\LACCOUNTING 1 © (berita® Lopenita Financial Instrument-Equity Instrument of Another Entity At initial recognition the equity investment must be designated as investment at fair value to peofit oF loss unless the entily made an irrevocable election 40 designate the investment at fair value to ether comprehensive income. Once the equity investment has been desivnated as fair value to peafit oF loss oF fair value tw other comprehensive income there would be no transfer from other comprehensive income t profit or lass Ce, no “recycling” of reclassification adjustments). Measurement of investment ‘he equity invesiments are énitially recorded at their fair values plus any transaction costs that are directly ‘attributable to the acquisition for an investment designated at fait value to other comprehensive income. The {ransaction costs incurred on the acquisition of a financial asset designated at fitit value t0 profit oF loss shall be expensed as incurred. “Transaction costs incurred on the acquisition of financial assets are the cost that would not have incurred if the entity had not acquired the financial asset such as commissions, stamp duties and other directly attributable charges. Subsequent to initial recognition the Financial assets deduction for transaction casts that it may in re remeasured at their «1 ur on sale oF other disposal values without any 3. Acquisition of two or mare securities at u lump sum price a. When both market values of the securities are known, the acquisition cast should be allocated using their relative market value ratio. b. When only one security has a known market value, the market value of the security with a known market value be its assigned value and the excess amount of the acquisition cost over the market value of the security with a known value will be the assigned value of the secutity with-out a known value. ec. When the market values of both securities are unknown, then the total aequisition cost will be temporarily charge to the account “Investment in Financial Instrument” until such time the market value of one or both securities are available, 4. Accounting for dividends on equity (ordinary stock) instruments: Cash dividend ~ is recognized as income on the date of declaration and measured at the face amount of dividend, Property dividend ~ also a dividend income on the date of declaration but it should be measured at the fair ‘market value of the property Stock dividends ~ no amount of income is recognized. Only a memorandum entry is required to acknowledge the receipt of new shares. Shares in liew of cash dividends ~ are recognized as income and measured at the fair market value of the shares, * ‘Cash in liew of shares - not a dividend income. the cash received is the proceeds on the as if sale of shares, Preference share (new financial debt or equity instrument) dividend — not an income, allocate the carrying value of the equity instrument to the new instrament (preference) and equity instrument (ordinary share) using their relative market value ratio. 5. Shares received in exchange for old shares oF stock splits (split-up oF reverse split): Only a memorandum entry 1 required to acknowledge to recep of new shares in e\change for shares originally held. PERS for SMEs Category of investment ~ for a small size equity investment the profil oF loss. Measurement ut initial recognition ~ the finangial transaction cost Measurement at financial reporting date at the end of each reporting period, an e asset at fair market value without any deduction for transaction disposal, Changes in the fair value of the investment are report investment can only be designated as investment to ‘set shall be measured at the transaction price excluding any ity shall measure financial 8 costs that the entity may incur on sale or other (ed inthe profit of lossaa oC ea a C, Uberita/(, Espenitta/, Macariola ial Instruments — Equ oo ‘uments Vee 1 Blue Company acquired the following portotio of equity 2012 and reporied the following balances af December 3, 2012. No sles mare dene © comidered Yo be lempotary pawn Cost Market Value. 