income?
A. 0 B. 100,000 C. 200,000 D. 400,000

Use the following information for items 8 and 9:

On December 31, 2018, Black Order Company appropriately reported a P100,000 unrealized gain. There was no change during 2019 in
the composition of the portfolio of trading equity securities.

Security Cost Market value

December 31, 2019
A 1,200,000 1,300,000
B 900,000 500,000
C 1,600,000 1,500,000
3,700,000 3,300,000

8. What is the market value of the investment on December 31, 2018?

A. 3,500,000 B. 3,600,000 C. 3,700,000 D. 3,800,000

9. What amount of gain or loss on these securities should be included in the statement of comprehensive income for the year
ended December 31, 2019?

FAR Page 1 of 5
 L.V.L UP ACCOUNTING TUTORIALS
CONTACT #0951 913 5318
FAR

TOPIC: RECEIVABLES M.LIMHEYA

A. 400,000 gain B. 400,000 loss C. 500,000 gain D. 500,000 loss

Use the following information to answer items 10 and 11:

On January 1, 2020, QQ Company purchased equity securities to be held at fair value through other comprehensive income. On
December 31, 2020, the cost and market value were:

Cost Market
Security A 2,000,000 2,400,000
Security B 3,000,000 3,500,000
Security C 5,000,000 4,900,000

On July 1, 2021, the company sold security A for P2,500,000.

10. What amount should be recognized directly in retained earnings as a result of the sale of financial asset in 2021?
A. 0 B. 100,000 C. 400,000 D. 500,000

11. What amount should be recycled to profit and loss as a result of the sale of financial asset in 2021?
A. 0 B. 100,000 C. 400,000 D. 500,000

12. On January 1, 2018, HH Company purchased 40,000 shares at P100 per share to be held for trading. Brokerage fees
amounted to P120,000. A P5 dividend per share had been declared on December 15, 2017, to be paid on March 31, 2018 to
shareholders of record on January 31, 2018. No other transactions occurred in 2018 affecting the investment. What is the
initial measurement of the investment?
A. 3,800,000 B. 3,920,000 C. 4,000,000 D. 4,120,000

13. BB Company purchased 10,000 shares representing passive ownership of DD Company on February 1, 2019. BB Company
received a stock dividend of 2,000 shares on March 31, 2019, when the carrying amount per share was P350 and the market
value per share was P400. DD Company paid a cash dividend of P15 per share on September 15, 2019. In the income
statement for the year ended December 31, 2019, what amount should be reported as dividend income?
A. 150,000 B. 180,000 C. 880,000 D. 980,000

14. Hipolito Company owns 20,000 shares of Homer Company’s 200,000 shares of P100 par, 6% cumulative, non-participating
preference share capital and 10,000 shares representing 2% ownership of Homer’s ordinary share capital. During 2018,
Homer Company declared and paid preference dividends of P2,400,000. No dividends had been declared or paid during 2017.
In addition, Hipolito Company received a 5% share dividend on ordinary share from Homer Company when the quoted market
price of Homer’s ordinary share was P10. What amount should be reported as dividend income for 2018?
A. 120,000 B. 125,000 C. 240,000 D. 245,000

Use the following information for items 15 and 16:

At the beginning of current year, Heather company acquired 200,000 ordinary shares of Gringo Company for P9,000,000. At the time of
purchase, Gringo Company had outstanding 800,000 ordinary shares with a carrying amount of P36,000,000. The following events took
place during the current year:
 Gringo Company reported profit of P1,800,000 for the current year.
 Heather Company received from Gringo Company a dividend of P0.75 per ordinary share.
 The market value of Gringo Company is P48.

Heather Company has elected irrevocably to measure the investment at fair value through other comprehensive income.

15. Total income to be reported in the income statement for the current year is
A. 150,000 B. 300,000 C. 450,000 D. 750,000

16. What is the carrying amount of the investment at year-end?

A. 9,000,000 B. 9,300,000 C. 9,600,000 D. 9,900,000

On January 1, 2018, Mega World Company acquired 10% of the outstanding ordinary shares of Hela Company for P4,000,000. The
investment was appropriately accounted for under cost method.

