Intacc 1

CHAPTER 3
INVESTMENTS IN DEBT SECURITIES

AND OTHER NON-CURRENT FINANCIAL ASSETS
Discussion Question No. 15
15.1
15.2
15.3
15.4
15.5
PROBLEMS
3-1. (Abu Company)

(a)
Interest Received Premium
Date Interest Revenue Amortization Carrying Value
01/01/Y1 8,274,646
12/31/Y1 1,200,000 1,158,450 41,550 8,233,096
12/31/Y2 1,200,000 1,152,633 47,367 8,185,729
12/31/Y3 1,200,000 1,146,002 53,998 8,131,731
12/31/Y4 1,200,000 1,138,442 61,558 8,070,173
12/31/Y5 1,200,000 1,129,827* 70,173* 8,000,000
*rounded off.
(b)
Y1
Jan. 1 Debt Investments at Amortized Cost 8,274,646
Cash 8,274,646
Dec. 31 Cash 1,200,000

Debt Investments at Amortized Cost 41,550
Interest Revenue 1,158,450
Y2
Dec. 31 Cash 1,200,000
Interest Revenue 1,152,633
3-2. (South Company)
(a)
(1) Securities are classified as at amortized cost
To facilitate computation, a partial amortization table is presented below.
https://cdn.fbsbx.com/v/t59.2708-21/50133764_2239989518…=70d4e93c3f00fb172e5165ea295038a1&oe=5CED5E7C&dl=1 27/05/2019, 8H06 AM

Page 1 of 17
Interest Received Interest Revenue Amortization
Date of Discount Amortized Cost
June 1, Year 1 3,691,500
Dec. 1, Year 1 160,000 184,575 24,575 3,716,075
June 1, Year 2 160,000 185,804 25,804 3,741,879
Dec. 1, Year 2 160,000 187,094 27,094 3,768,973
June 1, Year 3 160,000 188,449 28,449 3,797,422
Dec. 1, Year 3 160,000 189,871 29,871 3,827,293
June 1, Year 4 160,000 191,365 31,365 3,858,658
Dec. 1, Year 4 160,000 192,933 32,933 3,891,591
Year 1
June 1 Debt Investments at Amortized Cost 3,691,500

Cash 3,691,500
Dec. 1 Cash 160,000

Interest Revenue (see above table) 184,575
31 Interest Receivable 26,667

Interest Revenue 30,968
160,000 x 1/6 = 26,667
25,804 x 1/6 = 4,301
Year 2
Jan. 1 Interest Revenue 30,968

Interest Receivable 26,667
June 1 Cash 160,000

Dec. 1 Cash 160,000


160,000 x 1/6 = 26,667

28,449 x 1/6= 4,742
(2) Securities are classified as at fair value through profit and loss.
Year 1
June 1 Debt Investments at FVPL 3,691,500

Cash 3,691,500
Dec. 1 Cash 160,000

Interest Revenue (4M x 8% x ½) 160,000

Interest Revenue (4M x 8% x 1/12) 26,667

Page 2 of 17
31 Debt Investments at FVPL 188,500
Unrealized Gain on Debt Investments atFVPL 188,500
4M x .97 = 3,880,000
3,880,000 – 3,691,500 = 188,500
Year 2
Jan. 1 Interest Receivable 26,667

June 1 Cash 160,000

Dec. 1 Cash 160,000


Dec.31 Debt Investments at FVPL 80,000

Unrealized Gain on Debt Investments at
FVPL 80,000
4M x 0.99 = 3,960,000
3,960,000 – 3,880,000 = 80,000

(3) Securities are classified as at Fair Value Through Other Comprehensive Income
Year 1
June 1 Debt Investments at FV through OCI 3,691,500

Cash 3,691,500
Dec. 1 Cash 160,000

Debt Investments at Fair Value through OCI 24,575
Interest Revenue (see table) 184,575
Dec.31 Interest Receivable 26,667

Debt Investments at Fair Value through OCI 4,301
Dec. 31 Fair Value Adjustment – Debt Investments at FV through

OCI 159,624
FVPL 159,624
Amortized cost
3,716,075 + 4,301 = 3,720,376
3,880,000 – 3,720,376 = 159,624
Year 2
Jan. 1 Interest Revenue 30,968

Debt Investments at FV through OCI 4,301
June 1 Cash 160,000


Page 3 of 17
Dec. 1 Cash 160,000


160,000 x 1/6 = 26,667
28,449 x 1/6= 4,742
31 Fair Value Adjustment – Debt Investments at FV through

OCI 26,661
FVPL 26,661
Amortized cost
3,768,973 + 4,741 = 3,773,715
3,960,000 –3,773,715 =186,285
186,285 – 159,624 = 26,661
(b) Journal entry/entries to record sale of investment on November 1, Year 4.

