CHAPTER 6 – INVESTMENTS IN FINANCIAL INSTRUMENTS SOLUTIONS TO INVESTMENTS IN FINANCIAL INSTRUMENTS

Multiple Choice – Theories Financial Assets at FV through P&L 1,200

Dividend Income 1,200
1. B 2. A 3. B 4. D 5. C
6. A 7. B 8. C 9. B 10. D Dividend Receivable 5,000
Dividend Income 5,000
Problem 1
1. A 2. C 3. B, E 4. C, D 5. C, D Financial Assets at FV through P&L 400
6. A, C, D 7. D 8. D, E 9. D 10. A, B, C, D Unrealized Gain on FVPL 400

(b) (1) Carrying amount of FVPL (see worksheet above) P173,400

Problem 2 ESAU CORPORATION (2) Gain on sale of FVPL = 28,000 – 27,000 = P 1,000
(3) Dividend Income = 1,000 + 1,200 + 5,000 = P 7,200
A Corporation B Corporation C Corporation D Corporation E Corporation (4) Unrealized gain or loss on FVPL P 400
Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount
Jan 3 1,000 54,000
8 1,000 60,000 Problem 3 HONEY COMPANY
Apr 5 (500) (27,000)
1. Selling price on July 3 P130,000
8 1,000 30,000 1,000 36,000
Dividends included in the selling price 1,000 x 5 (5,000)
July 15 500 20,000
Carrying value of shares sold 600,000 x 1000/5,500 shares (109,091)
Dec 8 50
Gain on Shares sold P15,909
Bal.
before
2. Proceeds from sale P140,000
adj to
Carrying value of shares sold = 490,909 x 1,000/4,500 (109,091)
FV 500 27,000 1,000 60,000 1.000 30,000 1,000 36,000 550 20,000
Gain on December 4 sale P 30,909
Adj 500 (6,000) 2,000 3,000 900
Per
3. Dividend revenue for the year 2017:
audit 500 27,500 1,000 54,000 1,000 32,000 1,000 39,000 550 20,900
November dividends 500 shares x P 5 P22,500
On July 10 sale 1,000 x 5 5,000
Dividends accrued on December 31 ( 3,500 x P5) 35,000
(a) Audit Adjusting Entries:
Total dividend income P62,500
Financial Assets at FV through P&L 1,000
Dividend Income 1,000
4. Adjusted balance of the investment account
Financial Assets at FV through P&L 1,000 shares Peso balance
Gain on Sale of FVPL 1,000 Market value, January 1 5,000 P600,000
May 31 bonus issue 500
Treasury Shares 33,000 July 10 sale (1,000) (109,091)
Financial Assets at FV through P&L 33,000 Dec 4 sale (1,000) (109,091)
Balances before adjustment to fair value 3,500 381,818
Financial Assets at FV through P&L 20,000 Adjustment to market (84,318)
Treasury Shares 16,500 Balance, December 31, at fair value 3,500 P297,500
Paid in Capital from Treasury Shares 3,500
Adjusting Entries
Dividend Income 2,000 Dividend Income 12,000
Financial Assets at FV through P&L 2,000 Trading Securities 12,000

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SOLUTIONS TO INVESTMENTS IN FINANCIAL INSTRUMENTS SOLUTIONS TO INVESTMENTS IN FINANCIAL INSTRUMENTS

Trading Securities 20,909 Investment in Adams 9,000

Gain on Sale of Trading Securities 20,909 Dividend Income 9,000
Property dividends should be recorded
Trading Securities 30,909 at fair value
Gain on Sale of Trading Securities 30,909

