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CHAPTER 7

INVESTMENTS IN EQUITY SECURITIES AND DEBT SECURITIES
PROBLEMS
7-1

(Dusit, Inc.)
Classified as available for sale securities
a.
Purchase price
(10,000 shares x P33.50)
P335,000
Broker’s commission
Total cost

b.
Purchase price
(7,000 shares x P26.50)
P185,500.00
Broker’s commission
Transfer taxes (¼ x 1% x 185,500)
Total cost
c.
P58,000

1,980
P336,980

4,910.00
463.75
P190,873.75

Purchase price
Transfer fees and other costs

1,500

45,000

Total cost to be allocated

P59,500

Market values:
Ordinary shares 150 x 100
Preference shares
300 x 150

P15,000

Total
Allocation to:
Ordinary shares
P14,875

P60,000
59,500 x 15/60

Preference shares 59,500 x 45/60

P44,625
d.

Market value of ordinary shares
2,000 shares x P200
P400,000
Classified as Trading Securities
a.
Purchase price
(10,000 shares x P33.50)
P335,000
b.
Purchase price (7,000 shares x P26.50)
P185,500
c.
14,500
43,500

Allocation to Ordinary Shares
58,000 x 15/60

P

Allocation to Preference Shares
58,000 x 45/60

P

000 Preference 240.000 Available for Sale Securities-B Corp. Common (2. Ordinary (3.000 72.400 shares) B Corp.000 18. Ordinary (2.400/6 = 400 shares x 50 20.000 shares) Available for Sale Securities-B Corp. Preference (600 shares) d.000 x 300/450 160. Ordinary = P240.000 .400 shares) C Corp.000 P100 Memo entry. Cash Dividend Revenue 2.400 shares x 7.000 7-2 (A Company) a. Common (400 shares) 7-3 10.400 x 125) 300.000 Ordinary 240. Ordinary (no change) b.000 (Victoria Court) Classified as FVPL Cash Gain on Sale of Trading Securities P100 P 50 170.000 shares x P200 P400. Received additional 600 shares of B Corp.000 To record sale of Y Co.000/9. Market value of ordinary shares 2.50 Cost per share: B Corp.000 Market values: Allocation: 80. Common Unrealized Loss on Trading Securities Trading Securities To record valuation at end of year. Received additional shares of B Corp. 18.000 Trading Securities 160.000 Preference (600 x 250) 150. 48 72. P 80 P 67 P133 Memo entry.000 x 150/450 Costs per share: B Corp. Revised cost per share: B Corp.600 shares P 25 e. c.Chapter 7 – Investments in Equity Securities and Debt Securities d. Preference 80. Revised cost per share: B Corp. Ordinary 80. ordinary shares as stock dividends. Available for Sale Securities-C Ordinary Dividend Revenue 2.000 Costs per share: B Corp.000 20.000 Ordinary (2. ordinary shares on a 4-for-1 stock split.

000 Z Co.000/36.000) – dr Required adjustment Unrealized Holding Gains(Losses) P(42. 2007 Lot (4 x 750) 2008 Lot (4 x 1.000 30.500 Gain on sale P 87.000 P680.000 P 72.000 P 8.000 P150.000 P608.000) 162.000 40.300.000 shares P500.500 (2) Sales price Cost of shares sold (1.000 7-4 (Inn Corporation) (1) Sales price (15.Chapter 7 – Investments in Equity Securities and Debt Securities X Co. P330.000 x 15.000 72.000 Total P630. Total MV12/31/08 P330.000 750.000 Classified as available for sale securities Cash Loss on Sale of Available for Sale Securities Market Adjustment-AFS Securities Available for Sale Securities Net Unrealized Gain/Loss on AFS Securities 40.500 662.000 170. 300.000) Gain on sale (3) Sales price P900.000) Market12/31/09 P288.000 .000 + 40.000 P(22.000 Unrealized Holding Gains(Losses) P(42.000 3.300.000 P288.000 shares (1.000 200.000 shares P650.000 P237.000 To record sale of Y Co.000) 20.000 x 3.000 To record valuation at end of year.000/24. Z Co.500 812.000 Required balance in Market Adjustment Account – cr Balance before adjustment (10.000 P608.000 5.500 Gain on sale 7-5 P900.500 (Melody Corporation) a.000 320.800.000/24.000 Cost of shares sold: 12. Cost Market X Co.000) 50.000 350.000 shares (1.250) Total cost of stock rights received 49 P 3.000 320.000 x 60 ) P900.000 Cost of shares sold: 12.000 3. Common Net Unrealized Gain/Loss on AFS Securities Market Adjustment-AFS Securities 72.000) (30.000 x 3.000) P(72.000) 162.