(1) Securities are classified as at amortized cost.
Nov. 1 Debt Investments at Amortized Cost 27,444

Interest Revenue 192,933 x 5/6 160,777
32,933 x 5/6 = 27,444
1 Cash 3,925,000
Loss on Sale of Debt Investments at Amortized Cost
94,435
Debt Investments at Amortized Cost 3,886,102
CV of Debt Investments sold:

As of June 1, Year 4 3,858,658
Amortization June 1 to
Nov. 1, Year 4 27,444
As of Nov. 1, Year 4 3,886,102
Sales price 3,791,667
Loss on sale 94,435
(2) Securities are classified as at fair value through profit or loss
Nov. 1 Cash 3,925,000

Loss on Sale of Debt Investments at FVPL 128,333

Page 4 of 17
Debt Investments at FVPL 3,920,000
Acc. Int. = 4M x 8% x 5/12 = 133,333
Sales price (3,925,000–133,333) 3,791,667
Carrying value (4 M x 0.98) 3,920,000
Loss on sale 128,333
(3) Securities are classified as at Fair Value through Other Comprehensive Income
Nov. 1 Debt Investments at FV through OCI (32,933 x 5/6) 27,444

Interest Revenue (192,933 x 5/6) 160,777
1 Unrealized Gains/Losses on Debt Investments at FV through

OCI 280,720
Fair Value Adjustment – Debt Investments at FV through
OCI 280,720
3,858,658 + (32,933 x 5/6) = 3,886,102
3,886,102 – 3,791,667 = 94,435 decline
94,435 + 186,285 = 280,720
1 Cash 3,925,000
Fair Value Adjustment-Debt Investments at FV through OCI
94,435
Debt Investments at FV through OCI 3,886,102
Retained Earnings 94,435

Unrealized Gain/Losses on Debt Investments at FV through
OCI 94,435
3-3. (Grow Company)

(1) Classified as at Amortized Cost
Amortization Table
Date Nom Int Effect Int Prem Amort Amortized cost, end
1/1/Year 1 1,063,394
12/31/Year 1 120,000 106,339 13,661 1,049,733
12/31/Year 2 120,000 104,973 15,027 1,034,706
12/31/Year 3 120,000 103,471 16,529 1,018,177

(a) Carrying value, 12/31/Year 2 (see table) P1,034,706
(b) Sales price P 606,000

Carrying value, 1/1/Year 3 (1,034,706 x 6/10 P620,824
Amortization 1/1/Year 3 – 4/1/Year 3
1 6,529 x 3/12 x 600/1000 (2,479) 618,345

Page 5 of 17
Loss on sale P 12,345
(c) Interest income for Year 3:
Jan 1 to Mar 31 103,471 x 3/12 P 25,868

Apr 1 to Dec 31 103,471 x 400/1000 x 9/12 31,041
Total interest income for Year 3 P 56,909
(d) Carrying value, 12/31/Y3 (1,018,177 x 400/1000) P 407,271
(2) Classified as Debt Investments at FV through Profit or Loss
(a) Interest income (1,000,000 x 12%) P 120,000
(b) Sales price (600,000 x 1.01) P 606,000
Carrying value, 12/31/Year 2 (600,000 x 1.06) 636,000

(c) Carrying value, 12/31/Year 2 (FV) (1,000,000 x 1.06) P1,060,000
Carrying value, 12/31/Year 3 (400,000 x 1.04) P 416,000
(3) Classified as at Fair Value Through Other Comprehensive Income
(a) Carrying value, 12/31/Year 2 (1M x 1.06) P1,060,000

(1,034,760 + 25,240 FV Adj)
(b) Sales price P 606,000

Amortized cost 618,345
(c) Interest income for Year 3:
Jan 1 to Mar 31 103,471 x 3/12 P 25,868

Apr 1 to Dec 31 103,471 x 400/1000 x 9/12 31,041
Total interest income for Year 3 P 56,909
(d) Fair value, December 31, Year 3 (400,000 x 1.04) P 416,000