Dividends Receivable 35,000 Investments in Ivan 50,000

Dividend Income 35,000 Unrealized Gain/Loss on Equity Investments
- OCI 50,000
Unrealized Loss on Trading Securities 84,318
Unrealized Gain on Trading Securities 12,466 Selling price P550,000
Previous carrying value =
Problem 4 MYRA COMPANY fair value on January 1
5,000 x 100 500,000
Shares At cost Unrealized Unrealized gain – OCI P 50,000
gains
(losses) *Unrealized Gain/Loss on Equity Investments – OCI 110,000
Jan. 1 balances adjusted to Fair value Retained Earnings 110,000
3,000 @ 80 3,000 P240,000 60,000 3,000 (110 – 80) + 2,000 (110-100) =110,000
8,000 @ 100 8,000 800,000 ---
May 31 4,000 x (120-5) 4,000 460,000 Investment in Ivan 80,000
Oct. 31 Sold 5,000 shares (3,000) (240,000) Unrealized Gain/Loss on Equity Investments 80,000
(2,000) (200,000) 50,000 - OCI
31 Realized gain transferred to RE (110,000) Selling price = FV 2,000 x 140 = 280,000
Dec. 22 Sold 2,000 shares (2,000) (200,000) 80,000 Previous CV = FV, Jan. 1 = 200,000
22 Realized gain transferred to RE (80,000) Unrealized Gain 80,000
31 Adjustment to FV 276,000
Dec. 31 Per Audit 8,000 P 860,000 P 276,000
Miscellaneous Receivables 280,000
Investment in Ivan (2,000 x 140) 280,000
Investment in Ivan Company 60,000
Unrealized Gain /Loss on Equity Investments–
*Unrealized Gain/Loss on Equity Investments - OCI 80,000
Other Comprehensive Income 60,000
Retained Earnings 80,000
11,000 x (105 – 5)* = 1,100,000
2,000 ( 140 – 100) = 30,000
1,100,000 – 1,040,000 = 60,000
*105 is FV dividends-on
Investments in Ivan 276,000
Unrealized Gain/Loss on Equity Investments 276,000
- OCI
Dividend Income 55,000
FV, 12/31/15 = 8,000 x 142 = 1,136,000
Retained Earnings 55,000
Previous CV :
Dividends accrued last year.
Old = FV, Jan. 1
= 4,000 x 100 = 400,000
Dividend Income 20,000
New=4,000 x 115 = 460,000 860,000
Investment in Ivan 20,000
Unrealized Gain – OCI 276,000
Dividends included in the purchase price
of March 5 acquisition, acquired
Investments in Adams 1,500
dividends-on. 4,000 x 5 = 20,000
Unrealized Gain/Loss on Equity 500
Investments – OCI (17 – 16) x 1,500

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SOLUTIONS TO INVESTMENTS IN FINANCIAL INSTRUMENTS SOLUTIONS TO INVESTMENTS IN FINANCIAL INSTRUMENTS

April 6 1,000 x 10% x P200 x 1/2 P10,000

Note to the Teacher: At the date of sale, the investments at fair value through other comprehensive income are Oct, 6 1,000 x 10% x P200 x 1/2 10,000
adjusted to fair value (presumed to be equal to the selling price on the date of sale). Thus, no gain or loss on sale is On Blue ordinary
recognized in profit or loss. The entry transferring the cumulative unrealized gain or loss (equity account) to the June 30 3,500 x P5 17,500
retained earnings account is optional. P37,500
Unrealized gains on FVPL (see above working papaer)
P5,500 + 583 – 5,100 = P 983

Problem 5 White Corporation Income from Associate (Green Company)

Financial Assets at FV through Profit or Loss 25% x P10,000,000 P 2,500,000
Red Corp Preference Red Corp. Ordinary Blue Ordinary Yellow Ordinary
Shares Peso amt Shares Peso amt Shares Peso amt Shares Peso amt Problem 6 Epson Company
1/1/15 1,000 450,000 6,000 650,000 2,000 550,000
1/17 (2,500) (270,833) (a) Interest Revenue for 2014
2/15 200 P400,000 x 9% x 8/12 = P24,000
6/01 (500) (125,000) Interest Revenue for 2015
10/01 (500) (225,000) 1,500 240,000 P400,000 x 9% x 9/12 P27,000
Before adj. 500 225,000 1,500 240,000 3,500 379,167 1,700 425,000 P300,000 x 9% x 2/12 4,500
Adj to FV 5,500 5,583 (34,000) P180,000 x 9% x 1/12 1,350
Total for 2014 P 32,850
MV 12/31 500 230,000 1,500 240,000 3,500 385,000 1,700 391,000
(b) Unrealized Gains and Losses:
Non-Current Investments 2016: Fair value 12/31/15 107% x 400,000 P428,000
Investment in Associate – Green Company Purchase price
Acquisition cost P16,000,000 440,000 – (400,000 x 9% x 4/12) 428,000
Dividends received 100,000 x P0.50 x 4 (1,000,000) Unrealized gain P 0
Income from associate 25% x P10,000,000 2,500,000
Investment in Associate , 12/31/2012 P17,500,000 2017: Debt Investments
Fair value 12/31/17 P180,000 x 108% P194,400
Gains and losses Fair value 12/31/16 180,000 x 107% 192,600
On sale of Blue on January 17 Unrealized Gain P 1,800
Selling price P325,000
Carrying value (P65,000 x 2,500/6,000 270,833 Equity Investments:
Gain on sale P 54,167 Fair value, 12/31/17 1,000 x 143 P143,000
Initial cost 1,000 x 140 140,000
On sale of Yellow Unrealized Gain P 3,000
Selling price 500 x P210 P105,000
Carrying value (P550,000 x 500/2200) 125,000 (c) Gains and Losses on Disposal
Loss on sale P 20,000 2015: Oct 1 Proceeds P109,000
Accrued interest
On conversion of Red Preference to Red Ordinary 100,000 x 9% x 3/12 ( 2,250)
Market value 1,500 x P160 P240,000 Selling price P106,750
Carrying value P450,000 x 500/1000 225,000 Carrying value P100,000 x 107% 107,000
Gain on exchange P 7,500 Loss on sale P 250

