APr2– FQuiz 2

INSTRUCTIONS:
1. This quiz is good for 2 hours. Submit at or before 4:15 PM.
2. Answers must be handwritten, sequential and in good form. Double rule your final answer.
3. Take a picture of your answer sheets, save in one PDF file and send to mtesar99@gmail.com

PROBLEM 1:

Angel Corporation presented the following analysis of its investments in relation to your audit of its investments for the period
ended December 31, 2024:

Securities No. of Shares Acquired Acquisition Cost Direct Transaction Cost

Uno Shares 10,000 shares P150/share P5/share
Dos shares 20,000 shares P80/share P2/share
Tres shares 30,000 shares P120/share P10/share
10% Kwatro Bonds P2,000,000 face value 12% yield rate -

Audit notes:
a. Uno shares were acquired on February 1, 2024. Dividends of P5/share was received on March 31, 2024. The said
dividends was declared on December 30, 2023 to stockholders as of February 20, 2024. Uno shares were selling at
P160/share on December 31, 2024.

b. Dos shares were acquired on March 1, 2024. Half of the shares were sold on August 1, 2024. A 10% share dividends
were received on Dos shares on December 31, 2024 when its prevailing fair value was at P105 per share.

c. Tres shares were acquired on April 14, 2024. A 20% share dividends were received on Tres shares on August 1, 2024
when the prevailing fair value of shares was at P132 per share. Half of the shares were sold on December 31, 2024 at
their prevailing fair value of P140/share.

d. Quatro bonds had a remaining term of 3 years from the date it was acquired at the beginning of 2024. Interest on the
bonds were collected every December 31. The prevailing effective rate of the Quatro bonds by December 31, 2024
was at 8%.

REQUIRED
1. Assuming that all the securities are held for trading purposes (at fair value through profit or loss), how much total
investments should be presented in the 2024 statement of financial position?

2. Assuming all the securities are held for trading purposes (at fair value through profit or loss), how much total unrealized
gain/loss should be reported in the profit or loss from their year-end remeasurement?

3. Assuming all the securities are held for trading purposes (at fair value through profit or loss), how much realized
gain/loss from sale of securities should be recognized in 2024?

4. Assuming that the equity securities are non-trading and that they are accounted for at fair value through other
comprehensive income, how much unrealized gain/loss should be reported in the other comprehensive income/loss?

5. Assuming that the Quatro bonds is held until maturity, how much is its correct carrying value as of December 31, 2024?

PROBLEM 2:
SANTOL CORP. invested its excess cash in non-trading equity securities during 2022. On initial recognition, the entity made
an irrevocable election to present its securities at fair value through other comprehensive income (FVOCI). As of December
31, 2022, the company’s securities portfolio consisted of the following:

Investee Company Shares Cost Market Value

Kelly, Inc. 30,000 P 450,000 P 425,000
Eloy Corp. 60,000 1,500,000 1,610,000
Yogi Enterprises 60,000 2,160,000 2,300,000
Totals P4,110,000 P4,335,000

During the year 2023, Santol sold 60,000 shares of Eloy Corp. for P1,700,000 and purchased 60,000 additional shares of Kelly,
Inc. and 30,000 shares of Kongga Company. On December 31, 2023, Santol’s portfolio of non-trading equity securities
comprised the following:
Investee Company Shares Cost Market Value
Kelly, Inc. 30,000 P 450,000 P 500,000
Kelly, Inc. 60,000 1,300,000 1,450,000
Kongga Company 30,000 520,000 480,000
Yogi Enterprises 60,000 2,160,000 700,000
Totals P4,430,000 P3,130,000
During the year 2024, Santol sold all the Kelly, Inc. shares for P2,300,000 and 15,000 shares of Kongga Company at a loss of
P90,000. On December 31, 2024, Santol’s portfolio of non-trading equity securities consisted of the following:
Investee Company Shares Cost Market Value
Yogi Enterprises 60,000 P2,160,000 P4,200,000
Kongga Company 15,000 260,000 180,000
Totals P2,420,000 P4,380,000