350,000 sé 00 28.000 00.000 S250 a0. [200.0 Thee 6 ‘What is the carrying value ofthe secures On December 31, 2012 on Blue's balance shea? a. 1.275.000 £ 1.400.000 b 1,300,000 d. (1,425,000 2 Candy Company purchased the fotlos following balances at December 11, 2012. No ses occured during 2012 All deci temporary ng portfolio of equity instruments during, 2012 and reported the ‘are considered to be December 31, 2012 Cost P_ £00,000 1,400,000) 1.320.000, ited as investment (6 ProTit or toss. how much should Candy Company Teportas unrealized gain or loss related to the securities 1m its 2012 statement of comprebiensive income? a. None © P100.000 unrealized gain b.P20,000 unrealized gain 2 P180.000 unrealized gain Question 2- Wf the securities were designated as investment to other gaiupschensixe income, how much should Candy Company report as unrealized gain of loss related fo the securitics in the statement of comprehensive income? a None 6, P100,000 inrealized b. P20,000 unrealized gain of P180,000 unrealized gain mp olny s FIL Question 3: if Candy Company is a mediimzsized Entity, what amount of unrealized gain o¢ loss should be reported in the company’s oiler comprehensive income? None € P100,000 unsealized gain ’b. P20,000 unrealized gain 4, P180,0100 unrealized gain 3. Nation Company began business in November of 2011. During the year, Nation Company purchased ponfotio of equity scouritics listed below. In uls December 31, 2011 balance sheet, National Company appropriatcly reported a PLGO.000 att Value Adjustinent= Equity Security” account. The composition of the securities did not change during 2012, Pertinent data areas follows Cost leet Value, December 31, 2012 1,200,000 PL.260.000 ‘900.000 950,000 1,600,000 1,620,000 3,700,000 3,330,000 ‘Question J: What amount of unrealized gain oF loss on these securities should be included 1m Nation Company's profit or loss for the year ended December 31, 2012 assuming the equity sccurities were desisinated as investment {0 profit or loss” a None © PI30.000 P3000 4. PIG0.000 What amount of unrealized gain or loss on these securities should be included in Nation Companys ‘of comprehensive income for the year ended December 31, 2012 assuming the equity sccursuee were designated as investment fo other comprehensive income? ‘ a. None © PI%0.000 P30.000 4. PI60.000 918 Page 1 of 4ReSA / PRACTICAL ACCOUNTING 1 4 Investment in Equity Securities 1 Morgan Company began business an October of 2011 Dung the year, Moran purlised & porttle of securities listed below. In its December 31. 2011 balance shext, Morgat appropriately reported a B3,000 ~ Stedit balance in ats “Fair Value Adjustment Equity Security” account The composition of the sevurities did ‘ot change during the year 2012 Pertnett data ate a follows Security Gost Market Valuc, December 31, 2012 P P2,40H.000 Pease @ 2.500.000 2 ss0,000, R _1.900,000 3,000,000 6,801,000 7,000,000 Question 1: What amount of unrealized gain or fos on these securities sould be included in Morgan's profit 208 forthe year ended December 31,2012 assuming te asus were deste as vest 10 OH OF a 200,000 «PaO. 'b. P300,000 PSK, Question 2: What amount of unrealized gait or toss on these secunties should be inched ia Morgan's other comprehensive income. for the year ended Devember 31, 2012 assuming the secuniies were designated as investment in available for sale? a 200.00) © PaOn.oN) b. 300.000 |e 500,000 Question 3: What amount of unrealized gain of Hoss on these securities should be included in Morgan's Shareholders’ equity for the year ended December 31. 2012 assuming the secunties were designated as tnvestment in avaulable for sal a P2000, (= . P400,000 b. P300.000 2 P500.000 Question 4 By what amount the uncalized yain o loss oo the above securities had increased/Jucreased during 2012 assuming the sovuntes are classified as inyestnent in availabe fr sale? a P200,0%) 2s 400,000 b. 300,000 JAF P5000 (So0- Gsir) Owl Company reported the following investment in long-term marketable equity securities investment {0 other ‘comprehensive incomes in its December 31, 2011, statement of financial positon. TInvestinent in non-curent equity securities, at cost 2,600,000 Fair value adjustment 400,000) Fair market valuc, December 31, 2011 BR200,KN) ‘Question 1: On December 31, 2012, the market value of the portfotio was P2,500,000, How muich should Owl report in its 2012 statement of comprehensive income as a resull of the mcrease in the market value of the vestments in 2012? Bes MBE aes n\ None 2K P 300,000 , P200,000 Ps00.00 (Question 2: What amount of unrealized gain or loss should the company disclose in the December 31, 2012 sgjatement of financial position? Za. None ¢ P300,000 b P200,000 Oe PH00.000 ‘On November #2011, Ribbon Company invested in P600,0100 in equity securities representing 20,000 ordinary shares of Carbon Company. Ribbon Company incurred transaction cost of P5,000 related to the acquisition of the security. On December 31. 