000 P192.000 shares x 75) Carrying value.400 / 300 shares) P c. 24.000 x 5 b.000/5 = 2. Ordinary Unrealized Gain on Trading Securities Market value.000 140.000 (12. 2009: 2007 Lot (60.000 50.000 Cost of stock rights received ( 50. 2009 (98 x 2. Ordinary Trading Securities – Pro Corp.000 shares 2.000 Cash paid (300 shares x P80) Total cost of new shares acquired thru stock rights Cost per share (8. 6.500 7-6 (Anti Corporation) a.000 250 Available for sale securities balance at December 31.250 Cost of stock rights exercised: 2005 Lot 2006 Lot (750 x 4) P 3.Chapter 7 – Investments in Equity Securities and Debt Securities b.50) P Cost of stock rights sold 2008 Lot (500 x 4) Gain on sale d.000 Trading Securities – Pro Corp.000 50.000 140. 12/31/06 900. Stock Rights – Pro Corp. 2009 P 32.000) Cost of new shares from exercise 150.000 140.000 shares x 66) 660.000) 105. 12/31/07 (10.000 2.000 150.000 3.000) P 57.000 100 Sales price of stock rights (500 x 4.000 – 5.000 760.300 shares) Balance in unrealized gain/loss account at December 31. Ordinary 50.000 7-7 100. Ordinary Cash 10.000 P30. Ordinary Stock Rights – Pro Corp.000 50.000 – 3.000 Unrealized gain (EDSA Company) (a) 50 . Ordinary 10.000 x 50 = 100.900 Market value at December 31.000 2009 Lot 30. 225.400 P P 2. 50.000 Trading Securities – Pro Corp. Cash Stock Rights – Pro Corp.000 2008 Lot (110.000 c.

100 5. g. 7-8 150 – 135 2+1 2.000 P500 Gain = P5.500 2.600 500 h. 2. (b) 1.725 1.175 51 900 6. 3.200 Cash Gain on Sale of AFS Securities Available for Sale Securities – Diana Ordinary (54.000 2. Available for Sale Securities – Smith Preference Cash (1.000 x 120) + 1. Cash (1.500 13. e. Received 500 additional shares of Diana ordinary shares as a result of 2-for-1 split. f.000 Stock Rights – Diana Ordinary Available for Sale Securities – Diana Ordinary 750 shares x 3 2.500 – (1. Memorandum entry.375 900 Cash (100 x 56) Loss on sale of AFS Securities Available for Sale Securities – Diana Ordinary 13.000 / 1.000) x 250 shares = 13.00 = P10. c.725/ 225 = 61.000 54. Market Adjustment – AFS Securities Unrealized Gains/Losses on AFS Securities 2.00 P10.350 12. f. 54. 2.000 i.Chapter 7 – Investments in Equity Securities and Debt Securities 1.100 8.200 121.250 13. Available for Sale Securities – Diana Ordinary Cash b.000 x 100 x 8%) Dividend Revenue 8.000 x 5 = = = P5.250 Available for Sale Securities – Diana Ordinary Stock Rights – Diana Ordinary Cash (60% x 750) x 3. 225 x 55 Cash Stock Rights – Diana Ordinary (40% x 750) x 3 1. 61 x 100 = 6.000 (Tolits Corporation) 2009 a.200 d.175 .000 x 5 5.000 121.000 x 5) 145 – 135 2 2.500 15.

