Aguilan: Question No. 1 Answer B

AGUILAN
1. The Lightning Thief Company is considering the appropriate classification of the following items:
Land held for long-term capital appreciation P15,000,000

Land held for undecided future use 30,000,000
Building leased out under an operating lease 75,000,000
Building leased out under a finance lease 45,000,000
Vacant building held to be leased out under an operating 8,000,000
lease
Property held for use in the production or supply of
goods or services and for administrative purposes. 15,000,000
Property held for sale in the ordinary course of business 2,000,000
Property being constructed or developed on behalf of
third parties 12,000,000
Property held for future development and subsequent
use as owner-occupied property 4,400,000
Property occupied by employees 3,600,000
Owner-occupied property awaiting disposal 750,000
Property that is being constructed or developed for use
as an investment property 12,000,000
Existing investment property that is being redeveloped
for continuing use as investment property 24,000,000
Building held for administrative purposes and leased out
under operating lease (60% is for administrative 15,000,000
purposes)
Building leased out under an operating lease (the entity
supplies security and maintenance services to the 30,000,000
lessees)
How much is the total amount that would be reported as investment property?
a. 291,750,000
b. 200,000,000
c. 194,000,000
d. 170,750,000
Question No. 1 Answer b
Land held for long-term capital appreciation P15,000,000

Land held for undecided future use 30,000,000
Building leased out under an operating lease 75,000,000
Vacant building held to be leased out under an operating
lease 8,000,000
Owner-occupied property awaiting disposal 750,000
Property that is being constructed or developed for use as
an investment property 12,000,000
Existing investment property being redeveloped for
continuing use as investment property 24,000,000
Building held for administrative purposes and leased out
under operating lease (15,000,000 x 40%) 6,000,000
Building leased out under an operating lease (the entity
supplies security and maintenance services to the 30,000,000
lessees)
Investment Property P200,000,000
2. Ed Company acquired 40% of Sheeran Inc.’s voting common stock on Jan. 1, 2016 for P400, 000. The
carrying amount of Sheeran’s net assets at purchase date was P900, 000. All items, except equipment
for which fair values exceed carrying amounts by P100, 000, have their fair values equaled to their
carrying amounts. The equipment has an estimate of 5 year life. During 2016, net income of P150, 000
was reported by Sheeran Inc. If Ed uses equity method, what amount of income from this investment
should Ed report in its 2016 income statement?
A. P40, 000
B. P52, 000
C. P56, 000
D. P60, 000
No. 2 Answer: B
Sheeran’s net income P150, 000
40%
Ed’s share of Sheeran’s equity P60, 000
Less: Ed’s share of excess depreciation (P100, 000 x 40% / 4 yrs) (P8, 000)
Income from investment P52, 000
3. Aunty Em, Inc. and its subsidiaries have provided you, their PFRS specialist, with a list of the properties
they own:
 Land held by Aunty Em, Inc. for undetermined future use, P5,000,000.
 A vacant building owned by Aunty Em, Inc. and to be leased out under an operating lease,
P20,000,000.
 Property held by a subsidiary of Aunty Em, Inc., a real estate firm, in the ordinary course of its
business, P30,000,000.
 Property held by Aunty Em, Inc. for use in production, P1,000,000.
 A hotel owned by Dodds, Inc., a subsidiary of Aunty Em, Inc., and for which Dodds, Inc. provides
security services for its guests’ P50,000,000.
 A building owned by Aunty Em, Inc. being leased out to Minotaur, Inc, a subsidiary of Aunty Em, Inc.,
P20,000,000.
How much will be reported as investment properties in Aunty Em, Inc. and its subsidiaries consolidated
financial statements?
a. 25,000,000
b. 70,000,000
c. 85,000,000
d. 55,000,000
Question No. 3 Answer a
Land held by Aunty Em, Inc. for undetermined future use P5,000,000
Vacant building owned by Aunty Em, Inc. to be leased
under operating lease 20,000,000
Investment Property P25,000,000
4. On April 1, 2016, Baboy Inc. purchased P200,000, 9% Treasury Notes for P198,500, which includes
accrued interest of P4,500. The note will mature on July 1, 2017, and pay interest semi annually on
January 1 and July 1. Baboy uses the straight-line method of amortization. Saxe does not use the fair
value option for recording the securities. In its October 31, 2016 balance sheet, the carrying amount of
this investment should be
A. P194, 000
B. P196, 800
C. P197, 200
D. P199, 000
Answer: B
Cost P198, 000
Accrued Interest (4, 500)
Carrying amount (Apr. 1, 2016) P194, 000
Amortized Discount (P6, 000 x 7/15) 2,800
Carrying Amount P196, 800
5. Baby Company acquired a financial asset at the market value of P3, 200,000 were incurred in relation
to the purchase. At what amount should the financial asset initially recognized respectively if it is
classified as at fair value through profit or loss, or as at fair value through other comprehensive
income?
A. P3,400,000 and P3,200,000
B. P3,200,000 and P3,200,000
C. P3,200,000 and P3,400,000
D. P3,400,000 and P3,400,000
Answer: C
Financial asset at fair value through profit or loss P3, 200,000
Financial asset at fair value through other P3, 400,000
Comprehensive income (3,200,000+200,000)
ALEGARBES
Refer to this paragraph for question 1 to 2
Athena, Inc., a real estate company, has a property included in its inventory with a cost of P10,000,000 and net
realizable value of P8,000,000 on December 31, 2015. Because of the decline in the real estate industry, the
company decided to lease out the property to a tenant under an operating lease in 2016 when the fair value of
the property was P7,000,000.
1. If the company will use the cost model to measure the investment property, how much should be
recognized in the 2016 profit or loss as a result of the transfer from inventory to investment
property?
a. 3,000,000
b. 7,000,000
c. 10,000.000
d. 0
2. If the company will use the fair value model to measure the investment property, how much should
be recognized in the 2016 profit or loss as a result of the transfer from inventory to investment
property?
a. 3,000,000
b. 2,000,000
c. 1,000,000
d. 0
Question No. 1 Answer d
When an entity uses cost model for investment property, transfers between categories do not
change the carrying amount of the property transferred, and they do not change the cost of the
property for measurement or disclosure purposes.
Fair Value - 2017 P7,000,000