Amortized cost, December 31, Year 3
1 ,018,177 x 4/10 407,270
Cumulative amount of unrealized gains/loss P 8,730
3-4. (Powerpuff Company)
April 1 Debt Investments – FVPL – Peach Co. Bonds 1,010,000

Page 6 of 17
Cash 1,010,000
July 1 Debt Investments – FVPL – Buttercup Bonds 150,000

Interest Receivable (150,000 x 12% x 4/12) 6,000
Cash 156,000
Oct. 1 Cash 50,000

Interest Income (1,000,000 x 10% x 6/12) 50,000
Dec. 31 Interest Receivable 34,000

Interest Income 34,000
1M x 10% x 3/12 = 25,000
150,000 x 12% x 6/12 = 9,000
25,000 + 9,000 = 34,000
31 Unrealized Loss on Investments at FVPL 17,000

Debt Investments – FVPL - Buttercup Bonds 3,000
Debt Investments – FVPL - Peach Bonds 20,000
Cost Fair value UGL
Peach 10% Bonds 1,010,000 990,000 (20,000)
Buttercup 12% Bonds 150,000 153,000 3,000
1,160,000 1,143,000 (17,000)
3-5. (Narito Company)

Amortization Table
Nominal Interest Effective Interest Premium Amortization Amortized Cost, End
Date
Jan. 1, Year 1 108,660
Dec. 31, Year 1 7,000 5,433 1,567 107,093
Dec. 31, Year 2 7,000 5,355 1,645 105,448
Dec. 31, Year 3 7,000 5,272 1,728 103,720
Dec. 31, Year 4 7,000 5,186 1,814 101,906
Dec. 31, Year 5 7,000 5,094 1,906 100,000
Year 1
Jan. 1 Debt Investments at Amortized Cost – Wolf Bonds 108,660
Cash 108,660
Dec. 31 Cash 7,000

Debt Investments at Amortized Cost – Wolf Bonds 1,567
Year 2
Dec. 31 Cash 7,000


Page 7 of 17
Year 3
Dec. 31 Cash 7,000

31 Impairment Loss on Debt Investments 4,653

Carrying value, Dec. 31, Year 3 P103,720
Present value of future cash inflows
100,000 x 0.9070 90,700
4,500 x 1.8594 8,367 99,067
Impairment Loss P 4,653
Year 4
Dec. 31 Cash 4,500

Debt Investments at Amortized Cost – Wolf Bonds 453
Year 5
Dec. 31 Cash 4,500

Debt Investments at Amortized Cost – Wolf Bonds 480
Revised Amortization Table

Nominal Interest Effective Interest Discount Amortization Amortized Cost, End
Date
Dec. 31, Year 3 99,067
Dec. 31, Year 4 4,500 4,953 453 99,520
Dec. 31, Year 5 4,500 4,980* 480* 100,000
3-6. (Raffy Company)
To facilitate computation, a partial amortization table is presented below.

Interest Received Interest Revenue Amortization HTM
Date of Discount Carrying Value
June 1, 2018 5,353,150
Dec. 31, 2018 350,000 312,267 37,733 5,315,417
Dec. 31, 2019 600,000 531,542 68,458 5,246,959
Dec. 31, 2020 600,000 524,696 75,304 5,171,655
Dec. 31, 2021 600,000 517,166 82,834 5,088,821
2018
June 1 Debt Investments at Amortized Cost (Blessie) 5,353,150

Interest Revenue (5M x 12% x 5/12) 250,000
Cash 5,603,150
Dec. 31 Cash 600,000

Debt Investments at Amortized Cost (Blessie) 37,733

Page 8 of 17
2019
Dec. 31 Cash 600,000

2020
Dec. 31 Cash 600,000

2021
Sept. 1 Interest Receivable (3M x 12% x 8/12) 240,000

Interest Revenue (517,166 x 3/5 x 8/12) 206,866
1 Cash (3,090,000 + 240,000) 3,330,000

Gain on Sale of Debt Investments 20,141
Debt Investments at Amortized Cost (Blessie) 3,069,859
CV of debt investment sold:

As of 12/31/19 (5,171,655 x 3/5) 3,102,993
Amort from 1/1/20-9/1/20 33,134
CV as of 9/1/20 3,069,859
Sales price 3,090,000
Gain on sale 20,141
Dec. 31 Cash 240,000