000 25.750 115.000 14.250 125 (6.000) Dividend Revenue Unrealized Loss on Trading Securities Trading Securities – Avi Ordinary (5.000 x 25) Loss on Sale of Trading Securities Trading Securities – Avi Ordinary Available for Sale Securities – Ghio Preference Cash July 10 Memorandum entry.000 x 115) 121. 1 Dec.000 x (60-52) 25. P9.000.000 2009 Dec.000 Net Unrealized Gains/Losses on AFS Securities Market Adjustment – AFS Securities 5.000 40.000 9. Ordinary 5. Nov.000 7-9 Market 7.000 Market Adjustment – AFS Securities Impairment Loss – AFS Securities Net Unrealized Gains/Losses on AFS Securities Available for Sale Securities – Y Co.500 38.000 .000 9. Shares now held are 24.250 Diana 2 (125 sh) 7.625 Smith (1.000 (Carlo Company) 2009 Apr.250 Gain on sale of AFS Securities Loss on sale of AFS Securities ( 500) Dividend revenue Total income recognized in profit or loss in 2006 P1.000 additional Darrel ordinary shares representing a 20% bonus issue.000 24. 30 Cash (1 x 24. Received 4.000 Dec.000 300.200) 2.500 8. 31 Available for Sale Securities – Y Co.000 40.000 (X Corporation) 2008 Jan.000 x (60 – 55) 25.Chapter 7 – Investments in Equity Securities and Debt Securities CV Diana 1 (750 sh) 46.000 Unreal 8. 31 52 125.000 30. 1 May 15 Cash (5.075 b.550 24.175 169. Ordinary Cash 300.200 Total 167.000 139.000 x 26) – 139. 31 7-10 25.550 30.

000 2.160.000.000 200.000 .550 Investment in Associates Income from Associates 20% x 1. 1 Dec.160.000 Cash (30% x 400.00 Share in income – 2009 Share in income – 2010 Share in dividends Carrying amount. 31 31 Investment in Associates – Pirates Ordinary Cash 5.000 additional shares of Atlanta ordinary as 10% bonus issue. (b) 110.000.000. Investment in Associates Cash 2.000 Cash Investment in Associates 20% x 1.00 0 300.600.000.200 650 Total 511.000 120.000 300.) 2009 Jan.000 Investment cost P2. 110. Inc.000 Investment in Associates – Pirates Ordinary Income from Associates (30% x 3.000 2.000 1.000 116.000 30.550 394. Shares now held are 22.080.650 – 6.000 120. December 31.650 600.000 600.000.650 Cost (Hostel Company) (a) 1.000 (Byron. 4. Memo.000 (200.080.000) 1.500. Received 2.700.000 5.200 116.000 600.000 Ghio 31.000 3.000) Investment in Associates – Pirates Ordinary 53 5. 2010 7-12 200. Investment in Associates Income from Associates 20% x 3.000 300.Chapter 7 – Investments in Equity Securities and Debt Securities 31 Market Adjustment – AFS Securities Net Unrealized Gains/Losses on AFS Securities 116.000) P2.650 7-11 364.000.000 balance FV Unrealized Darrel 480.