Cost (10,000,000)
Loss (3,000,000)
3. Danielle Company acquired a building on January 1, 2015 for P18, 000, 000. At the same date, the
building had a useful life of 40 years. The fair value of the building was P20, 000, 000 at December
31, 2015. The building was appropriately classified as investment property for using cost model.
What amounts should be presented in the statement of financial position at December 31, 2015 and
recognized in profit and loss for the year ended respectively?
A. P16,700,000 and P78,000
B. P18,000,000 and 0
C. P17,550,000 and P450,000
D. P20,000,000 and 0
Answer: C
Initial cost P18, 000,000
Depreciation expense (18,000,000÷40) (P 450,000)
Carrying amount P17, 550,000
4. Drachma Company owns a ten-story building purchased on January 1, 2012 for P60 million. The
building was used as the company’s head office. The building has an estimated useful life of 25
years. In 2016, the company transferred its head office and decided to lease out the old building.
Tenants began occupying the old building by the end of 2016. On December 31, 2016, the
company reclassified the building as investment property to be carried at fair value. The fair value
on the date of reclassification was P40 million. How much should be recognized in the 2016 profit
or loss as a result of the transfer from owner-occupied to investment property?
a. 40,000,000
b. 20,000,000
c. 8,000,000
d. 0
For transfer from owner-occupied property to investment property carried at fair value, PAS 16
should be applied up to the date of reclassification. Any difference arising between the carrying
amount under PAS 16 at that date and the fair value is dealt with as a revaluation under PAS 16
5. Puring does not elect the fair value option for its investment. Information regarding Puring Co.’s
available-for-sale securities is as follows:
Aggregate cost as of 12/31/17 P170, 000

Unrealized gains as of 12/31/17 P 4, 000
Unrealized losses as of 12/31/17 P 26, 000
Net realized gains during 2017 P 30, 000
At December 31, 2016, Puring reported an unrealized loss of P1, 500 in its other comprehensive
income to adjust these securities to fair value. Under the accumulated other comprehensive income in
stockholders’ equity section of its December 31, 2017 balance sheet, what amount should Puring
report?
a. P26, 000
b. P22, 000
c. P20, 500
d. P0
Answer: B
Unrealized losses P26, 000

Unrealized gains (4, 000)
Net unrealized loss P22, 000
AMBALADA
Refer to the following data for question 1 TO 2
The following data pertains to Aurora Co.’s investments in marketable equity securities:
Fair value
Cost 12/31/2017 12/31/2016
Trading P150, 000 P155, 000 P100, 000
Available-for-sale P150, 000 P130, 000 P120, 000
1. Assuming Aurora does not elect to use the fair value option to report its investments. What
amount should Aurora report as unrealized holding gain in its 2017 income statement?
a. P50,000
b. P55,000
c. P60,000
d. P65,000
Answer: B
FV Trading Investment (12/31/17) P155, 000

