PROBLEM 1

Star Corporation completed the following transactions for the year 2011, relating to its investment in
Moon Corporation ordinary shares, which Star corporation acquired for trading purposes:

March 1 Purchased 2,000 shares for a total cost of P200,000, plus brokerage fees amounting to
P30,000.
April 1 Received P40,000 cash dividends. This cash dividends were declared by Moon
Corporation on January 25,2011 to all stockholders as of March 20,2011
June 30 Received a 20% bonus issue.
September 30 Received one share of Moon Corporation preference share for every 20 ordinary
shares held. On the date of the receipt, each ordinary share sells ex-dividend at P95;
while each preference share sells at P130.
November 30 Received a P5 cash dividend on ordinary shares.
December 31 The fair market value per share of the equity securities held are:
Ordinary – P92
Preference – P110

Required: Compute for the following:

1. Initial valuation of the 2,000 ordinary shares acquired on March 1

2. Total dividend revenue for the year
3. Unrealized gain/(loss) to be presented in the profit or loss for the year
 PROBLEM 2

Lucky Corporation acquired all of its equity securities at the beginning of year 2011. The total number of
shares acquired and their fair market values for the years 2011 and 2012 follow:

Number of Shares Total Fair Market Value Total Fair Market Value
Acquired December 31,2011 December 31,2012
A Co. 40,000 P 2,100,000 P 2,400,000
B Co. 20,000 1,500,000 1,400,000
C Co. 50,000 1,800,000 1,200,000
D Co. 12,000 400,000 600,000
E Co. 100,000 2,800,000 3,200,000
F Co. 40,000 1,900,000 1,700,000

At the end of the year 2013, Lucky Corporation had the following equity securities, with their
corresponding historical costs and total fair market values. These equity securities were classified either
as FVPL (Equity investment at fair value through profit or loss) or FVOCI (Equity investment at fair value
through other comprehensive income):

Designation No. of Shares Historical Cost Total Fair Market Value

A Co. FVPL 30,000 P 1,500,000 P 1,650,000
B Co. FVPL 20,000 1,200,000 1,300,000
C Co. FVOCI 40,000 2,800,000 1,600,000
E Co. FVOCI 100,000 2,500,000 3,000,000
F Co. FVOCI 40,000 2,000,000 1,800,000

In 2013, Lucky Corporation sold A Co. shares, C Co. shares and D Co. shares at P42 per share, P30 per
share and P55 per share, respectively. D Co. shares were designated as FVPL and were acquired at P50
per share excluding a transaction cost of P2 per share.

Required: Compute for the following:

4. Gain or loss on sale of equity securities to be reported in the 2013 profit or loss
5. Unrealized gain/(loss) to be reported in the 2013 Statement of Comprehensive Income, put a
plus sign if your answer is to be added to the profit or loss, and a to or minus sign if it is to be
deducted from profit or loss
6. Unrealized gain/(loss) to be reported in the 2013 profit or loss
7. Valuation of total equity securities in the 2013 Statement of Financial Position
 PROBLEM 3

Light Company acquired 30% of the ordinary shares of Bright Company on January 1,2016. On March
31,2016, Light Company sold 20% of its investment. All throughout the year 2016, Bright company has
9% preference shares with a total par value of P10,000,000. Bright Company declared P650,000
dividends on its preference shares. Bright Company reported profit of P3,600,000 during the year 2016.

Required: Compute for Light Company’s share in profit of Bright Company for the year 2016

8. Assuming the preference shares are non-cumulative

9. Assuming the preference shares are cumulative

PROBLEM 4

On October 1,2016, S Co. acquired 25,000 shares of the 100,000, outstanding ordinary shares of M Inc.
for a total cost of P14,000,000. The carrying value of the underlying net asset of M Inc. at date of
acquisition was P48,000,000. Below is a list of M Inc.’s assets with their corresponding fair market values
at date of acquisition:

Carrying Value Fair Market Value

Machine with a remaining life of 5 years P 5,000,000 P 7,000,000
Inventories (all sold by December,2016) 1,000,000 600,000
Intangible asset with a remaining life of 4 years 3,000,000 4,600,000
Land 10,000,000 10,800,000
M Inc. reported the following net income and paid the following dividends:

Year Net Income(Loss) Dividends

2016 P 1,000,000 P 400,000
2017 800,000 200,000
2018 400,000
2019 (150,000)
2020 50,000

Required: Compute for the following:

10. December 31,2016 carrying value of the investment

11. Amount to be reported in the 2020 profit or loss
12. December 31,2019 carrying value of the investment

PROBLEM 5

On April 1,2016, Bow Inc. purchased 30,000 ordinary shares, 30% of the outstanding shares of Power
Corp., for P5,160,000. Bow gained ability to exercise influence over Power as a result of this acquisition.
On the date of acquisition, the carrying value of Power Corp.’s net assets was P12,400,000. Bow had
determined that the excess of the acquisition cost of the investment over its share of Power’s net assets
is attributable to a depreciable asset, with a remaining life of two years.