Dividend Income
On Red preference

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SOLUTIONS TO INVESTMENTS IN FINANCIAL INSTRUMENTS SOLUTIONS TO INVESTMENTS IN FINANCIAL INSTRUMENTS

Nov. 30 Fair value of the ordinary sharesP140,000 Problem 8

Carrying value of bond investment
120,000 x 107% 128,400 Entries that should have been made:
Gain on exchange P 11,600 Jan. 21 Investment in Pearl 510,000
Interest Income 6,250
Net gain on sale for the year P11,350 Cash 516,250

(d) Carrying value of the investment Mar. 1 Cash 106,000

Investment in Pearl (510,000 x 100/500) 102,000
December 31, 2016= P400,000 x 107% P428,000 Interest Income (100,000 x 9% x 3/12) 2,250
December 31, 2017 : P180,000 x 108% P194,400 Gain (Loss) on Sale of Trading Securities 1,750
+ 1,000 x 143 143,000
Total carrying value of debt and equity inv. P 337,400 June 1 Cash 18,000
Interest Income 18,000

Problem 7 Nov. 1 Cash 104,750

Gain (Loss) on Sale of Trading Securities 1,000
Total amount paid P547,778 Investment in Pearl (510,000 x 100/500) 102,000
Accrued interest 500,000 x 10% x 2/12 8,333 Interest Income (100,000 x 9% x 5/12) 3,750
Initial measurement P539,445
Dec. 1 Cash 13,500
Amortization Table Interest Income 13,500
300,000 x 9% x 6/12
Date Nominal Interest(5%) Effective Interest (4%) Premium Carrying Value, end
Amortization 31 Interest Receivable 6,750
08/1/16 P539,445 Interest Income 6,750
11/30/16 P16,667 P14,385 P2,282 537,163 300,000 x 9% x 1/12
05/31/17 25,000 21,487 3,513 533,650
11/30/17 25,000 21,346 3,654 529,996 31 Investment in Pearl 3,000
05/31/18 25,000 21,200 3,800 526,196 Unrealized Gains on Trading Securities 3,000
(300,000 x 1.03) – 306,000
(a) Interest Revenue:
2016: P14,385 + 1/6(P21,487) = P17,966 Audit Adjustments
2017: 5/6(21,487) + 21,346 + 1/6(21,200) = P42,785 Interest Income 6,250
Investment in Pearl 6,250
(b) Interest Receivable, December 31, 2015
P500,000 x 8% x 1/12 = P4,167 Investment in Pearl 4,000
Interest Income 2,250
(c) Carrying value Gain on Sale of TS 1,750
Dec. 31, 2016: P537,163 – 1/6(3,513) = P536,577
Dec. 31, 2017: P529,996 – 1/6(3,800) = P529,363 Investment in Pearl 18,000
Interest Income 18,000

Investment in Pearl 2,750

Loss on Sale of TS 1,000
Interest Income 3,750

Investment in Pearl 13,500

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SOLUTIONS TO INVESTMENTS IN FINANCIAL INSTRUMENTS SOLUTIONS TO INVESTMENTS IN FINANCIAL INSTRUMENTS

