‘Accounting 21 Financial Accounting and Reporting Part 1 43.2 investment in Debt Securit ; 6. | Generaly ncepied scouring pnccls (GAAP) er fe uve fa vale accountng ro MB Gb Cargvetorsive neomalo od anges sosoclay uly Servos poten scoprv oes sodoaere ivsemert Te rare eos must be rept on fhe income alent me mnlst veers coher tarprherdr’ fcome laren bs fete seperation wed corn icin capa on the balance sheet, as sccuraied oer comprenensre inca, 16 <{emprsharave income does at aoc et f eRecimaave ‘ffecis of cthor comprehensive comet false. © eo f aries cate coparia rceend comers 34-Poanci tess al ak vue twoegh PL aecutues wo aera eons meotrae prealcedhcng ona alesse we cori iret ncome for ian anes ot ar vue foosgh securities, iS 4 aGm Problem No. 1 5 ‘On January 1, 2011, Ellison Company purchased 12% bonds, having @ matury value of P&00,000, for P860,652. The bonds provide the banaholders with a 10% yield, They are dated January 1.2011. and mature Januscy-S-2055, wih wierest receiv smber 31 af each year. Elison's business model isto bald thece- bonds in acia However it uses oft {1 compute interest (round to the nearest peso). (Do not re-compui the eflecive interest rate.) Ri cees ret esonlpewtne _ £800,064 ono prem 20117 _P4 fag Za emount of he bond invosimert os of December 31, 20117 Peeoly _ ing Pn a 860000 Dont 9.201, __ P9383 gain “Pall.08 gain Problem No.2 ‘On sty 1, 2010, West Co. purchased 160.000 of63) bonds for 168,300 (a Patiect 7 eco interest rate) as a nantacting Investment or at adialzndcDt Interests paid on July {and January and the bonds mature on ly! 20\8 Trees RYT a9 sold on Noverber 1, aD 105 pus accrued intrest Amoriznton was recoded whan inureet war eae (our othe nearest poo), ‘ Eats ott casn payment to acauire the bonds? @ Calcatehe ttl interest revenue for 2010, ® ‘Me cost of gale of bonds Reape 5 PBR. ‘ fe Ee een: en pee Peet! Broiees ® cates gin ortss ons, again P4011 ABR gain 24992 N® 909 (G7 602 , Ry Jonooh M, Redoblado | 2Accounting 21 Financial Account 321nvestment in Debt Secures 28° P2PHiNG Pat + problem No.3 On gly 2011, Kier Com puconad PASO 0) of einerisresiraod (ound ow ramen pss) eben are ison Gears Sets PCN DOUDsonS Eisen rssoe Bao rocendngoratancncnd sanyo to" Ce 2OLL PAZ7 0 esr tare) P 43) 987 {© aca etal ineesevee fr 2011 17,504 _ * Haas 1548 @ can cost sal otbonss. 4 wus BP ABER 490,085 eo) Getcdate the ill cash received on Octcber 1, 2011, & @ cacane gan ors on sie tasc1 PIGS _peppigersats gain Problem No.4 Bosch Crpoaton has government bends cssied a bldxsslcton at December 31.2011, These bond have 85% Walue of P5000, an smarized cost ot PEDO 00, ad far valve of PSS 000, n evalua te bende, Bosch deterres the onde have PA5.000 nemanent decir in aus. Thats, he company bebeves that imparment seeming = 0M ‘ooroptaforthasa bonds. At Decors 31, 20°, he far vaio of fe nicipal bends ie P570.000 45,000_ PO © oaenina alpsives cs a tre 0 ® Whatis the new cost basis of the bonds? © Given atte may vo of be bod 7002 : rd Sout Bouck Copertcn snort tn itareneebomann te cain mu =¥ Sheihe many valve ores eto he benae? os oF) No, a 3, 2012. , 000 F 5 G2 RiDecembers 1.2012, impeinment be reported in comprehensive income aa! _p.510,000 _ ‘thabactount of rovers 55-A December 31,2012, whatis he carrying amount of he deb invesiment? Pra: ran Se Comin pnd 000000 0 nt eran SO age Stiinta Sa 2 ens pyte sera vy ae Oe ld sean tn Thm bende pene 3 ne bce er ang meen sary 2, 20% POP Soe at Oe ede 9 01, Te bonds were sling at 103 on December 31,2011. (Round of Pr Coca eces) ae 07, BF ncn nanny 208 anaso P a7,405 — pp cance oon 1208018 P99 gt ota 9 pe GER. “aca sabato vreconeraar 1.20118 EL ae 00 GE vinaracnis no tc eas SAN ren oy 2a zr ees SOOT 8) on ma robe apr tcanpornt fay on Daca 31, 20127 P_494,099 Fo -End- ‘Who said “Fill-in-the-Blank is so easy? Sige, ikaw nga. Try natin. Fillthe blank with a YES or NO. don't have a