ACTIVITY 8 – INVESTMENT IN EQUITY SECURITIES – FVPL and FVOCI
Name: Date: Instructor: Score: / Direction: Read and solve the following problems below. Encircle the letter of your answer. Provide your solutions. No solution, no points. 1. At the beginning of current year, ABC Co. purchased marketable equity securities to be held as “trading” for P5,000,000. The entity also paid transaction cost amounting to P200,000.
The securities had a market value of P5,500,000 at year-end and the transaction cost that would be incurred on sale is estimated at P100,000. No securities were sold during the current year.
What amount of unrealized gain or loss on these securities should be reported in the income statement for the current year? a. 500,000 gain b. 500,000 loss c. 300,000 gain d. 400,000 gain 2. During 2021, DEF Co. purchased marketable equity securities as a trading investment. For the year ended December 31, 2021, the entity recognized an unrealized loss of P200,000. There were no security transactions during 2022. The entity provided the following information on December 31, 2022:
Security Cost Market value
A P2,450,000 P2,300,000 B 1,800,000 2,700,000 P4,250,000 P5,000,000
In the 2022 income statement, what amount should be reported as unrealized gain or loss? a. Unrealized gain of P950,000 c. Unrealized loss of P750,000 b. Unrealized loss of P950,000 d. Unrealized gain of P750,000 3. During 2021, GHI Co. purchased marketable equity securities for P1,850,000 to be held as trading investments. In 2021, the entity appropriately reported an unrealized gain of P250,000 in the income statement.
There was no change during 2021 in the composition of the portfolio of trading securities. Pertinent data on December 31, 2022 are: Security Cost Market value A P600,000 P900,000 B 450,000 400,000 C 800,000 1,200,000
What amount of unrealized gain on these securities should be included in the 2022 income statement? a. 400,000 b. 650,000 c. 900,000 d. 700,000 4. During 2021, JKL Co. purchased trading securities with the following cost and market value on December 31, 2021: Security Cost Market value A – 1,000 shares P200,000 P300,000 B – 10,000 shares 1,700,000 1,600,000 C – 20,000 shares 3,100,000 2,900,000
The entity sold 8,000 shares of Security B on January 15, 2022 for P150 per share. What amount should be reported as loss on sale of trading investment in 2022? a. 150,000 loss b. 200,000 loss c. 80,000 loss d. 120,000 loss 5. At the beginning of current year, MNO Co. acquired nontrading equity instrument for P4,000,000. The transaction cost incurred amounted to P700,000.
The equity instrument is irrevocably designated as financial asset at fair value through other comprehensive income. The fair value of the instrument was P5,500,000 at year-end and the transaction cost that would be incurred on the sale of the investment is estimated at P600,000. What amount of gain should be recognized in other comprehensive income for the current year? a. 200,000 b. 900,000 c. 800,000 d. 0 6. PQR Co. acquired an equity investment a number of years ago for P2,900,000 and classified it as at fair value through other comprehensive income.
On December 31, 2021, the cumulative loss recognized in other comprehensive was P400,000 and the carrying amount of the investment was P2,500,000. On December 31, 2022, the issuer of the equity instrument was in severe financial difficulty and the fair value of the equity investment had fallen to P1,200,000. What cumulative amount of unrealized loss should be reported as component of other comprehensive income in the statement of changes in equity for the year ended December 31, 2022? a. 1,400,000 b. 1,800,000 c. 1,700,000 d. 0 7. During 2021, STU Co. purchased marketable equity securities to be measured at fair value through other comprehensive income. In December 31, 2021, the balance in the unrealized loss on these securities was P100,000.
There were no security transactions during 2022. Pertinent data on December 31, 2022 are: Security Cost Market value X P2,100,000 P1,600,000 Y 1,850,000 2,000,000 Z 1,050,000 900,000
In the statement of changes in equity for 2022, what amount should be included as cumulative unrealized loss as component of other comprehensive income? a. 500,000 b. 300,000 c. 200,000 d. 600,000 8. At the beginning of current year, VWX Co. began operations. The following information related to the portfolio of equity securities held for trading at year-end: Trading Nontrading Aggregate cost 360,000 550,000 Aggregate fair value 220,000 450,000 Aggregate lower of cost of market value applied to each security in the portfolio 304,000 420,000
The nontrading investments are measured at fair value through other comprehensive income. What amount should be reported as unrealized loss in the income statement for the current year? a. 140,000 b. 186,000 c. 40,000 d. 56,000 9. 123 Co. provided the following information at year-end regarding the portfolio of equity securities: Aggregate cost 1,700,000 Unrealized gains 40,000 Unrealized losses 260,000 Net realized gains during the current year 300,000
The equity investments are measured at fair value through other comprehensive income. At the beginning of current year, the entity reported an unrealized loss of P15,000 to reduce investments to market on portfolio basis. In the year-end statement of changes in equity, what amount of unrealized loss should be reported? a. 260,000 b. 220,000 c. 205,000 d. 0 10. During 2021, 456 Co. purchased marketable securities as short-term investment to be measured at fair value through other comprehensive income. The cost and market value on December 31, 2021 were: Security Cost Market value A – 1,000 shares P300,000 P350,000 B – 10,000 shares 1,700,000 1,550,000 C – 20,000 shares 3,150,000 2,950,000
The entity sold 10,000 shares of B on January 5, 2022 for P1,400,000.
What total amount should be charged to retained earnings as a result of the sale of equity securities in 2022? a. 300,000 b. 100,000 c. 250,000 d. 50,000