Interest Income 13,500

Debt Investments- Fulfilled Dreams 6% Bonds 145,704
Dividend Receivable 6,750 Interest Revenue 145,704
Interest Income 6,750
Debt Investments- Fulfilled Dreams 6% Bonds 109,296
Investment in Pearl 3,000 Unrealized Gains/Losses on Debt Investments 109,296
Unrealized Gains on TS 3,000
Unrealized Gains/Losses on Debt Investments 10,930
Gain on Sale of Debt Investments 10,930
Problem 9

SUPPLY THE REQUIRED INFORMATION

Amortization Table
1. P12 per share
Date Nominal Interest(3%) Effective Interest (4%) Discount Carrying Value, end 2. 2,500
Amortization 3. P0
January 2, 2017 P1,815,000 4. 6,500
June 30, 2017 P60,000 P72,600 P12,600 1,827,600 5. 350
December 31, 2017 60,000 73,104 13,104 1,840,704 6. 15,800
7. 55,200
(a) Entries that should have been made: 8. 1,600
9. 376,400
Jan. 2 Debt Investments – Fulfilled Dreams 6% Bonds 1,815,000 10. 3,776,400
Cash 1,815,000 11. 0
12. 48,279
June 30 Debt Investments – Fulfilled Dreams 6% Bonds 12,600 13. 2,097,928
Cash 60,000 14. 365,668
Interest Revenue 72,600 15. 360,000
16. 160,000
Dec. 31 Debt Investments – Fulfilled Dreams 6% Bonds 13,104
17. 35,000 loss
Cash 60,000
18. 1,970,000
Interest Revenue 73,104
19. 50,000 gain
20. 0
31 Debt Investments – Fulfilled Dreams 9% Bonds 109,296
Unrealized Gains/Losses on Debt Investments 109,296 21. 30,000
*97.5% x 2,000,000 = 1,950,000 22. 0
Amortized Cost 1,840,704 23. 0
Unrealized gain P 109,296 24. 15,000 credit
25. 116,000
*FV = 195,000/200,000 = 97.5% 26. 0
27. 1,816,000
Dec. 31 Cash 195,000 28. 3,333
Unrealized Gains/Losses on Debt Investments 10,930 29. 1,000 gain
Debt Investments – Fulfilled Dreams 6% Bonds 195,000 30. 500 gain
Gain on Sale of Debt Investments 10,930 31. 200 gain
32. 10,600
33. 77,100
(b) Audit Adjustments

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SOLUTIONS TO INVESTMENTS IN FINANCIAL INSTRUMENTS SOLUTIONS TO INVESTMENTS IN FINANCIAL INSTRUMENTS

34. 55,000 Cost (See WP below) 35,400

35. 4,125 Cumulative Unrealized Gain 19,800
36. 111,000 Balance before adjustment to FV
37. 2,293,500
6,000 – 1,000 – 1,000 4,000
38. 316,500
39. 31,500 Unrealized gain this year in OCI 15,800 (ITEM #6)
40. 4,125 Cumulative balance in equity, Dec. 31 P19,800
41. 136,300
42. 0 7. P55,200 6,000 x 9.20 P55,200
43. 52,900 8. P1,600 500 X 3.20 P 1,600
44. 7,500
45. 758,600 Equity Investments at FV through OCI– Y Company Ordinary
46. 3,133 Date Shares Total Cost Gain(loss) Dividend Income
01-01-17 3,000 P30,000
Final Answers Computations 01-12-17 3,000
1. P36,000 or P12 per share 03-17-17 (1,000) (5,000) P2,500
2. P0 Net selling price: (1,000 x 8) - 500 = P7,500 06-30-17 1,000 x P2.50 = P2,500
Cost of shares sold P 30,000 x 1,000/6,000 5,000 10-01-17 2,000 15,400*
Gain on sale P 2,500 10-20-17 5,000 x 0.80= 4,000
This gain is not taken to P and L (no recycling). 11-30-17 (1,000) (5,000) 3,500
12-31-17 Balances
6,000 P35,400 P6,000 P6,500