FV Trading investment (12/31/16) (P 100,000)
Unrealized holding gain P55, 000
2. What amount should Aurora report as net unrealized loss on marketable equity securities at
December 31, 2017, in accumulated other comprehensive income in stockholders’ equity?
a. P0
b. P10, 000
c. P15, 000
d. P20, 000
Answer: D
Cost (available for sale) P150, 000

FV (12/31/17) (130, 000)
Net unrealized loss P20, 000
3. Polyphemus Limited acquired a 22% interest in Odysseus Company for 26,000. Polyphemus
Ltd. holds other equity investments but it doesn’t prepare consolidated financial statements.
Odysseus Co. revalued its buildings class of assets by 70,000 during the 2016. What is the
balance of the investment in associates at the end of 2016?
a. 5,720
b. 15,400
c. 41,400
d. 75,720
Question No. 3 Answer c
Initial Investment P26,000

Share of revaluation (70,000 x 22%) 15,400
Investment in associate, end P41,400
4. Data regarding Ball Corp.’s available-for-sale securities follow:
Cost Fair value

December 31, 2016 P150, 000 P130, 000
December 31, 2017 P150, 000 P160, 000
Differences between cost and fair values are considered temporary. Ball does not elect the fair value option to
account for available-for-sale securities. The effect on Ball’s year 2 other comprehensive income would be
a. P30, 000
b. P20, 000
c. P10, 000
d. P0
Answer: A
FV of Securities 12/31/17 P160, 000

FV of Securities 12/31/16 (130,000)
Unrealized loss P30, 000
5. Susan Co. began operations on January 1, 2017. The following information pertains to Susan’s
December 31, 2017 marketable equity securities:
Trading securities Available for sale securities

Aggregate cost P360, 000 P550, 000
Aggregate fair value P320, 000 P450, 000
Aggregate lower of cost or market value
applied to each security in the port folio P304, 000 P420, 000
Susan elects the fair value option for all financial instruments. If the fair value declines are judged to be
temporary, what amounts should Susan report as a loss on these securities in its December 1, 2017 income
statement?
Trading securities Available-for-sale securities
a. P40, 000 P0
b. P0 P100, 000
c. P40, 000 P100, 000
d. P56, 000 P130, 000
Answer: C
Trading Securities
Cost P360, 000
Fair Value (320,000)
Unrealized Loss P40, 000
Available-for-sale securities
Cost P550, 000
Fair Value (450,000)
AQUINO
For numbers 1-4 refer to the data below:
Peter Johnson Company completed the construction of a building at the end of 2015 for a total cost of P100
million. The building is estimated to be economically useful for 25 years. The building was constructed for the
purpose of earning rentals under operating leases. The tenants began occupying the building after its
completion. The company opted to use the fair value model to measure the building. An independent
valuation expert was used by the company to estimate the fair value of the building on an annual basis.
According to the expert the fair values of the building at the end of 2015, 2016 and 2017 were P104 million,
P118 million and 116 million, respectively.
The company’s business expanded in 2016. As a result, the company started to use the building in its
operations on January 1, 2017. Because of the change in use, the company reclassified the building from
investment property to property, plant and equipment.
1. How much should be recognized in profit or loss in 2015 as a result of the completion of the
building at the end of 2015?
a. 18,000,000
b. 16,000,000
c. 4,000,000
d. 0
2. The depreciation expense in 2016 is

a. 4,000,000
b. 4,720,000
c. 4,160,000
d. 0
3. How much should be recognized in profit or loss in 2016 as a result of the fair value changes?
a. 18,000,000
b. 12,000,000
c. 14,000,000
d. 0
4. How much is the carrying amount of the building on December 31, 2017?
a. 118,000,000
b. 116,000,000
c. 113,083,333
d. 113,280,000
Fair Value - 2015 P104,000,000

Cost (100,000,000)
Gain 4,000,000
If investment property is accounted for fair value method, there is no depreciation.
Fair Value - 2016 P118,000,000

Carrying Amount - 2015 (104,000,000)
Gain 14,000,000
Fair Value - 2016 P118,000,000