brain! ‘Fano ang sagot mo?ig: ‘Accounting 21 Financial Accounting and Reporting Part 1 43.2 Investment in Debt Secures we -ggean cfd TL Date ain oor tue or false. cinue to be clasifed as temporary, provided . MeV, sane for several years, they 62 I costs relate tothe purchase. Pied intorest since the last interest a prt tet ya roc ye any se ely mackatabl aed py ar way al oat ofa bore wwaniment aos fed ~ sn interest dates, ‘the purchase price includes accr Altende ore purchased Debtee ent © Titan's bond is purchased for an inves woot is recorded. ete emountol nares pid when buying 2 =F Fg PLompanies invest excess cash in on née ssid a bond invesiment between interest payment rou be codied 7 Bs fate 4 rtoatong-trm investments n bonds are sold befor thir ties ogert an fam en ee Ipatitratpaynrt at om Bs pvecronis excende te carina aunt of he bende 8 en erg and nvasiments exicoos Meporiad in he Olher Income (Lass) section of te income tment, he purchase price, minus fe brokerage commission, lus any accrued bond ae an investment should be credited to Interest Revenue bon oe tame in ardor to profit long-term from the growih ofthe periods, investment in Bonds would be debited and Cash and since the aturity date, the seller deducts any accrued interest Tue Pe STs lesen onthe sae o | Ine es A vesment in ese than 20% of another company's stck ie accounted for sing the Soa FE SS 2aesey nce wang wontcant paronsine ver oo of eras comoraon S28 forthe investment / Sand te uity method fle, 12—einventa cary an vestry he ent mated recat cash en fale @Uniorine eaaly mtg.» stock purchase i recorded tits oiginal cost andis rot adusled 12 _-actounting period. mt Fenn Pa 9 tno investment account ror te proporional changes in baok value of tne este Se sips some for bohine con ana re oauty Matos of accountng or VERE on thor corporation is known aa the paren company. i oceived ar not eated as income eae 8 eae ‘gang all ox majority ofthe voting stock of zeroraon oni a 8h Fo ee cf anothor company ive i or oe 20% oe te and eubsidary siatements are called consolidate statements drietiate Ss jved as an inerease in the carrying foirmarket value each financial statements resulting He eepoasible for one company 10 uence Une operating policies of another comnany unless i reat in that company, priate for accounting for investments where the purchaser does nat have ‘We ‘The equity method is usually more appr fcont influence over te investee ‘ata price ciher than the face value, the premium or discount He 22-~Wihen ponda nea as Tongs invesmonis are puacnased Should be amorized over the remaining life ofthe bonds. * (sare recerded as part of nlarastincorne on the income statement 1) emortnton of scouts oper ; 25 ena snes st Smmorizad cost securiies are reported on the balance sheet at fair market value. et 25 tal noel ot Sinorized cost securiies maturing beyond a year are reported as noncurrent assets. ‘i eae ot far velue inrough Pl. secures should be reported onthe financial statements a fac market valve ‘io hold fo matunly are called Financial assets at fair value through P/L ns earns bande at management nos eet atone of cost of mart i ne 15 itn ont reo balance 6 ‘ercetment in Bends is ised onthe balance shes after Bonds Payable. Inmet as) are recorded at hee cost which would inkude broker's ®. Temparory investments missions, ATO a ater value trough OCI secures are seers thal management expects 1 sellin he flue, bu are fot actively traded for prof % Truro Front soot ata vain hough PHL neces re repaid cn haps cost Iifial? ‘ai migra vlvee of te secures and the cost ia an oss cluded in the calculation of as ae sear betwaen the Ur wos on financial assets ot fair value through PIL securities ar re pgselzed gine ands income Fale, 25 tsirerian stocks at re xpi tober bola om alin Pe stockholders equly section of he dobited or credited to the account Rey Joseph M. Redoblado | 1