Inc. 1 Dec.000 Market Adjustment – AFS Securities Net Unrealized Gains/Losses on AFS Securities 480.000 480.000 200.500) P 762.000 Share in income (10% x 6M) 54 1. December 31.00 0 480.000 240.) (a).000 240.000 – 37.000 45.365.000 37.000 Cash dividends received ( 240.000 x 10/12 = 37. Inc.000 800.000 . = 45.500 Income reported by Barbie from its investment in associates: (800. 2009 P1.000. 1 Dec. Inc.000 2009 Jan.000 900.500) Investment carrying value.2M x 10/12) x 30% Income from Associates – Kitchie Investment in Associates – Kitchie 1.000 Adjustment in reported income ( 37.000) / 5 yrs.000 480.000 900. 31 31 Available for Sale Securities – Pen.365. 2009 P1. Inc. March 1.300.000 1. 2009 Mar.000) Investment in Associates – Kitchie Investment in Associates – Kitchie Income from Associates (3.000 800.000 200.500 (b) Acquisition cost.887.000) Income from associates 800. 1 Investment in Associates – Pen. 31 31 31 Investment in Associates – Kitchie Cash Cash (30% x 800.500 37.Chapter 7 – Investments in Equity Securities and Debt Securities 7-13 (Barbie. Net Unrealized Gains/Losses on AFS Securities Market Adjustment – AFS Securities Retained Earnings Available for Sale Securities – Pen.365. Cash 900. Acquisition cost 900.000 Cash Dividend Revenue 10% x 2.500 (30% x 750.000 400.500 7-14 (Richmonde Corporation) (a) 2008 Jan.

950.000 1 Investment in Associates – Pen.00 0 100. 12/31/05 1. 2. 31 Investment in Associates – Pen.000 2010 Jan. 1 Cash Investment in Associates – F Company 210.00 0 Aug.250.000 Cash Investment in Associates – F Company 210.600. 1.000 170.00 0 Cash (50.00 0 Income from Associates (30% x 6.000) 4. 1 Investment in Associates – F Company 8.300.000 210.950.000 (210.000 Share in dividends (10% x 2M) (200.000 250. Inc.000.000) 31 (b) Cash Investment in Associates (30% x 3. December 31.250.000) 900.00 0 Cash Dec. 2009 7-15 2.000 .000 25% x 680.00 0 2. Inc.500.250.000 1.300. 31 31 25% x 1.00 0 Investment in Associates – F Company Gain on Sale of Investment in Associates Acquisition cost Share in income (2006) Share in dividends (2006) 55 8.000 170.000 1.750.00 0 (E Corporation) (a) 2008 Jan.Chapter 7 – Investments in Equity Securities and Debt Securities 600.950.000 Investment in Associates – F Company Income from Associates – F Company 250.300.400.000 210.000 (900.400.000 x 165) 8.000) Carrying amount.000 x 170) 3. 2 Cash (20.600.000 Dec.00 0 900.000 2009 Dec.000 Cost transferred from Available for Sale Securities 1. 31 Investment in Associates – F Company Income from Associates 170.000.000 Additional investment Share in income Share in dividends Carrying amount.000) 3.

000 8.000 Dec. 12.729 8. end of year 170.002 1.633 1.998 61.000 Income from associates Cash dividends received Sale of shares Market adjustment Carrying value.000 1.000 P8.000.152. Cost/Carrying Value. 3.000 1.558 70.442 1.233. 31 31 Cash Dividend Revenue 120.200.000 750.250. 4. 7. 5.250.Chapter 7 – Investments in Equity Securities and Debt Securities Share in dividends (2007) Share income (2007) Investment carrying amount Portion sold Cost of investment sold 2 (210. 2.827* 41. B and C C A B A C (Abu Company) (a) Date 01/01/07 12/31/07 12/31/08 12/31/09 12/31/10 12/31/11 Interest Received Interest Revenue Premium Amortization 1.000 = 750.250.000) 250.300.146.000 (30.000 2010 P8.646 8.210.550 47. 15.200.173* 56 Carrying Value 8.000 Available for Sale Securities – F Company Investment in Associates – F Company 4. 8.200.000 1.731 8.000 – 3.000 P8.000 Market Adjustment-AFS Securities Net Unrealized Gains/Losses on AFS Securities 750.000 P5. 10.00 0 8.000 (210.000 x 190) .950.700. 11. 9.000 .173 8.367 53.096 8.200.000 2009 P8.000) 250.200.158. 13.138.070.131.185.000 (210.300.450 1.950. 14.000 1.129.000 1.210.000 120.000 40% 3.000 7-16 1.00 0 4.250.000 (b). beg of year 2008 P8. 7-17 A and B A B and C A and B B C C A B A.274.4.250. 6.000) 750.000) (3.950.300.