Power’s reported the following profit and dividend declarations:

For the Year Ended Profit(Loss) Dividends

2016 500,000
2017 2,500,000 500,000
2018 2,000,000
The market values per share are:

December 31,2016 P 115

December 31,2017 200
December 31,2018 340

Required: Compute for the following:

13. Amount to be shown on the 2016 profit or loss, assuming there is an objective evidence that the
investment is impaired in this year
14. Amount to be shown on the 2017 profit or loss assuming that in this year the amount of
impairment loss is recovered and the recovery is related objectively to an event occurring in
2017
15. Amount of the investment at the end of 2018

PROBLEM 6

Ethel Corporation purchased 30,000 ordinary shares of Fall Company on January 1,2011 at P170 per
share. At the date of purchase, Fall had 100,000 ordinary shares outstanding. On December 31,2011 Fall
reported total profit of P680,000 and a revaluation surplus of P200,000, as a result of shifting from the
cost to the revalued model during this year.

On January 2,2012, Fall sold additional 20,000 shares at P200 per share to other shareholders. Ethel
Corporation did not opt to exercise its share rights to purchase from Fall.

Required: Compute for the following:

16. December 31,2012 Investment in associate

17. 2012 gain/(loss) on dilution
18. December 31,2012 Revaluation Surplus
 PROBLEM 7

On January 2,2011, Green acquired 15% interest in Brown Co. by purchasing 7,500 ordinary shares for a
total amount of P1,200,000. This is classified as financial assets at fair value through profit or loss. In
August,2011 Green received dividends of P4 per share. For the year 2011, Brown Co. reported a total
net income of P1,500,000. The fair market value per share on December 31,2011 was P200.

On July 1,2012, Green acquired 5,000 ordinary shares of Brown Co. for a total of P1,400,000. As a result
of this acquisition, Green is now able to exercise significant influence over the operating and financial
policies of Brown Co. Green received a dividend of P4.50 per share on April 30,2012 and P6 per share
on September 1,2012. For the year 2012, Brown Co. reported profit of P1,800,000.

Required: Compute for the following:

19. Amount to be included in the 2012 profit or loss

20. December 31,2012 valuation of the equity securities

PROBLEM 8

The following transactions pertain to High Company:

1. Purchased 20,000 ordinary shares of P100 par of Art Company for P2,000,000 on January
1,2016. This purchase represents 20% interest in the net assets of Art. The shares give High
Company significant influence over Art Company.
2. Art reported profit of P1,200,000 for 2016.
3. Fair market value per share on December 31,2016 was P105.
4. In 2017, High received additional shares as a result of a 2-for-1 share split.
5. Art reported profit of P2,700,000 for 2017.
6. Art paid cash dividend of P1,000,000 on the ordinary shares at December 31,2017.
7. Fair market value per share on December 31,2017 was P85.
8. High Company sold one-half of its investment on March 30,2018 for P90 per share. Remaining
shares were designated as financial assets at fair value through other comprehensive income.
9. Art reported profit of P3,000,000 for 2018.
10. Fair market value per share on December 31,2018 was P58.

Required: Compute for the following:

21. Compute for the amount to be reported in the 2018 profit or loss
22. Carrying amount of the investment at December 31,2018
 23. Carrying amount of the investment at December 31,2017

PROBLEM 9

Rap Corporation had the following transaction for the year 2016:

January 1 Purchased 40,000 shares of ABC Co. at P22 per share plus transaction cost of P1
per share. This is designated as fair value through profit or loss.
February 1 Purchased 20,000 shares of DEF at P15 per share plus transaction costs of P2 per
share. This is designated as fair value through other comprehensive income.
March 1 ABC declared a P2 cash dividend per share to all stockholders as of April 15,2016.
April 1 DEF declared a P3 cash dividend per share to all stockholders as of May 1,2016.
April 5 Sold 8,000 ABS shares for a total price of P240,000.
April 20 Sold 5,000 DEF shares for a total price of P120,000
May 1 Received cash dividend from ABC
May 15 Received cash dividend from DEF
June 1 Received 20% bonus issue from ABC
July 1 Received stock rights from ABC to purchase 1 share for P30 for every 10 rights
exercised.
August 1 Sold 25% of the stock rights for P2 per right.
September 1 Exercised 50% of the remaining rights when the fair market value of ABC share
was P35.
October 1 Remaining rights expired
December 31 Fair market value per share: P25 for ABC and P24 for DEF

Required: Compute for the following:

24. Gain or loss on sale of DEF shares

25. Gain or loss on sale of ABC shares
26. Amount to be recycled to Retained Earnings
27. Unrealized gain/(loss) in the 2016 Statement of Financial Position
28. December 31,2016 Fair value of the two equity securities