Cost (116,000,000)
Loss 2,000,000
Carrying Amount - 2016 P116,000,000

5. Information regarding Juan Co.’s available for sale securities is as follows:
Aggregate cost as of 12/31/17 P150, 000

Unrealized gains as of 12/31/17 P14, 000
Unrealized losses as of 12/31/17 P26, 000
Net realized gains during 2017 P30, 000
Juan elects to use the fair value option for reporting all investments At December 31, 2017, what total amount
should Juan report on its income statement?
a. P 4, 000 gain
b. P 18,000 gain
c. P 30, 000 gain
d. P 44,000 gain
Answer: B
Unrealized gain P14, 000
Net realized gain P30, 000
Unrealized losses (P26, 000)
Net gain P18, 000
ARCAY
For questions 1-3 refer to data below:
On April 1, 2015, Camp Half Blood Company purchased as a short-term investment a P1,000,000 face value
8% bond for P905,000 including accrued interest. The bonds were designated as held for trading. The
commission to acquire the bonds was P5,000. The bonds are dated January 1, 2015 and mature on January
1, 2020, and pay interest semi-annually on January 1 and July 1. On December 31, 2015, the bonds had a
market value of P920,000. On April 1, 2016, Camp Half Blood Company sold the bonds for a total
consideration of P950,000.
1. What amount should Camp Half Blood report as unrealized gain in its 2015 income statement?
a. 35,000
b. 15,000
c. 30,000
d. 0
2. How much is the gain from the sale of short-term investment in debt securities on April 1, 2016?
a. 30,000
b. 45,000
c. 10,000
d. 65,000
3. On December 31, 2015, what should be the amount reported for trading debt securities?
a. 910,000
b. 905,000
c. 950,000
d. 920,000
Market Value of bonds on December 31, 2015 P920,000

Acquisition Cost 905,000
Unrealized Gain, 2015 P15,000
Sales Price P950,000

Carrying Amount 920,000
Realized Gain P30,000
Financial Asset held for trading – FVPL P920,000

4. Information regarding Bossing Corp.’s available-for-sale securities follows:
Cost Fair value

December 31, 2016 P150, 000 P130, 000
December 31, 2017 P150, 000 P160, 000
Differences between cost and fair values are considered temporary, Bossing elects to use the fair value option
for reporting all available-for-sale securities. The effect of accounting for available-for-sale securities on other
comprehensive income in 2017 would be
a. P30, 000
b. P20, 000
c. P10, 000
d. P0
Answer: D
Under provisions of ASC Topic 825 (SFAS 159), there would be no entry to other comprehensive income for
available-for-sale securities.
5. During year 1, Rex Company purchased marketable equity securities as a short-term

investment. These securities are classified as available-for-sale. Rex does not elect the fair
value option to account for available-for-sale securities. The cost and fair value at December 31,
year 1, were as follows:
Security Cost Fair value

A—100 shares P 2, 800 P 3, 400
B—1,000 shares P17, 000 P15, 300
C—2,000 shares P31, 500 P29, 500
P51, 300 P48, 200
Rex sold 1,000 shares of Company B stock on January 31, year 2, for P15 per share, incurring P1,500 in
brokerage commission and taxes. On the sale, Rex should report a realized loss of
a. $ 300
b. $1,800
c. $2,000
d. $3,500
Answer: D
Cost P17, 000

Expense (P1, 500)
Cash received P13. 500
Investment in Security B (P15, 300)
Unrealized loss on Security B P 1, 700
Journal entries:
Cash (net) P13, 500
Loss on Sale of Stock 3, 500
Investment in Security B P15, 300
Unrealized loss on Security B 1,700
ASAYTUNO
For questions 1-2 refer to the data below:
Circe, Inc. purchased investment in bonds classified as available-for-sale on January 1, 2014. At this date, the
cost and fair value is P1,000,000. On December 31, 2014, the bonds were selling at 90. Because of the
significant financial difficulty of the issuer, the bonds are considered impaired on December 31, 2015 when the
bonds are quoted at 70. On December 31, 2016, the bonds are quoted at 110. The increase in the fair value
of the bonds on December 31, 2016 is due to the improvement of the issuer’s credit rating.
a. 300,000
b. 200,000
c. 100,000
d. 0
a. 300,000
b. 400,000
c. 100,000
d. 0
Fair Value of Bonds – January 1, 2014 P1,000,000