3. P0 Selling price 1,000 x 8.50 P8,500  2,000 (8.50 - .80 dividends on) = 15,400
Cost of shares sold 5.000
Unrealized Gain taken to OCI P3,500 FVPL – B Co. Ordinary
Date Shares Total CV Gain(loss) Dividend Income
06-30-14 1,000 P2,500
None of the gain or loss shall be transferred to P and L.
9-10-14 (500) (1,250) 150
12-31-14 UGL
500 x (3.20 – 2.50) 350
4. P6,500 Property dividends 5,000/5 x P2.50 P2,500 12-31-14 balances 500 shares P1,600
Cash dividends 5,000 x 0.80 4,000
Total dividend income P6,500 Unrealized Gain or Loss on Equity Investments at Fair Value through Other Comprehensive Income
01/01/17 Balance P6,000
03-17 1,000/6,000 x P6,000 (1,000)
5. P350 500 (3.20 – 2.50) P 350 11-30 1,000/6,000 x 6,000 (1,000)
12-31 Fair value
6. P15,800 6,000 x P 9.20 = P55,200
OCI- Unrealized Gain or Loss on Equity Investments Cost 35,400
Cumulative Unrealized Gain 19,800
01-01 Balance P6,000
Balance before adjustment to FV
03-17 1,000/6,000 x P6,000 (1,000) 6,000 – 1,000 – 1,000 4,000
11-30 1,000/6,000 x 6,000 (1,000) Unrealized gain this year in OCI 15,800
12-31 Fair value Cumulative balance in equity, Dec. 31 P19,800
6,000 x P 9.20 = P55,200

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SOLUTIONS TO INVESTMENTS IN FINANCIAL INSTRUMENTS SOLUTIONS TO INVESTMENTS IN FINANCIAL INSTRUMENTS

Items 9 through 14:

18. P1,970,000 2M x .985 = P1,970,000
Kristine Company 19. P50,000
10%Effective Discount Amortized Cost, Fair value, 12/31/18 P1,970,000
Interest Date 9%Interest Paid Interest Amortization End Fair value, 12/31/17 2,000,000 x .96 1,920,000
Jan. 2, 2016 P3,760,000 Unrealized gain for 2018 P 50,000
June 30, 2016 P180,000 188,000 P8,000 3,768,000
Dec. 31, 2016 P180,000 188,400 8,400 3,776,400 Items 20 through 22
June 30, 2017 P180,000 188,820 8,820 3,785,220 Power Cast Company
Dec. 31, 2017 P180,000 189,261 9,261 3,794,481
June 30, 2018 P180,000 189,724 9,724 3,804,205 Cost of investment P1,800,000
Dec. 31, 2018 P180,000 190,210 10,210 3,814,415 Underlying equity 20% x P6,000,000 1,200,000
Excess of cost P 600,000
Undervaluation in land 20% x 750,000 (150,000)
Final Answers Computations Undervaluation in equipment 20% x 200,000 (40,000)
9. P376,400 P188,000 + 188,400 = P376,400 Undervaluation in inventory 20% x 30,000 ( 6,000)
10. P3,776,400 Goodwill P 404,000_
11. P0
12. P48,279 Selling price on November 30, 2014 (1.8M x 98%) P1,764,000 25. P116,000 Income from Associate
Carrying amount Initial share (800,000 – 160,000) x 20% P128,000
June 30, 2014 3,804,205 x 1.8/4 = P1,711,892 Amortization
Amortization June 30 – Nov 30 Depreciation on Equipment 40,000/5 x 9/12 ( 6,000)
10,210 x 1.8/4 x 5/6 = 3,829 1,715,721 Inventory ( 6,000)
Gain on sale on November 30 P 48,279 Income from Associate P116,000

