Professional Documents
Culture Documents
FAR OCAMPO/CABARLES/SOLIMAN/OCAMPO
FAR.2924-Other Investments OCTOBER 2020
DISCUSSION PROBLEMS
1. Nueva Vizcaya Company has the following accounts 4. How should the sinking fund be reported in the
included in its December 31 trial balance: company’s balance sheet at December 31?
FA@FVTPL P1,000,000 a. The cash in the sinking fund should appear as a
FA@FVTOCI 2,000,000 current asset.
FA@AC 3,000,000 b. Only the accumulated deposits should appear as a
Investment in associate 4,000,000 noncurrent asset.
Interest rate swap receivable 100,000 c. The entire balance in the sinking fund account
Forward contract receivable 200,000 should appear as a current asset.
Futures contract receivable 250,000 d. The entire balance in the sinking fund account
Call option 150,000 should appear as a noncurrent asset.
Petty cash fund 50,000
Payroll cash fund 500,000 5. Following are selected transactions in chronological
Dividend cash fund 200,000 order of Bayombong Company and its trustee in
Interest fund 150,000 connection with a sinking fund.
Sinking fund 1,100,000 a. Cash contribution to the sinking fund, P1,000,000.
Plant expansion fund 2,000,000 b. Acquisition of securities at par by the trustee,
Stock redemption fund 1,800,000 P700,000.
Contingency fund 1,000,000 c. The trustee receives interest on the securities,
Insurance fund 1,000,000 P60,000.
Investment property 4,000,000 d. The trustee pays expenses of P30,000.
Prepaid rent 200,000 e. The trustee sells the securities for P800,000 plus
Cash surrender value of life insurance 100,000 accrued interest of P10,000.
f. The trustee pays bonds payable of P1,000,000 and
How much is the total amount normally considered as
interest of P100,000.
noncurrent investments?
g. The trustee remits the remaining cash to
a. P20,000,000 c. P17,900,000
Bayombong Company.
b. P18,000,000 d. P14,000,000
How much was remitted by the trustee to Bayombong
Company?
2. Which statement is incorrect regarding fund a. P150,000 c. P50,000
accounting? b. P140,000 d. P40,000
a. In essence, the fund is accounted for as an
individual set of books.
b. Fund refers to cash and other assets set aside to Use the following 8% interest factors for questions 6 to 13.
accomplish specific objectives.
FV of PV of
c. The purpose for which fund was established may
ordinary ordinary
be current or noncurrent.
annuity annuity
d. Funds that relate directly to current operations are
Periods FV of 1 PV of 1 of 1 of 1
ordinarily shown in the long-term investments
1 1.0800 0.9259 1.0000 0.9259
section of the statement of financial position or in a
2 1.1664 0.8573 2.0800 1.7833
separate section if relatively large in amount.
3 1.2597 0.7938 3.2464 2.5771
4 1.3605 0.7350 ? 3.3121
5 1.4693 0.6806 5.8666 3.9927
Use the following information for the next two questions.
7 1.7138 0.5835 8.9228 5.2064
The following information is available concerning the Mauro 8 1.8509 0.5403 10.6366 5.7466
Corporation's sinking fund transactions in the current 9 1.9990 0.5002 12.4876 6.2469
period. There is no trustee.
Jan. 1 Established a sinking fund to retire an 6. What amount should be deposited in a bank account
outstanding bond issue by contributing today to grow to P3,000,000 three years from today?
P425,000. a. P3,779,100 c. P9,739,200
Jan. 15 Purchased securities for P400,000. b. P2,381,400 d. P7,731,300
Jul. 30 Sold securities originally costing P48,000
for P45,000. 7. If P1,000,000 is put in a savings account today, what
Dec. 31 Collected dividends and interest on the amount will be available three years from today?
remaining securities in the amount of a. P1,259,700 c. P3,246,400
P49,000; the securities had a market b. P 793,800 d. P2,577,100
value of P360,000 at this time.
8. If P900,000 is put in a savings account today, what
3. The sinking fund balance at December 31 is amount will be available six years from now?
a. P479,000 c. P471,000 a. P900,000 x 0.6302
b. P474,000 d. P442,000 b. P900,000 x 1.08 x 1.4693
c. P900,000 x 0.6806 x 0.9259
d. P900,000 x (1.08 + 1.4693)
9. What amount will be in a bank account three years c. In the future value of an ordinary annuity, the last
from now if P500,000 is invested each year for four cash payment will not earn any interest.
years with the first investment to be made today? d. Other things being equal, the present value of an
a. P1,656,050 c. P2,433,300 annuity due will be less than the present value of
b. P1,788,534 d. P2,253,050 an ordinary annuity.