On January 1, 2019, Mega World gained the ability to exercise significant influence over financial and operating control of Hela by
acquiring an additional 20% of Hela’s outstanding ordinary shares for P10,000,000.

The fair value of Hela’s net assets equaled their carrying amount. The fair value of the 10% interest on January 1, 2018 was
P6,000,000.

For the years ended December 31, 2018 and 2019, the investee reported the following:

2018 2019
Dividends paid 2,000,000 3,000,000
Net income 6,000,000 6,500,000

FAR Page 2 of 5
 L.V.L UP ACCOUNTING TUTORIALS
CONTACT #0951 913 5318
FAR

TOPIC: RECEIVABLES M.LIMHEYA

The recoverable value of the net assets of Hela Company is P50,000,000.

17. What is the investment income in 2018?

A. 200,000 B. 400,000
C. 600,000 D. 300,000

18. What is the investment income in 2019?

A. 1,300,000 B. 1,950,000
C. 1,000,000 D. 1,900,000

19. What is the carrying amount of the investment in associate on December 31, 2019?
A. 16,000,000 B. 17,050,000
C. 15,000,000 D. 16,700,000

Use the following information to answer items 14 to 16:

Chicken Company acquired 30% of Tikka Company’s voting share capital for P2,000,000 on January 1, 2018. Chicken’s 30% interest in
Tikka gave Chicken the ability to exercise significant influence. During 2018, Tikka earned P800,000 and paid dividend of P500,000.

Tikka reported earnings of P1,000,000 for the 6 months ended June 30, 2019 and P2,000,000 for the year ended December 31, 2019.
On July 1, 2019, Chicken sold half of the investment in Tikka for P1,500,000 cash. Tikka paid dividend of P1,000,000 on October 1,
2019.

The fair value of the retained investment is P1,60,000 on July 1, 2019 and P2,000,000 on December 31, 2019. The retained investment
is to be held as financial asset at fair value through profit or loss.

20. On December 31, 2018, what is the carrying amount of the investment in associate?
A. 2,000,000 B. 2,090,000
C. 2,240,000 D. 2,300,000

21. What is the carrying amount of the investment in associate before disposal on June 30, 2019?
A. 1,790,000 B. 2,390,000
C. 1,195,000 D. 2,240,000

22. What total amount of income should be reported in 2019?

A. 1,560,000 B. 1,410,000
C. 1,160,000 D. 1,260,000

Leo Company acquired 20% of Albino Company’s voting share capital for P2,000,000 plus P500,000 transaction cost on July 1, 2018.
Leo’s 20% interest in Albino gave Leo the ability to exercise significant influence. On December 15, 2018, Albino paid Leo Company
cash dividends of P270,000. Albino’s net income for the year ended December 31, 2018 was P5,250,000, earned evenly throughout the
year. Albino reported earnings of P2,000,000 for 2019, of which P1,200,000 was for the nine months ended December 31, 2019. On
April 1, 2019, Leo sold a quarter of the investment in Albino for P960,000 cash. Albino paid ordinary shareholders cash dividends of
P1,000,000 on October 1, 2019. The fair value of the retained investment is P2,400,000 on April 1, 2019 and P2,774,000 on December
31, 2019. The retained investment is to be held as trading securities.