000 4M x 0.000 – 3.000 (3) Securities are classified as held-to-maturity securities.000 31 Interest Receivable Interest Revenue (4M x 8% x 1/12) 26.000 160. 31 7-18 47.667 June 1 Cash Interest Revenue 160. 1 Interest Receivable Interest Revenue 26. 31 Held to Maturity Securities Cash 8.Chapter 7 – Investments in Equity Securities and Debt Securities *rounded off. Interest Interest Amortization HTM Date Received Revenue of Discount Carrying Value 57 .000 Cash Held to Maturity Securities Interest Revenue 1.99 = 3.960.880.367 1. (b) 2007 Jan.000 3.667 188.274.880. Bonds Cash Cash Interest Revenue (4M x 8% x ½) 3.880.450 2008 Dec. 1 Trading Securities – State Corp.667 80. 2008 June 1 Dec.200.500 2009 Jan.500 4M x 0.667 31 Trading Securities – State Corp.000 160.667 Trading Securities – State Corp.200.646 41.500 3.000 = 80. Bonds Unrealized Gain on Trading Securities 80.500 = 188.000 Dec.960. Journal entries in 2006 and 2007 (1) Securities are classified as financial assets at fair value through profit and loss.000 – 3.274.000 Dec.646 Cash Held to Maturity Securities Interest Revenue 1.000 3. Bonds Unrealized Gain on Trading Securities 188.000 8.633 (South Company) a. 1 Cash Interest Revenue 160.691.158.550 1.000 26. 31 26. To facilitate computation.97 = 3. a partial amortization table is presented below.667 160.691.500 26.152.691. 1 Dec.500 160.000 31 Interest Receivable Interest Revenue 26.

871 3.000 160.Chapter 7 – Investments in Equity Securities and Debt Securities June 1.804 187. 1.575 30.871 29.094 Interest Receivable Held to Maturity Securities – State Corp. 58 . Bonds 30.768.891. 1 31 Held to Maturity Securities – State Corp.691.000 187.575 Interest Receivable Held to Maturity Securities – State Corp.000 24.741.933 3.968 3.50 0 Cash Held to Maturity Securities – State Corp. Bonds Interest Revenue 26. 1 June 1 Dec.667 4.973 160.000 188.301 Cash Held to Maturity Securities – State Corp.667 4.691.804 x 1/6 = 4.500 160.000 27.301 2009 Jan.000 x 1/6 = 26.293 160.000 191.827. Bonds Interest Revenue 26.804 3.301 Interest Revenue Interest Receivable Held to Maturity Securities – State Corp.691. a partial amortization table is presented below.000 184. 1.804 24.409 4.000 192.094 31.575 25. 1. 2011 Dec.500 184. 2008 June 1.797.804 Cash Held to Maturity Securities – State Corp. 1 31 26. 2010 June 1. Bonds Cash 3. 2009 June 1.449 3.716.879 160. 28.094 3. 2009 Dec.742 160.933 32.000 x 1/6 = 26.449 28. 25.658 160.365 31.094 27. Bonds Interest Revenue(see above table) 160.667. 2011 3. Bonds Interest Revenue (see above table) 160.667.365 3.449 x 1/6= 185. Bonds Interest Revenue (see above table) 160.591 2008 June 1 Dec.422 160. To facilitate computation.575 185.968 160.742 (3) Securities are classified as available for sale securities.667 4. 2008 Dec 1. 2010 Dec.000 189.858.000 25.075 3.