13. P2,097,928 P2,200,000/4,000,000 x 3,814,415 = P2,097,928 26. P0 Dividends received from associate should be credited to the Investment account.
The reclassification shall be treated in the first reporting period
subsequent to the change in the business model.
27. P1,816,000 Cost of investment P1,800,000
14. P365,668 Interest income for 2018 Dividends received ( 100,000)
January 1 to June 30 P189,724 Income from Associate 116,000
July 1 to November 30 190,210 x 5/6 = 158,508 Carrying value of investment P1,816,000
December 1 to 31 P190,210 x 2.2/4 x 1/6 17,436
Total interest income P 365,668
Items 23 through 28
Items 15 through 19
Boracay Co. ordinary Bohol Company ordinary 8% treasury bonds
15. P360,000 P4,000,000 x 9% = P360,000 # of shares Amount # of shares Amount Face Amount
1/1/12 bal. 1,000 P 25,000 3,000 P18,000 P50,000 P50,000
16. P160,000 (98% x P4,000,000) – 3,760,000 = P160,000 1/31 (200) ( 5,000)
17. P35,000 loss 6/30 600
7/8 (300) (1,500)
Total proceeds P1,960,000 8/1 (20,000) (20,000)
Accrued interest 2,000,000 x 9% x 5/12 ( 75,000) 12/31 bal.
Selling price P1,885,000 before Fair
CV 96% x 2,000,000 1,920,000 Value adj. 800 P20,000 3,300 P16,500 30,000 P30,000
Loss on sale of FVPL P 35,000 Adj to FV 4,000 6,600

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SOLUTIONS TO INVESTMENTS IN FINANCIAL INSTRUMENTS SOLUTIONS TO INVESTMENTS IN FINANCIAL INSTRUMENTS

12/31 per Cumulative balance of UGL P 31,500

audit 800 shares P24,000 3,300 P23,100 P30,000 P30,000
34. P115,125 P111,000 + P4,125 = P115,125
23. P3,333 Interest Income
January 1 to July 31 P50,000 x 8% x 7/12 = P2,333 Items 35 through 40
August 1 to Dec. 31 P30,000 x 8% x 5?12 = 1,000
Total interest income for 2017 P3,333 Financial Assets at Fair Value through Profit or Loss
Seattle Ordinary Grunge Preference Cobain Ordinary
24. P1,000 gain Net selling price P6,000 Shares Amount Shares Amount Shares Amount
Carrying value P25,000 x 200/1,000 (5,000) 1/1/17 2,000 P28,400 1,200 P78,000
Gain on sale P 1,000 20% bonus 400
Sale (400) (4,733)
25. P18,300 gain Selling price P 2,000 Purchase 1,500 P31,500
Carrying value P18,000 x 300/3,600 ( 1,500) 12/31 bal.
Gain on sale P 500 before adj to
FV 2,000 P23,667 1,200 P78,000 1,500 P31,500
26. P200 gain Cash received P21,000 Unrealized
Interest for 6 months (20,000 x 8% x 6/12) ( 800) Gains (Losses)
Selling price P20,200 4,333 (1,200)
Carrying value 20,000 Per audit 2,000 P28,000 1,200 P76,800 1,500 P31,500
Gain on sale P 200

27. P10,600 See above worksheet: P4,000 + P6,600 P10,600 41. P136,300 28,000 + 76,800 + 31,500 = 136,300

28. P77,100 See above worksheet: P24,000 PP23,100 + P30,000 = P77,100 42. P0 Cash dividend from Grunge should have been recorded as income in 2011.

Items 29 through 34
43. P52,900 Cost (800 x P50) + P5,400 = P45,400
29. P55,000 P1,040,000 – P985,000 = P55,000 Share in profit 50,000 x 20% x 9/12 7,500
Investment in Associate, Dec. 31 P52,900
30. P4,125 From Alaska: 5,500 x P0.75 = P4,125
44. P7,500 50,000 x 20% x 9/12 = P 7,500
31. P111,000 P370,000 x 30% = P111,000
45. 758,600 764,000 – 5,400 = P758,600
32. P2,293,500 Fair value of old 25,000 shares: P1,520,000 x 25,000/50.000 = P760,000
Purchase price of new 50,000 shares 1,520,000 46. 3,133 See above worksheet : 4,333 – 1,200 P 3,133
Initial cost of 75,000 shares P2,280,000
Income from associate 111,000
Dividends received (75,000 x 1.30) ( 97,500)
Carrying value, December 31, 2013 P2.293,500

38. P316,500 Alaska 5,500 x 23 P126,500

Bahamas 10,000 x 19 190,000
Total fair value P316,500
A-MAGS CORPORATION
33. P31,500 Fair value P316,500
Cost : 125,000 + 160,000 285,000

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SOLUTIONS TO INVESTMENTS IN FINANCIAL INSTRUMENTS SOLUTIONS TO INVESTMENTS IN FINANCIAL INSTRUMENTS