Market Value – December 31, 2015 (700,000)
Loss P300,000
A decline in the fair value of an available-for-sale financial asset would be recognized directly in equity
if there is no objective evidence that the asset is impaired.
3. Herminihilda Corp. reported accrued investment interest receivable of P38, 000 and P46, 500 at
January 1 and December 31, 2017, respectively. During 2017, cash collections from the
investments included the following:
Capital gains distributions P145, 000

Interest P152, 000
What amount should Cap report as interest revenue from investments for 2017?
a. P160, 500
b. P153, 500
c. P152, 000
d. P143, 500
Answer: A
Investment Receivable:
Beginning Balance: P38, 000
Interest Revenue (SQUEEZE) 160, 500
Interest Collected (152, 000)
Ending Balance P46, 500
For 4-5
Maria Corp. had investments in marketable debt securities costing P650, 000 that were classified as available-
for-sale. On June 30, 2017, Maria decided to hold the investments to maturity and accordingly reclassified
them to the held-to maturity category on that date. The investments’ fair value was P575, 000 at December 31,
2016, P530, 000 at June 30, 2017, and P490, 000 at December 31, 2017. Maria does not elect the fair value
option to account for these investments.
4. What amount of loss from investments should Sun report in its year 2 income statement?
a. P 45, 000
b. P 85, 000
c. P120, 000
d. P0
5. What amount should Sun report as net unrealized loss on marketable debt securities in its year
2 statement of stockholders’ equity?
a. P40, 000
b. P 45, 000
c. P160, 000
d. P120, 000
Answer:
4: D
5: D
4.
Carrying amount P575, 000
Fair Value of Security (530, 000)

5.
Loss from 2016 P75, 000
Loss from 2017 45,000
Accumulated OCI P120, 000
ATOS
1. Colchis Bull Company, a part of a consolidated group, acquired a 35% interest in an
associate, Cyclops Company, for 30,000. In the financial period immediately following the
date on which it became an associate, Cyclops Company revalued assets by 8,000,
generated profits of 20,000 and declared a dividend of 6,000. What is the balance in the
investment account after equity accounting has been applied?
a. 33,500
b. 36,300
c. 40,500
d. 44,400
Initial Investment P30,000

Share of revaluation (4,000 x 35%) 1,400
Share of profit (20,000 x 35%) 7,000
Share of dividend (6,000 x 35%) (2,100)
Investment in associate, end P36,300
2. Jill Corp. had investments in marketable debt securities purchased on January 1, 2016, for
P650, 000 that were classified as trading securities and accounted for using the cost
adjusted to fair value method. On June 30, 2017, Jill decided to hold the investments to
maturity and accordingly reclassified them to the held-to-maturity category on that date. The
investments’ fair value was P575, 000 at December 31, 2016, P530, 000 at June 30, 2017,
and P490, 000 at December 31, 2017. Jill elects the fair value option for reporting these
held-to-maturity securities. What amount of loss from investments should Jill report in its
year 2 income statement?
a. P 40, 000
b. P 85, 000
c. P160, 000
d. P0
Answers: B
Fair Value 12/31/16 P575, 000
Fair Value 12/31/17 (P490, 000)
Total loss recognized P85, 000
3. Princess Andromeda Corporation acquired a long-term investment 24,000,000 of quoted 6%

bonds, dated July 1, on July 1,2016. Company management has the positive intent and
ability to hold the bonds until maturity. The market interest rate was 8% for bonds similar risk
and maturity. Princess Andromeda Corporation paid 20,000,000 for the bonds. The
company will receive interest semiannually on June 30 and December 31. As a result of
changing market conditions the fair value of the bonds at December 31, 2016 was
21,000,000. At what amount will Princess Andromeda Corporation report its investment in
the December 31,2016, statement of financial position?
a. 20,800,000
b. 21,600,000
c. 24,000,000
d. 27,200,000
Question No.3 Answer a
Initial Investment P24,000,000

Cash 20,000,000
Discount on bond investment P4,000,000
Interest Revenue (20,000,000 x 8% x 6/12) P800,000
Investment in bonds P24,000,000