Questions:
1. What total amount should be credited to retained earnings as a result of the sale of Eloy Corp. securities in 2023?
A. P200,000 B. P110,000 C. P90,000 D. P20,000

2. What unrealized loss on the remaining financial assets should be reported in the 2023 statement of comprehensive income
as component of other comprehensive income?
A. P1,600,000 B. P1,640,000 C. P1,415,000 D. P1,300,000

3. What cumulative amount of unrealized loss should be reported as component of other comprehensive income in the
statement of changes in equity on December 31, 2023?
A. P1,415,000 B. P1,300,000 C. P335,000 D. P225,000

4. What unrealized gain on the remaining financial assets should be reported in the 2024 statement of comprehensive income
as component of other comprehensive income?
A. P1,960,000 B. P60,000 C. P3,440,000 D. P3,500,000

5. What cumulative amount of unrealized gain should be reported as component of other comprehensive income in the
statement of changes in equity on December 31, 2024?
A. P1,505,000 B. P1,960,000 C. P1,480,000 D. P3,440,000

PROBLEM 3:
The portfolios of debt securities at December 31, 2023 and December 31, 2024 of No Challenge Company are shown below.
All the bonds have face value of P4M, will mature on December 31, 2024 and were all acquired by the company at the
beginning of 2023. The bonds were all acquired to yield 13%.

December 31, 2023 December 31, 2024

Acquisition Amortized Fair Value Amortized Fair Value
Cost Cost Cost
15% Honey bonds 4,281,379 4,237,958 4,633,973 4,188,893 4,497,370
12% Sweetheart bonds 3,859,311 3,881,021 4,253,589 3,905,554 4,198,498

The prevailing market rate of interest of the bonds at the end of 2023 and 2024 are 10% and 9%, respectively.

Case No. 1: Assume that the above securities are classified as financial asset at fair value through profit or loss
Case No. 2: Assume that the above securities are classified as financial asset at amortized cost
Case No. 3: Assume that the above securities are classified as financial asset through other comprehensive income

Required: Assuming the above independent cases, answer the following:

1) How much is the unrealized gain or loss to be reported in the company’s statement of comprehensive income
for 2023 and 2024?
2) How much is the corresponding interest income to be reported in the company’s income statement for 2023
and 2024?
3) What is the carrying value of the investment in debt securities as of December 31, 2023 and 2024?
4) If the Sweetheart bonds were sold at P4,000,000 on January 2, 2022, how much realized gain or loss on the
sale should be recognized?

PROBLEM 4:
On January 2, 2022, KIKO, Inc. acquired a 15% interest in Trillanes, Inc. by paying P8,000,000 for 100,000 ordinary shares.
On this date, the net assets of Trillanes totaled P40,000,000. The fair values of Trillanes’ identifiable assets and liabilities were
equal to their book values. Kiko did not have the ability to exercise significant influence over the operating and financial
policies of Trillanes. On October 1, 2022, Kiko received dividends of P1.40 per share. Trillanes reported net income of
P5,000,000 for the year ended December 31, 2022. The investment was classified by Kiko as at fair value through other
comprehensive income. At the end of the year, the investment in Trillanes’ shares had a market value of P9,000,000.

Additional 300,000 ordinary shares of Trillanes were purchased by Kiko on January 1, 2023, which represents a 25% interest.
The fair value of Trillanes’ identifiable assets, net of liabilities, was equal to their book values of P92,000,000. As a result of
this additional acquisition, Kiko has the ability to exercise significant influence over the operating and financial policies of
Trillanes. Kiko received a dividend of P2.70 per share on October 5, 2023. Trillanes’ net income for the year amounted to
P6,000,000 and the investment had a fair value of P45,000,000 on December 31, 2022.
Questions:

1. In the December 31, 2022 statement of financial position, what is the carrying amount of the investment in equity
securities?
2. What is the total amount of investment-related income that should be reported in the 2022 income statement?
3. Determine the gain on remeasurement to equity that should be reported in the 2023 income statement
4. The goodwill arising from the acquisition of additional shares on January 1, 2023 should be _______
5. The investment in associate should be reported in the statement of financial position on December 31, 2024 at ____