Advances from Customers 24,000

Selling and Administrative Expenses 2,000 Accounts Receivable – Not yet due 56,000
Advances to Officers and Employees 1,500
Cash – Petty cash fund 3,500 Accounts Receivable – not yet due (182,000 x 60% x 125%) 136,500
Sales 136,500
Other Assets 130,000
Cash in Bank 130,000 Inventories ( 182,000 x 40%) 72,800
Cost of Sales 72,800
Cash in Bank – PCI Bank – Current 5,000
Accounts Payable 5,000 Selling and Administrative Expenses 5,460
Accrued Expenses 182,000 x 60% x 5%) 5,460
Cash in Bank 45,000
Other Current Liabilities (Bank Overdraft) 45,000 Other Current Assets (80% x 28,000) 22,400
Loss due to Flood 5,600
Accounts Receivable – Past Due 20,000 Inventories 28,000
Cash in Bank – PCI Bank 20,000
Equipment 15,000
Accounts Receivable 15,000 Cost of sales 15,000
Customer Credit Balances 15,000
Selling and Administrative Expenses 1,500
Allowance for Doubtful Accounts 10,250 Accumulated Depreciation (15,000/5 x 6/12) 1,500
Accounts Receivable – Past due 10,250 AR – Total AR – Not due
Per client P424,000 P187,000
Advances to Officers and Employees 3,500 Adjustments 20,000
Accounts Receivable 3,500 15,000
(10,250)
Sales 30,000 (3,500)
Discount on Notes Receivable 30,000 (56,000) (56,000)
136,500 136,500
Notes Receivable – Non-Current 120,000 P525,750 P267,500
Interest Income 24,337
Notes Receivable 120,000 Operating Expenses 363
Discount on Notes Receivable – Non- current 24,337 Allowance for Doubtful Accounts 363
Total Accounts Receivable P525,750
Discount on Notes Receivable (30,000 x 5/12) 12,500 Accounts Receivable not yet due (267,500)
Discount on Notes Receivable – Non-current (95,663 x 12% x 10/12) 9,566 Accounts Receivable past due P258,250
Interest Income 22,066 Provision rate for past due accounts 5%
Required allowance P 12,913
Interest Receivable 4,057 Existing allowance ( 22,800 – 10,250) 12,550
Interest Income 4,057 Additional doubtful accounts expense P 363
40,000 x 16% x 36/360 = 640
75,000 x 20% x 82/360 = 3,417 Investments in Associate – Johnny Walker 280,000
Total 4,057 Equity Investments – FVPL 89,000
Investment in Equity Securities 369,000
Inventories 22,500
Accounts Payable 22,500 Investment in Associate – Johnny Walker 150,000
Income from Associate 150,000
Sales 80,000

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SOLUTIONS TO INVESTMENTS IN FINANCIAL INSTRUMENTS SOLUTIONS TO INVESTMENTS IN FINANCIAL INSTRUMENTS

Dividend Income 12,000 21. P122,960

Investments in Equity Securities 12,000 22. P52,500
23. P490,873
Investment in Equity Securities 16,800 24. P55,000
Equity Investments – FV (43,200 x 400/1,200) 14,400 25. P0
Gain on Sale of Equity Investments 2,400 26. P4,677,163
27. P3,682,361
Treasury Stock 45,000 28. P643,126
Investments in Equity Securities 45,000 29. P9,000
30. P35,923
Dividend Income 30,000 31. P18,000
Investment in Associate 30,000 32. P14,400
33. P0
Equity Investments – FVPL 18,000 34. P5,600
Unrealized Gain on FVPL 18,000 35. P150,000
36. 157,980
December 31 Fair values: 37. P368,619
San Miguel 500 x 50 P 25,000 38. 363
Asia Brewery 800 x 38 30,400 39. 9,566
La Tondena 1,200 x 31 37,200 P92,600 40. 5612,724
Previous carrying value
San Miguel P28,000
Asia Brewery 43,200 – 14,400 28,800
La Tondena 17,800 74,600
Unrealized gain P 18,000

1. P491,500
2. P92,600
3. P525,750
4. P12,913
5. P6,500
6. P295,000
7. P12,500
8. P4,057
9. P5,000
10. P1,347,300
11. P5,500
12. P0
13. P400,000
14. P213,500
15. P257,629
16. P399,500
17. P275,000
18. P15,000
19. P24,000
20. P153,450

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