Less: Discount on bond investment (4,000,000 – 3,200,000
800,000)
Amortized Cost P20,800,000
For questions 4-5
Mercedes, Inc. acquired 30% of Sagittarius Co.’s voting stock for P200, 000 on January 1, 2016. Mercedes
30% interest in Sagittarius gave Mercedes the ability to exercise significant influence over Sagittarius operating
and financial policies. During 2016, Sagittarius earned P80, 000 and paid dividends of P50, 000. Sagittarius
reported earnings of P100, 000 for the six months ended June 30, 2017, and P200, 000 for the year ended
December 31, 2017. On July 1, 2017, Mercedes sold half of its stock in Sagittarius for P150, 000 cash.
Sagittarius paid dividends of P60, 000 on October 1, 2017. Grant does not elect the fair value option to report
this investment.
4. Before income taxes, what amount should Grant include in its 2016 income statement as a
result of the investment?
a. P15, 000
b. P24, 000
c. P50, 000
d. P80, 000
5. In Grant’s December 31, 2016 balance sheet, what should be the carrying amount of this
investment?
a. P200, 000
b. P209, 000
c. P224, 000
d. P230, 000
Answers:
4: B
5: B
4. Net income P80, 000
x 30%
Interest Revenue P24, 000
5. Investment beg P200, 000

Interest Revenue P 24, 000
Dividends (P15, 000)
Investment end P209, 000
BACOLOR
1. Tyson and Grover Company purchased several marketable securities during 2016. At
December 31, 2016, the company had the investments in ordinary shares listed below.
None was held at the last reporting date, December 31, 2015, and all are considered
available-for-sale securities. What amounts would be reported in the income statement at
December 31, 2016, as a result of these changes in fair value and unrealized gains or
losses?
COST FAIR VALUE UNREALIZED GAIN

(LOSS)
SHORT TERM:
GOLDEN P 480,000 P 405,000 P (75,000)
FLEECE LTD.
PARTY PONIES, 450,000 480,000 30,000
INC.
TOTAL P 930,000 P 885,000 P (40,000)
LONG TERM:
GEORGE P 480,000 P 560,000 P 80,000
COMPANY
MARTHA 450,000 660,000 (60,000)
INDUSTRIES
TOTAL P 1,200,000 P 1,220,000 P 20,000
a. 0
b. 25,000
c. 30,000
d. 75,000
None. Accumulated Net Holding Gains and Losses for securities available-for-sale are reported
as a component of Shareholders’ Equity, and changes in balance are reported as other
comprehensive income or loss rather than as part of earnings.
2. Mosley Corp. owns 20% of Dilly Corp.’s preferred stock and 80% of its common stock.
Dilly’s stock outstanding at December 31, 2016, is as follows:
10% cumulative preferred stock P100, 000

Common stock P700, 000
Net income P60, 000
Assume that Mosley does not elect the fair value option to report the investment in Dilly. What amount should
Mosley record as equity in earnings of Dilly for the year ended December 31, 2016?
a. P42, 000
b. P48, 000
c. P48, 400
d. P50, 000
Answer: A
Equity in earnings (P50, 000 x 80%) P40, 000

Dividends Revenue (20% x P 100, 000 x 10%) P 2, 000
Equity in earnings P42, 000
3. A land site for capital appreciation was acquired for 9,000,000. Labyrinth Corp. paid 450,000
commission to a real estate agent. Costs of 150,000 were incurred to clear the land. During
the course of clearing the land, timber and gravel were recovered and sold for 70,000. What
is the total cost of investment?
a. 9,670,000
b. 9,600,000
c. 9,450,000
d. 9,530,000

Purchase price P 9,000,000
Commission to real estate agent 450,000
Costs of clearing the land (150,000-70,000) 80,000
Total cost P 9,530,000
4. Babae, Inc. bought 40% of Lalaki Corp.’s outstanding common stock on January 1, 2016, for
P400, 000. The carrying amount of Lalaki’s net assets at the purchase date totaled P900,
000. Fair values and carrying amounts were the same for all items except for plant and
inventory, for which fair values exceeded their carrying amounts by P90, 000 and P10, 000,
respectively. The plant has an eighteen-year life. All inventories were sold during 2016.
During 2016, Lalaki reported net income of P120, 000 and paid a P 20, 000 cash dividend.
Assume that Babae uses the equity method to account for this investment. What amount
should Babae report in its income statement from its investment in Lalaki for the year ended
December 31, 2016?
a. $48,000
b. $42,000
c. $36,000
d. $32,000
Answer: B
Share of income (40% x P120, 000) P 48, 000