301 185.871 29.827.500+ 24.000 24. 2011 Interest Received Interest Revenue Amortization of Discount HTM Carrying Value 3. 1.094 3.500 160.000 184.293 160.591 2008 June 1 Dec.768.000 188.968 26. Bonds Interest Revenue (see above table) 160.741.804 3.575 25.365 3. 2008 June 1.891.691.691. 2009 Dec.797.658 160. Bonds June 1 Cash Available for Sale Securities – State Corp.720.97 = 3. Bonds Interest Revenue 160.000 189.000 192.094 27.871 3.575 185. 1.804 x 1/6 = 4.804 Cash Available for Sale Securities – State Corp. Bonds Cash Cash Available for Sale – State Corp.880. 2010 June 1.667 25. 2010 Dec.575 184.804 24. 1.000 191.094 .716.000 187.691.449 28.500 3.667 4.691.Chapter 7 – Investments in Equity Securities and Debt Securities Date June 1.422 160. 2009 June 1.933 3.879 160.376 Market Adjustment P 159.804 187. 2011 Dec.624 2009 Jan. 1 Interest Revenue Interest Receivable Available for Sale Securities – State Corp. 2008 Dec 1.973 160.000 x 1/6 = 26.301 30. 1 31 31 Available for Sale Securities – State Corp. Bonds Interest Revenue (see above table) Interest Receivable Available for Sale Securities – State Corp.500 160.624 159.858. 1 59 30.000 25.000 160.575 + 4.667 4.000 27.000 Amortized cost 3.624 4M x 0. Bonds Interest Revenue(see above table) 160.075 3.301 = 3.575 26.094 Dec.301 Market Adjustment – AFS Securities Net Unrealized Gain/Loss on AFS Securities 3.449 3.365 31.968 159.933 32.

(a) Securities are classified as financial assets at fair value through profit and loss. 2011 3.333 Sales price (3. 1 Cash Loss on Sale of Trading Securities Interest Revenue Trading Securities – State Corp.00 0 94. 2011 3.000 Loss on sale 128.920.285 Before adjustment 159. Journal entry/entries to record sale of investment on November 1.658 Amortization June 1 to Nov.333 Acc.773.444 3.Chapter 7 – Investments in Equity Securities and Debt Securities 31 Interest Receivable Available for Sale Securities – State Corp.742 Dec 31 26.435 133.00 0 128.333 3. Bonds CV of HTM Securities sold: As of June 1.333) 3.000 (b) Securities are classified as held-to-maturity securities.925.444 As of Nov.667 4.661 31. Int.000–133.667 Carrying value (4 M x 0. = 4M x 8% x 5/12 = 133. 2011 Nov.715 Cumulative UG/L P 186.333 133.742) 3.449 x 1/6 = 4.444 Cash Loss on Sale of Held to Maturity Securities Interest Revenue Held to Maturity Securities–State Corp. 1 1 Held to Maturity Securities – State Corp.102 60 27.000 x 1/6 = 26. 1.10 2 .791. 2011 Nov.886.925.667 28.933 x 5/6 = 27.886.858.98) 3. Bonds Interest Revenue 32.624 Increase in UG/L P 26.409 160.333 3.000 Amortized Cost (3.973 + 4. 2. Bonds 3.444 27. Bonds Interest Revenue 26.661 2011.925.920.768.960.661 Market value (4M x 99%) P3.742 Market Adjustment – Available for Sale Securities Unrealized Gain or Loss on AFS 26. 1. 2011 27.

