3 Investments

A.
Happy Company held a 3% holding of the shares of Polo Company, a public

limited Company. The investment was classified as an investment in equity
instruments and at June 30, 2019 had a carrying amount of P10,000,000
(brought forward from the previous period). Happy Company made an
irrevocable election to recognize all changes in fair value in other comprehensive
income. The cumulative unrealized gain to June 30, 2018 relating to the
investment was P800,000. On June 30, 2019, the whole of the share capital of
Carry Company was acquired by Roxy Company, a public limited company and,
as a result Happy Company received shares of Roxy Company in exchange for its
shares in Polo Company. The fair value of the shares received is P11,000,000. As
a result of the exchange of shares, what amount of unrealized gain or loss
should be transferred to retained earnings?
a. none c. P1,000,000
b. P800,000 d. P1,800,000
B. Bailey, Inc. purchased 40,000 ordinary shares of Miller Manufacturing as a

trading investment for P2,640,000. During the year, Miller Manufacturing paid a
cash dividend of P6.50 per share. At year-end, Miller Manufacturing shares were
selling for P69 per share. On the income statement for the year ended December
31, what is the total amount of unrealizable gain/loss and dividend revenue
reported by Bailey Inc.?
a. P120,000 c. P260,000
b. P140,000 d. P380,000
C. Loraine Corporation purchased 16,000 ordinary shares of Comma Co. for

P528,000. During the year, Comma paid a cash dividend of P13 per share. At
year-end, Comma shares were selling for P38 per share. Loraine Corporation
purchased the shares to meet a non-trading regulatory requirement. What
amount of total income will Loraine Corporation report in its income statement
for the year?
a. P-0- c. P288,000
b. P80,000 d. P208,000
D. On January 2, 2019, Marco Company purchased 200,000 shares (40%) of Polo

Company’s ordinary share P4,500,000. During 2019, Polo reported the following
in its statement of comprehensive income a P4,000,000 net income and a
P500,000 unrealized loss from its investment in equity at fair value to other
comprehensive income. Polo Company paid cash dividends of P3,000,000 on
December 31, 2019. On January 2, 2020, Marco Company sold 50,000 shares of
Polo Company at current market value of Polo’s shares at P32 per share. What
amount of gain or loss from the sale should Marco Company recognize?
a. P325,000 c. P425,000
b. P375,000 d. P475,000
E. On January 1, 2021, Unicorn Company purchased equity securities to be held at

fair value through other comprehensive income. On December 31, 2021, the cost
and market value were:
Cost Market Value

Security X 2,000,000 2,300,000
Security Y 3,000,000 3,500,000
Security z 5,000,000 4,900,000
On July 1, 2022. The entity sold Security X for P2,700,000

What amount should be recognized directly in retained earnings as a result of
the sale of financial asset in 2022?
a. P700,000 c. P500,000
b. P300,000 d. P-0-
F. At the beginning of current year, Leather Company acquired 40% of the

outstanding ordinary shares of an investee for P6,220,000. The carrying amount
of the net assets of the investee equaled P12,400,000. Any excess cost over
carrying amount is attributable to goodwill.
The investee reported net profit of P2,000,000 and paid dividends of P1,300,000
What is the carrying amount of the investment at year-end?
a. P6,500,000 c. P4,900,000
b. P3,900,000 d. P5,500,000
G. On July 1, 2021, Nino Company purchased bonds with face value of P8,000,000
for P7,680,000 as a long-term investment. The stated rate on bonds is 8% but
the bonds are acquired to yield 10%
The bonds mature at the rate of P2,000,000 annually every December 31 and
the interest is payable annually also every December 31. The entity used the
effective interest method of amortizing discount.
1. What is the interest income for 2021?

a. P320,000 c. P64,000
b. P128,000 d. P384,000
2. What is the carrying amount of the investment in bonds on December 31,
2021?
a. P5,759,250
b. P5,744,000
c. P5,616,000
d. P5,800,480

3 Investments

Uploaded by

Copyright:

Available Formats

3 Investments

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

3 Investments

Uploaded by

Copyright:

Available Formats

A.

Happy Company held a 3% holding of the shares of Polo Company, a public

B. Bailey, Inc. purchased 40,000 ordinary shares of Miller Manufacturing as a

C. Loraine Corporation purchased 16,000 ordinary shares of Comma Co. for

D. On January 2, 2019, Marco Company purchased 200,000 shares (40%) of Polo

E. On January 1, 2021, Unicorn Company purchased equity securities to be held at

Cost Market Value

On July 1, 2022. The entity sold Security X for P2,700,000

F. At the beginning of current year, Leather Company acquired 40% of the

1. What is the interest income for 2021?

You might also like