Excess amortization (P36,000 / 18 + P4, 000) (P6, 000)
Investment Income P42, 000
5. Land and building were acquired to be held for lease under operating leases. The company
made a down payment of 7,000,000, issued 25,000 P200 par ordinary shares with market
price P250 per share and issued a three year noninterest bearing note for P 7,500,000. The
note is payable in equal installments of P2,500,000 at the end of each year from the date of
purchase.
Prevailing interest rate for similar notes is 10%. 30% of the purchase price is allocated to the land. The
PV of 1 at 10% for 3 periods is 0.7513, and the PV of an ordinary annuity of 1 at 10% at 3 periods is
2.4868.
What is the total cost of property investment?
a. 15,128,250
b. 15,750,000
c. 18,509,100
d. 19,467,250
Down payment P 7,000,000

Market value of shares issued (25,000 x 250) 6,250,000
Present value of non-interest bearing note issued (2,500,000 x 6,217,250
2.4869)
Total cost of land and building P 19,467,250
Cost allocated to land (30% x 19,467,250) P 5,840,175
Cost allocated to building (70% x 19,467,250) P 13,627,075
BALBUENA
1. Luzviminda Co.’s income statement for the year ended December 31, 2017, as prepared by
Luzviminda’s controller, reported income before taxes of P125,000. The auditor questioned the
following amounts that had been included in income before taxes:
Unrealized gain on available-for-sale investment P40, 000

Equity in earnings of Auring Co. P20, 000
Dividends received from Auring P 8, 000
Adjustments to profits of prior years for arithmetical errors in depreciation (P35, 000)
Luzviminda owns 40% of Auring’s common stock. Luzviminda accounts for its investment in Auring in
accordance with the requirements of the equity method. Luzviminda’s December 31, 2017 income statement
should report income before taxes of
a. $ 85,000
b. $117,000
c. $112,000
d. $152,000
Answer: C
Reported Income P 125,000

Unrealized holding gain (P40, 000)
Dividends Received (P8, 000)
Prior Adjustment P35, 000
Correct Income P112, 000
For questions 2-5

At December 31, 2016, Mythomagic Ltd had the following investments that were purchased during 2016,
its first year of operations:
Cost Fair Value

Trading Securities: Security A P 900,000 P 910,000
Security B 105,000 100,000
Total P 1,005,000 P 1,010,000
Available-for-sale securities: Security P 700,000 P 780,000
C
Security D 900,000 915,000
Total P 1,600,000 P 1,695,000
Held-to-maturity securities: Security E P 490,000 P 500,000
Security F 615,000 610,000
Total P 1,105,000 P 1,110,000
No investments were sold during 2016. All securities except Security D and Security F are considered
short-term investments. No impairment loss events arose during the year.
2. What is the total amount of investments reported as current assets?

a. 3,815,000
b. 3,710,000
c. 2,280,000
d. 2,195,000
3. What is the total amount of investments reported as noncurrent assets?
a. 1,530,000
b. 1,525,000
c. 1,515,000
d. 1,510,000
4. What is the unrealized gain or loss component of income before taxes?
a. 95,000
b. 5,000
c. 45,000
d. 10,000
5. What is the unrealized gain or loss component of other comprehensive income in shareholders’
equity?
a. 95,000
b. 5,000
c. 45,000
d. 10,000
Security A P 910,000
Security B 100,000
Security C 780,000
Security E 490,000
Total Current Investments P 2,280,000
Security D P 910,000
Security F 100,000
Total Noncurrent Investments P 1,530,000
Security A P 10,000
Security B (5,000)
Net Unrealized Gain P 5,000
Security C P 80,000
Security D 15,000
Net Unrealized Gain P 95,000
BAMUYA
1. On January 1, 2016, Saxe Company purchased 20% of Lex Corporation’s common stock for
P150,000. Saxe Corporation intends to hold the stock indefinitely. This investment did not give
Saxe the ability to exercise significant influence over Lex. During 2016 Lex reported net income
of P175, 000 and paid cash dividends of P100, 000 on its common stock. There was no change
in the fair value of the common stock during the year. The balance in Saxe’s investment in Lex
Corporation account at December 31, 2016 should be
a. $130,000
b. $150,000
c. $165,000
d. $185,000
Answer: B
The equity method is to be used when the investor owns 20% or more of the investee’s voting stock,
unless there is evidence that the investor does not have the ability to exercise significant influence over the
investee. Hence, the investment account would remain the same.
Investment P150, 000