920.353.000 .479 133. Bonds Interest Revenue (5M x 12% x 5/12) 61 5.000 312.333 3.Chapter 7 – Investments in Equity Securities and Debt Securities Sales price 3. 31.791.444 27.Bonds Interest Revenue 27.827.886.333) 3.542 68.655 600. 2011 Nov.733 HTM Carrying Value 5.304 5.435 87.088.667 Loss on sale 94.925.267 37.166 82.435 (c) Securities are classified as available for sale securities.000 524.479 P Raffy Company) To facilitate computation. a partial amortization table is presented below.791. 31.886.10 2 87.000 Unrealized Gain on 12/31/08 87.834 5.000 517.353. Date June 1.293 Discount Amort.000 531.102 Loss 94.228 Amortized Cost 12/31/08 P3.00 0 94.15 0 250. 2009 Dec.435 Amortized Cost 12/1/08 P3.417 600. 2007 Dec.150 5.246. 2008 Dec. 31.832.458 5.171. 2007 Dec. 2010 2007 June 1 Interest Received Interest Revenue Amortization of Discount 350. 1 1 Available for Sale Securities – State Corp.000–133.19 3.959 600.521 MV 12/31/08 4M x 98% 3.667 Amortized Cost 3.479 7.444 Cash Loss on Sale of Available for Sale Securities Net Unrealized Gain/Loss on AFS Securities Interest Revenue Available for Sale Securities–State CorpBonds Market Adjustment – AFS Securities Sales price (3.696 75.315.925.365 x 1/6 5. 31.821 Held to Maturity Securities – Blessie Corp. 12/1/08 – 12/31/08 31.

31 531.069.000 Interest Receivable (3M x 12% x 8/12) Held to Maturity Securities – Blessie Interest Revenue (517.000 + 240.068.171.090.000 2M x 12% = 240.102.068.993 Amort from 1/1/08-9/1/08 33.068.472 *or 5.068.068.171.528* Market value 2M x 103.070.000 562.66 2 5.000 Cash Interest Revenue Held to Maturity Securities – Blessie 600. 31 Cash Interest Revenue Available for Sale Securities – Blessie 240.472 Instead of recognizing the unrealized gain or loss at the date of 62 .068.655 – 3.035.102.000 Cash Interest Revenue Held to Maturity Securities – Blessie 600. 31 5.458 524.000) Gain on sale of HTM Securities Interest Receivable Held to Maturity Securities – Blessie 3.134 CV as of 9/1/08 3.069.000 Market Adjustment P 34.166 x 3/5 x 8/12) 240.000 5.134 Dec 31 Market Adjustment – AFS Unrealized Gain or Loss on AFS Amortized cost 2. 31 2009 Dec.15 0 Cash Interest Revenue Held to Maturity Securities – Blessie 600.859 Sales price 3.66 2 2.655 – 3.655 x 3/5) 3.088.Chapter 7 – Investments in Equity Securities and Debt Securities Cash Dec.542 68.85 9 CV of HTM securities sold: As of 12/31/07 (5.603.134 206.141 1 Available for Sale Securities – Blessie Held to Maturity Securities 2.662 2.304 2010 Sept.733 2008 Dec.662 x 10% = 206.267 37.000 – 206.171.5% 2.866 240.102.662 – 33.035.662 Dec.00 0 33.090.528 Note: 206.821 x 2/5 = P2.000 Gain on sale 20.134 34.330.866 20. 1 1 Cash (3.134 = P2.866 33.993 = 2.993 = 2.141 240.000 3.472 34.696 75.866 = 33.