23. On December 31, 2018, what is the carrying amount of the investment in associate?
A. 3,496,000 B. 3,280,000 C. 2,971,000 D. 2,755,000

24. What total amount of income should be reported in 2019?

A. 1,129,000 B. 1,139,000 C. 1,149,000 D. 1,159,000

25. At the beginning of current year, Madrid Company bought 40% of Spain Company’s outstanding ordinary shares for
P3,500,000. The company also paid P500,000 to a business broker who helped find a suitable business and negotiated the
purchase. The carrying amount of Spain’s net assets at the purchase date totaled P9,000,000. The difference was attributed
to plant which had a carrying amount of P1,100,000 and a fair value of P2,000,000 and to inventory which had a carrying
amount of P250,000 and a fair value of P350,000. The plant has an 18-year life. All inventory was sold during the current year.
During the current year, the investee reported net income of P1,200,000 and paid a P200,000 cash dividend. What amount
should be reported as investment income for the current year?
A. 320,000 B. 360,000 C. 420,000 D. 480,000

On January 1, 2018, KQ Company purchased bonds with face amount of P5,000,000. The entity paid P4,600,000 plus transaction cost
of P142,000. The bonds mature on December 31, 2020 and pay 6% interest annually on December 31 of each year with 8% effective
yield. The bonds are quoted at 105 on December 31, 2018 and 110 on December 31, 2019. The business model in managing the
financial asset is to collect contractual cash flows that are solely payments of principal and interest and also to sell the bonds in the
open market.

26. What amount of unrealized gain should be reported as component of other comprehensive income for 2018?
A. 0 B. 250,000 C. 400,000 D. 428,640

FAR Page 3 of 5
 L.V.L UP ACCOUNTING TUTORIALS
CONTACT #0951 913 5318
FAR

TOPIC: RECEIVABLES M.LIMHEYA

27. What cumulative amount of unrealized gain should be reported as component of other comprehensive income in the
statement of changes in equity for 2019?
A. 0 B. 164,291 C. 500,000 D. 592,931

28. What is the interest income for 2019?

A. 300,000 B. 379,360 C. 385,709 D. 392,931

On January 1, 2018, Mars Company purchased bonds with face amount of P4,000,000 for P4,206,000. The business model in
managing the financial asset is to collect contractual cash flows that are solely payments of principal and interest and also to sell the
bonds in the open market. The bonds mature on December 31, 2020 and pay 10% interest annually on December 31 each year with
8% effective yield. The bonds are quoted at 95 on December 31, 2018 and 90 on December 31, 2019.

29. What amount of unrealized loss should be reported as component of other comprehensive income in 2018?
A. 0 B. 342,480 C. 406,000 D. 469,520

30. What amount of unrealized loss should be reported as component of other comprehensive income in 2019?
A. 0 B. 131,398 C. 200,000 D. 473,878

31. What amount of cumulative unrealized loss should be reported in the statement of changes in equity for 2019?
A. 0 B. 406,000 C. 473,878 D. 606,000

32. What is the carrying amount of the bond investment on December 31, 2019?
A. 3,600,000 B. 3,800,000 C. 4,206,000 D. 4,673,878

On January 1, 2019, Woot Company 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, 2019 and pay interest annually on
December 31 of each year. The bonds are quoted at 115 on December 31, 2019. The entity has irrevocably elected the fair value
option.

33. What amount of gain from change in fair value should be reported for 2019?
A. 0 B. 250,000 C. 350,000 D. 750,000

34. What amount of interest income should be reported for 2019?

A. 540,000 B. 550,000 C. 600,000 D. 660,000

35. What is the carrying amount of the bond investment on December 31, 2019?
A. 5,400,000 B. 5,450,000 C. 5,500,000 D. 5,750,000

36. What total amount of income from the investment should be reported in the income statement for 2019?
A. 540,000 B. 890,000 C. 900,000 D. 950,000

FAR Page 4 of 5
 L.V.L UP ACCOUNTING TUTORIALS
CONTACT #0951 913 5318
FAR

TOPIC: RECEIVABLES M.LIMHEYA

Answer:

1 D 11 A 21 B 31 C

2 C 12 A 22 A 32 A

3 A 13 B 23 D 33 C

4 B 14 C 24 A 34 C

5 B 15 A 25 C 35 D

6 C 16 C 26 D 36 D

7 D 17 A 27 D

8 D 18 B 28 C

9 D 19 C 29 B

10 D 20 B 30 B

FAR Page 5 of 5