2M x 12% = 240,000
517,166 x 2/5 = 206,866
82,834 x 2/5 = 33,134
3-7. (Grow Company)

Amortization Table
Date Nom Int Effect Int Prem Amort Amortized cost, end
1/1/Year 1 1,063,394
12/31/Year 1 120,000 106,339 13,661 1,049,733
12/31/Year 2 120,000 104,973 15,027 1,034,706
12/31/Year 3 120,000 103,471 16,529 1,018,177

(a) Market value, 12/31/ Year 2 (1.06 x 1M) P1,060,000
Amortized cost, 12/31/Year 2 1,034,706
Unrealized Gain or Loss (In Equity) P 25,394


Page 9 of 17
(b) Interest income for Year 2 P 104,973

(c) Market value, 12/31/Year 3 (1.04 x 400,000) P 416,000
Amortized cost ( 1,018,177 x 4/10) 407,271
Unrealized Gain on 12/31/Year 3 P 8,729
3-8. (Naruto Company)

Amortization Table
Nominal Interest Premium Amortization Amortized Cost, End
Date Effective Interest
Jan. 1, 2018 108,660
Dec. 31, 2018 7,000 5,433 1,567 107,093
Dec. 31, 2019 7,000 5,355 1,645 105,448
Dec. 31, 2020 7,000 5,272 1,728 103,720
Dec. 31, 2021 7,000 5,186 1,814 101,906
Dec. 31, 2022 7,000 5,094 1,906 100,000
(a) Interest income for 2018 P 5,433

(b) Carrying amount at December 31, 2019 (amortized cost) P105,448

(c)
2020
Dec. 31 Cash 7,000
ebt Investments at Amortized Cost
D 1,728
2021
May 31 Interest Receivable 2,917
I nterest Revenue 756
7,000 x 5/12 = 2,917
5,186 x 5/12 = 2,161
1,814 x 5/12 = 756
31 Cash (106,000 + 2,917) 108,917

Page 10 of 17
Gain on Sale of Debt Investments 4,441
Debt Investments at Amortized cost 101,559
1 00,000 x 1.06 = 106,000
1 03,720 – 2,161 = 101,559
1 06,000 – 101,559 = 4,441
3-9. (Donna Corporation)
(a)
Amortization Table
Jan. 2, Year 1 104,330
Dec. 31, Year 1 6,000 5,217 783 103,547
Dec. 31, Year 2 6,000 5,177 823 102,724
Dec. 31, Year 3 6,000 5,136 863 101,861
Dec. 31, Year 4 6,000 5,093 907 100,954
Dec. 31, Year 5 6,000 5,044 954* 100,000
*Adjusted, P4 difference is due to rounding off
(b) Present value of modified cash flow based on completed negotiation

Present value of new principal (90% x 100,000 = 90,000)
9 0,000 x 0.9070 81,630
Present value of reduced interest (6% x 90,000 = 5,400)
5 ,400 x 1.8594 10,041
Total 91,671

(c.1) Carrying value of bond investment, December 31, Year 3 101,861
Present value based on modified terms 91,671
Impairment loss 10,190
(c.2) Impairment Loss 10,190

Debt Investments at Fair Value Through OCI 10,190
PLEASE CHECK ANSWERS. As of December 31, Year 2, Unrealized Loss (debit balance) and Fair Value
Adjustment (credit balance) accounts have balance of P5,724 (102,724 – 97,000). SINCE THERE IS NO
QUOTED PRICE AT DEC. 31, YEAR 3, I DID NOT HAVE ANY ADJUSTMENT RELATED THERETO.

(d) Interest Income, Year 4 (see table below) P4,584
Interest Income, Year 5 (see table below) P4,542

Revised amortization table – New modified terms
Dec. 31, Year 3 91,671

Page 11 of 17
Dec. 31, Year 4 5,400 4,584 816 90,855
Dec. 31, Year 5 5,400 4,542 855* 90,000
*Adjusted; P2 difference is due to rounding off
3-10. Classification of Investments in Debt Securities
1. B and C 6. B and C 11. C
2. A 7. A 12. B and C