2011. this investment has @ market value of -PS80,000, Ou April 15, 2012, Ribbon Company sold the investment for P630,040, Question 1: Whot pmo of realized gain should Ribbon Company recognized on the disposal of the security Sssumune the security was clasiicd ws investment in prof oF Lose? 7 a. P20.000 <, PAS000 &P30,000 P5000 (620..608)) Questicn 2: What amount of realized gain should Ribbon Company recognized on the disposal of the. secur assuring the security svas classified as investment at far value t other comprehensive incon a 20,000 Cok GP © PASO a -& 25,000 ARS Seo d P5000 918 Page 2 0f3ReSA / PRACTICAL ACCOUNTING 1 Investment in Equity Securities 1 Cuesiion 3 What aout of realtved jan should Ribbon Company rccapnized on the disposal of the security ‘usage Sey way elansitie as tvestneHt aL Lai Gatae to other comprehensive tncorne under PFRS. 9? a Poo fe PAS HOG ’P Ti pe P2S.000 ps0. 0011 6 FE Pst.on Fey hep 7 September 1, 2012, Cede: Company evehanged equipment for 2 $00 shares of Chunk Company's ordinary of P300,000 and tts fiir mkt value wa shure way PMG per shave On December 11. 2012. Chunk youl us sachet value if stare On that date, the eqquqprictt ha The book value oF Clnth sont numbers ob grdumay sluanyss outsuan What amu shoul Codie Company report as carrying vitlue of the investinent and the aniount of gain or loss fon the exchange respectively? ‘ 260,00 nil 40.000 gain 240,080 and 60,000 pin Ph 260,000 and 40,000 oss d, 240,000 and 60,000 loss 8 Mutint Company purchased 20.000 P92 1,000 ares of Twister Company orduxiry shares on February 29, 2011, for Wtscen a PAD sash dra an Tne sc on all 7, 2081 wher dodared dividend on Devembyy 2011, to shareholders of record as of December 31, 2001 was nbd on Jamuay 31 S8G& "The mut eet sh wa Pak on December 1 2011229 on December 31, 2011 and P42 om lanmury 41, 2012. What amount of unrealized gaun or loss and the amdant of divnkond income respecte tat sald ape in e vember T2071 fn seten a 4 on nnd 40,000 qa4or) b won and 120,000 4. 44,900 and 120.000 (Bi 070) oe ret ahs, ‘noone ules fore 9. Goose Company tied 30.000 dines (8% owner) of Casio Compan etree 15, 2012. Guess reseed shitg Un ahulal 1% 0 Murch 31-3012 whine mene preeerdishee ae PaO, On Novae PPX per share {In the statement of comprehensive imcome for the year ended December 31. 2012, en shod Gasca tn gl py Sete fs + Seo Ske a oan he) aed aH xe b 180.000 bot llicle oar a y teed of Were Coole 10 Comfort Compan purchased 10H ses of Vel) odour shy at POO stare on Jamuary 8, 2012, Om Deventer 4,201? Comfart tee? 00 shires of Veh et ody shares i he elated oF Kee state” On his eth Vet oray shat hav qt wart pce oC ORR + od given! {nuts 2012 stem of compchenyive income, Comfart should report dividend income at al F100 op doabend | HINO 61D) Shady 2 ded pleating seme 7” PHAR. +1 6 60 nny Coron Di. Reger = 100,000 Fochcome — RoW none bis coew raced Vr Casi d; col 76 3 2: 5 2 1, January 2, 2012 Tender Company vequired 16.00 suyes ofA Company aie Sane APNE ght UW ree en) July 1. 2012, the A Company shares were split $ to 1" Gn October 1.2012 Tender Compan recenes hom a pen ohana. Company a peeference share disidend of ongshare for every l¢) ordinary states held On this date, the sorket Powe of A Company's ordinary shines ts PIS per shire and the preference shares is PIO por share Oe December 31. 2012. A Coup taster to Tender Company its investment in B Company representing $00 ordinary shares as di aden, "Tho market price of 8 Company shares is PIS per share and ts rr cals PO per share. What is the amount OLgn wend nyo. hal should appear the Devember 31. 2012 fron statement of Tender Co.? humo 05-1 a. None 75,000 “gy: b. 50.000 Aime 00 OS -wicloeo ngnets 0+ Bergh y IS = ).2M Argo x grok © 750k eo Po PY» Berry P_PK/ 290M X Boks eo) “70 re 918 + hvest. tm feb cok Page 30f 3 * Jnvest in old Sk Wel le of inveclaerh Mirador sant «