4.500 = 167.000.500.000.000 x 138) = 540. Both methods would achieve the same effect of reflecting the AFS to market at balance sheet date through the equity account Unrealized Gain or Loss on AFS.000 = 4.400. 1.000 x 50 = 150.10 = 80 352. a single adjustment at yearend is made in the above entries.000 x 180 = 4.600 10.000 + 480. 21 1.000 = 1. 15.000 = 37.000–26.500 = 577.500.060/10 = 106 shares 88 ÷ 1.240. 9.250 – (1.000 x 50 = 500.000 = 280.400.000.400. 12.500.916.000 577.000 = 10.000 – 525.000 150.000 – (4. 14.000 + 600. 2010 (the company demonstrating no ability to hold the securities until maturity.000 – 540. (600 x 440) + (2.000 – (3 x 40.600.400 x 4) = 334. 8.000 = 2.Chapter 7 – Investments in Equity Securities and Debt Securities reclassification on September 1.000 – 12.250. 3. 560.000 – 60. hence the securities were reclassified as AFS).000 360.000.000 x 600/3600 = 60.000 ÷ 12 = 12.000 = 100. 1. B A B A B A A A B B C B A A B and C and C and C and C and C MULTIPLE CHOICE QUESTIONS Theory MC1 MC2 MC3 MC4 B B A C MC5 MC6 MC7 MC8 D D A D MC9 MC10 MC11 D B C Problems MC12 MC13 B D MC14 C MC15 MC16 A C MC17 D MC18 B MC19 MC20 MC21 MC22 MC23 MC24 D B A D B B MC25 A MC26 D 535.500 – 500 = 12. 6.060.000 = 80. 7-21 1.000.000 360.250 = 152. 11. 200.250 3.000 x 150 = 1.000 – 280.000 x 120 = 360.400 / 4.000 gain 960-500 = 460 + 600 = 1.000 4.000. and adjusting the account again at yearend.000 x 15/25 = 2.200.900 + 13.500.000) = 480.000 x 10) = 142.000 10.000 360.860.000 500 x 25 = 12. 152. 12.000 40% x 450.000 = 180.860. 10.000 1.000) = 1. 2.500=26.500 25.000 – 260.000 500 x 20 = 10.000 307. 12.000 – 480. 180.400=10. 20% x 3M = 600.000 4.000 – 500.500 + 269.000. 5.000 x 3.000/6.000 – 10.000 63 . 37. 25% x (2. 334.000 + 2.000.000) + (25% x 640.000 = 260. 7.000 + 60. 13.000 – 60.400 sh = 76 See No.500.

530.000 – (8M x . 7.Chapter 7 – Investments in Equity Securities and Debt Securities MC27 B MC28 MC29 MC30 A C B MC31 MC32 C B MC33 MC34 MC35 MC36 A A C C MC37 MC38 C B MC39 D MC40 MC41 MC42 D B D 10.08 x 6/12) = 7.000 40% x 100.483.000 = 51.000 + 49.000 x 5% = 369.383.000 488.000 184.000 – 40.483.000 – 20.150 + 51.000 40% x 1.000) = 4.000 + 420.500 64 .150 – 320.000 + (10% x 3M) = 2.000 = 480.000 2.000 x 10/25 = 1.944.150 x 5% = 371.000 x8% = 80.000.000 – 20.400 x 10% = 91. 4M x 4% = 160. 7.000.000 – 472. (40% x 900.340.000 x 5% = 184.860.640 7.758 = 46.000 – 1.530.000 = 49.500 = 12.150.000 – 7.500.000 x 200 = 2.608 371.000 4. 369.000 = 40.432.000.000 x 150) + (900 x 180) + (800 x 220) = 488.432.150 8M x 4% = 320. 35. 1.000.750. 4.000 500. 480.000) ÷ 18 = 20.150 = 7.608 = 7.400 + 11.000 = 24.300.242 500.000.000 = 35.240.240.608 – 320. 33 8.342.150 7.944.850.600.000 See No.000.200.000 91.600 – 160.000 + 1.000 – 453.692.000. 912. 36 912.608.000 (1.000.600.000 x 4% = 20.240-80. 7.240 = 923.000 = 15.758 7.000 + 24.600 See No.600 = 3.716.000 460.000 (1.000 x 5% = 437.000 – (40% x 200.000.000.692.383.000 = 11.000 = 56.500 3. 3.000 = 420.000 x 140) + (900 x 170) + (800 x 200) = 453.