3. B and C 8. A 13. A
4. A 9. B and C 14. A
5. B and C 10. B and C 15. B
3-11. (Raymond Company)

1. Building Construction Fund Cash
Cash
2. Building Expansion Fund Securities
Building Expansion Fund Cash

Interest Receivable – Building Expansion Fund

uilding Expansion Fund Cash
B
4. Building Expansion Fund Cash
Dividend Income
5. Building Expansion Fund Expenses

Interest Receivable – Building Expansion Fund

Interest Income

Building Expansion Fund Securities

Gain on Sale of Building Expansion Fund Securities

Page 12 of 17
Interest Income
Dividend Income
Building Expansion Fund Securities

Gain on Sale of Building Expansion Fund Securities
11. Buildings

12. Cash
3-12. (Cordero Corporation)
(a) Required semiannual deposit

= P15,000,000/FV of ordinary annuity of 1 discounted at 4% for 20 periods
= P15,000,000 /29.7781 = P503,726
(b) 6/30/19
Bond Sinking Fund Cash 503,726
ash
C 503,726
12/31/19
Bond Sinking Fund Cash 523,875
ash
C 503,726
I nterest Income (503,726 x 4%) 20,149
3-13. (Dorina Company)
(a) Entries for 2017 through 2022

7/01/17 Prepaid Life Insurance 120,000
ash
C 120,000
12/31/17 Life Insurance Expense (120,000 X 6/12) 60,000
Prepaid Life Insurance 60,000

Cash 120,000

Page 13 of 17
12/31/18 Life Insurance Expense 120,000

Cash 120,000


Cash 120,000

Cash Surrender Value* 36,000

Life Insurance Expense 36,000

Cash 120,000

Cash Surrender Value 13,000

Life Insurance Expense 13,000

Receivable from Insurance Company 4,000,000
Cash Surrender Value 49,000
Gain on Insurance Settlement 3,921,000
*The cash surrender value of life insurance may be recognized on the anniversary date (June 30, 2020 and
every June 30 thereafter). No proportionate adjustment, however, is necessary at year-end because there is no
actual increase in cash surrender between anniversary dates.

Page 14 of 17
(b)
If the president or his heirs were the beneficiaries of the policy, the premiums paid shall be charged to
employees benefit expense and no cash surrender value will be set up by the company.
3-13. (Solidbank)
(a) P10,000,000 x 0.3220 = P3,220,000
(b) Interest Income in 2019 = 12% x P3,220,000 =P 386,400
(c) 1/1/19 Advances to Officers 3,220,000

Prepaid Compensation Expense 6,780,000
Cash 10,000,000
12/31/19 Advances to Officers 386,400

Compensation Expense 678,000

Prepaid Compensation Expense 678,000
6,780,000/10
12/31/20 Advances to Officers 432,768

(3,220,000 + 386,400) x 12%
Compensation Expense 678,000

Prepaid Compensation Expense 678,000
(d) Amortized Cost, December 31, 2020

3,220,000 + 386,400 + 432,768 = P4,039,168
MULTIPLE CHOICE QUESTIONS

Theory
MC1 MC6
MC2 MC7
MC3 MC8
MC4 MC9
MC5 MC10
Problems

MC11 A Purchase price is 1,000,000 x 1.04, or 1,040,000
Accrued interest is 1,000,000 x 12% x 4/12, or 40,000
MC12 C Interest income (8,750,000 x 5%) P437,500
MC13 C Investment cost, July 1, Year 2 P3,692,000

Nominal interest (4,000,000 x 4%) 160,000
Effective interest (3,692,000 x 5%) 184,600
Amortization of discount
24,600
Investment carrying value, December 31, Year 2 P3,716,600
MC14 C Interest income/Effective interest (3,692,000 x 5%) P184,600

Page 15 of 17
MC15 B Investment cost P912,400
Amortization of discount (912,400 x 10%) – (1M x 8%) 11,240
Investment carrying value, December 31, Year 2 P923,640
MC16 D Total proceeds from sale of bonds P7,850,000

Accrued interest included (8.0M x .08 x 6/12) 320,000
Selling price P7,530,000
Carrying value of bond investment sold
Acquisition cost 7,383,000
Amortization, December 1, Year 1
Nominal interest (8.0M x 4%) 320,000 49,150
Carrying value, December 1, Year 1 7,432,150
Amortization, June 1, Year 2
Nominal interest 320,000 51,608
7,483,758
Gain on sale P 46,242
MC17 D Carrying amount is equal to FV P472,500
MC18 B Interest income is equal to nominal interest (500,000 x 4%) P20,000
MC19 D Sales price P460,000

Carrying amount of investment sold 472,500
MC20 A Annual insurance premium P110,000

Increase in cash surrender value during the year (115,000-80,00) 35,000
Life insurance expense for the year P75,000
MC21 C Present value of note, June 30, 2019 (2,000,000 x 0.7972) P1,594,400
Amortization of discount for 6 months (1,594,400 x 6%) 95,664
Carrying amount, December 31, 2019 P1,590,064
MC22 A Cash surrender value, January 1, 2019 P100,000

Annual premium paid, net of dividends earned
(200,000-20,000) 180,000
Life insurance expense reported 160,000
Increase in cash surrender value
Cash surrender value, December 31, 2019 20,000
P120,000
MC23 D Annual premium P40,000

Increase in cash surrender value (108,000 – 87,000) (21,000)
Dividend received (6,000)
Life insurance expense for 2019 P13,000
MC24 B Bond sinking fund, January 1 P2,250,000

Additional investments during the year 450,000
Dividend revenue 75,000
Interest revenue 150,000
Administration costs (25,000)
Bond sinking fund, December 31 P2,900,000
MC25 C Annual deposit (5,000,000/5.11) = 978,474 Rounded P 978,500

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CHAPTER 3

INVESTMENTS IN DEBT SECURITIES

Discussion Question No. 15

3-1. ​(Abu Company)

Dec. 31 Cash 1,200,000

3-2. ​(South Company)

​To facilitate computation, a partial amortization table is presented below.

https://cdn.fbsbx.com/v/t59.2708-21/50133764_2239989518…=70d4e93c3f00fb172e5165ea295038a1&oe=5CED5E7C&dl=1 27/05/2019, 8H06 AM

June 1 Debt Investments at Amortized Cost 3,691,500

Dec. 1 Cash 160,000

31 Interest Receivable 26,667

Jan. 1 Interest Revenue 30,968

June 1 Cash 160,000

Dec. 1 Cash 160,000

31 Interest Receivable 26,667

160,000 x 1/6 = 26,667

June 1 Debt Investments at FVPL 3,691,500

Dec. 1 Cash 160,000

31 Interest Receivable 26,667

https://cdn.fbsbx.com/v/t59.2708-21/50133764_2239989518…=70d4e93c3f00fb172e5165ea295038a1&oe=5CED5E7C&dl=1 27/05/2019, 8H06 AM

Jan. 1 Interest Receivable 26,667

June 1 Cash 160,000

Dec. 1 Cash 160,000

31 Interest Receivable 26,667

Dec.31 Debt Investments at FVPL 80,000

June 1 Debt Investments at FV through OCI 3,691,500

Dec. 1 Cash 160,000

Dec.31 Interest Receivable 26,667

Dec. 31 Fair Value Adjustment – Debt Investments at FV through

Jan. 1 Interest Revenue 30,968

June 1 Cash 160,000

https://cdn.fbsbx.com/v/t59.2708-21/50133764_2239989518…=70d4e93c3f00fb172e5165ea295038a1&oe=5CED5E7C&dl=1 27/05/2019, 8H06 AM

Dec. 1 Cash 160,000

31 Interest Receivable 26,667

31 Fair Value Adjustment – Debt Investments at FV through

(b) ​Journal entry/entries to record sale of investment on November 1, Year 4.

Nov. 1 Debt Investments at Amortized Cost 27,444

CV of Debt Investments sold:

(2) Securities are classified as at fair value through profit or loss

Nov. 1 Cash 3,925,000

https://cdn.fbsbx.com/v/t59.2708-21/50133764_2239989518…=70d4e93c3f00fb172e5165ea295038a1&oe=5CED5E7C&dl=1 27/05/2019, 8H06 AM

Nov. 1 Debt Investments at FV through OCI (32,933 x 5/6) 27,444

1 Unrealized Gains/Losses on Debt Investments at FV through

Retained Earnings 94,435

3-3. ​(Grow Company)

​ ​(b) ​Sales price ​ ​ ​ ​ ​ ​P 606,000

https://cdn.fbsbx.com/v/t59.2708-21/50133764_2239989518…=70d4e93c3f00fb172e5165ea295038a1&oe=5CED5E7C&dl=1 27/05/2019, 8H06 AM

(c) Interest income for Year 3:

Jan 1 to Mar 31 103,471 x 3/12 ​ ​ P ​ 25,868

Total interest income for Year 3 ​ ​ P 56,909

​ ​(d) ​Carrying value, 12/31/Y3 (1,018,177 x 400/1000) ​P 407,271

(2) ​Classified as Debt Investments at FV through Profit or Loss

​ ​(a) ​Interest income (1,000,000 x 12%) ​ ​ P 120,000

​ ​(b) ​Sales price (600,000 x 1.01) ​ ​ ​ P 606,000

​ ​ ​Carrying value, 12/31/Year 2 (600,000 x 1.06) ​ ​ 636,000

​ ​(c) ​Carrying value, 12/31/Year 2 (FV) (1,000,000 x 1.06) P1,060,000

​ ​ ​Carrying value, 12/31/Year 3 (400,000 x 1.04) ​ P 416,000

(3) ​Classified as at Fair Value Through Other Comprehensive Income

​ ​(a) ​Carrying value, 12/31/Year 2 (1M x 1.06) ​ ​P1,060,000

​ ​(b) ​Sales price ​ ​ ​ ​ ​ ​P 606,000

(c) Interest income for Year 3:

Jan 1 to Mar 31 103,471 x 3/12 ​ ​ P 25,868 ​

Total interest income for Year 3 ​ ​ P 56,909

​(d) ​Fair value, December 31, Year 3 ​(400,000 x 1.04) ​P 416,000

3-1. (Abu Company)

3-2. (South Company)

To facilitate computation, a partial amortization table is presented below.

(b) Journal entry/entries to record sale of investment on November 1, Year 4.

3-3. (Grow Company)

(b) Sales price P 606,000

Jan 1 to Mar 31 103,471 x 3/12 P 25,868

Total interest income for Year 3 P 56,909

(d) Carrying value, 12/31/Y3 (1,018,177 x 400/1000) P 407,271

(2) Classified as Debt Investments at FV through Profit or Loss

(a) Interest income (1,000,000 x 12%) P 120,000

(b) Sales price (600,000 x 1.01) P 606,000

Carrying value, 12/31/Year 2 (600,000 x 1.06) 636,000

(c) Carrying value, 12/31/Year 2 (FV) (1,000,000 x 1.06) P1,060,000

Carrying value, 12/31/Year 3 (400,000 x 1.04) P 416,000

(3) Classified as at Fair Value Through Other Comprehensive Income

(a) Carrying value, 12/31/Year 2 (1M x 1.06) P1,060,000

(b) Sales price P 606,000

Jan 1 to Mar 31 103,471 x 3/12 P 25,868

Total interest income for Year 3 P 56,909

(d) Fair value, December 31, Year 3 (400,000 x 1.04) P 416,000

Cumulative amount of unrealized gains/loss P 8,730

3-5. (Narito Company)

3-6. (Raffy Company)

To facilitate computation, a partial amortization table is presented below.

3-7. (Grow Company)

3-8. (Naruto Company)

(a) Interest income for 2018 P 5,433

31 Cash (106,000 + 2,917) 108,917

1 00,000 x 1.06 = 106,000

1 03,720 – 2,161 = 101,559

1 06,000 – 101,559 = 4,441

*Adjusted, P4 difference is due to rounding off

(b) Present value of modified cash flow based on completed negotiation

(c.2) Impairment Loss 10,190

*Adjusted; P2 difference is due to rounding off

3-10. Classification of Investments in Debt Securities

1. B and C 6. B and C 11. C

2. A 7. A 12. B and C

3-11. (Raymond Company)

Building Expansion Fund Cash

Interest Receivable – Building Expansion Fund

Building Expansion Fund Cash

Interest Receivable – Building Expansion Fund

Building Expansion Fund Cash

Building Expansion Fund Securities

Building Expansion Fund Securities

Building Expansion Fund Cash

Building Expansion Fund Cash

3-12. (Cordero Corporation)

(a) Required semiannual deposit

I nterest Income (503,726 x 4%) 20,149

3-13. (Dorina Company)

(a) Entries for 2017 through 2022

Prepaid Life Insurance 60,000

06/30/18 Prepaid Life Insurance 120,000

06/30/19 Prepaid Life Insurance 120,000

12/31/19 Life Insurance Expense 120,000

06/30/20 Prepaid Life Insurance 120,000