2. On January 2,2016, Artemis Corporation issued P10,000,000 bonds that will mature in 10 years.
The management decided to set up a separate fund for the retirement of these bonds. The fund
is to be placed in a separate account to be maintained in the company’s depository bank. In a
board resolution, it was decided that deposits of equal amounts will be made every June 30 and
December 31, starting June 30, 2016 through December 31, 2025. The company expects to
earn an average interest of 8%, net of tax, on this investment.
What is the required semiannual deposit that will accumulate P15,000,000 at the end of ten years?
a. 335,817
b. 750,000
c. 735,819
d. 220,269
Bonds P10,000,000
PV of annuity of 1 discounted at 4% for
20 periods 29.7781
Required Semiannual deposit P 335,817
3. On January 1, 2017, Well Co. purchased 10% of Rea, Inc.’s outstanding common shares for
P400,000. Well is the largest single shareholder in Rea, and Well’s officers are a majority on
Rea’s board of directors. Rea reported net income of P500,000 for 2017, and paid dividends of
P150,000. Well does not elect the fair value option to report its investment in Rea. In its
December 31, 2017 balance sheet, what amount should Well report as investment in Rea?
a. $450,000
b. $435,000
c. $400,000
d. $385,000
Answer: B
Investment in Rea P 400, 000

Equity in earnings P 50, 000
Dividends (P 15, 000)
Investment end P 435,000
4. On January 2, 2016 Valhalla Tobacco bought 5% of Jupiter Industry’s ordinary shares for 90
million as a temporary investment. Valhalla classified the securities acquired as available-for-
sale. Jackson Industry’s net income for the year ended December 31, 2016 was 120 million.
The fair value of the shares held by Valhalla was 98 million at December 31, 2016. During 2016,
Jupiter declared a dividend of 60 million. What is investment revenue of Valhalla Tobacco
during 2016?
a. 60,000,000
b. 8,000,000
c. 4,900,000
d. 3,000,000
Investment Revenue (60,000,000 x 5%) P 3,000,000

5. On January 1, 2017, Kean Co. purchased a 30% interest in Pod Co. for P 250, 000. On this
date, Pod’s stockholders’ equity was P500, 000. The carrying amounts of Pod’s identifiable net
assets approximated their fair values, except for land whose fair value exceeded its carrying
amount by P200, 000. Pod reported net income of P100, 000 for 2017, and paid no dividends.
Kean accounts for this investment using the equity method. In its December 31, 2017 balance
sheet, what amount should Kean report as investment in subsidiary?
a. $210,000
b. $220,000
c. $270,000
d. $280,000
Answer: D
Original cost P 250, 000

Share of Income (P100, 000 x 30%) P30, 000
Investment in subsidiary P 280, 000
BARLISO
Celestial Bronze Company buys securities to be available for sale when circumstances warrant, not to
profit from short-term differences in price and not necessarily to hold debt securities to maturity. The
following selected transactions relate to investment activities of Celestial Bronze Company whose
financial year ends on December 31. No investments were held by Celestial Bronze Company at the
beginning of the year.
2015
Mar. 2 Purchased 1 million Backbiter Company ordinary shares for P31 million, including
brokerage fees and commissions.
Apr. 12 Purchased 20 million of 10% bonds at face value from Riptide Corporation.
July 18 Received cash dividends of 2 million on the investment in Backbiter ordinary shares.
Oct. 15 Received semiannual interest of 1 million on the investment in Riptide bonds.
16 Sold the Riptide bonds for 21 million.
Nov. 1 Purchased 500,000 Katoptris International preference shares for 40 million, including
brokerage fees and ability to .
Dec. Recorded the necessary adjusting entry(s) relating to investments. The market prices of
31 the investments are 32 per share for Backbiter Company and 74 per share for Katoptris
International preference shares.
2016
Jan. 23 Sold half the Backbiter Company shares for 32 per share.
Mar. 1 Sold the Katoptris International preference shares for 76 per share.
1. What would be the investment revenue shown in the 2015 income statement?
a. 1,000,000
b. 2,000,000
c. 3,000,000
d. 4,000,000
2. What is the gain on sale of investments shown in the 2015 income statement?
a. 1,000,000
b. 2,000,000
c. 3,000,000
d. 4,000,000
3. What is the unrealized loss on investments shown in other comprehensive income?

a. 1,000,000
b. 2,000,000
c. 3,000,000
d. 4,000,000

Investment Revenue (from July 18; Oct 15) P 3,000,000
Gain on Sale of Investments (from Oct 16) P 1,000,000

AVAILABLE-FOR-SALE COST FAIR VALUE ACCUMULATED

SECURITIES UNREALIZED GAIN
(LOSS)
BACKBITER COMPANY 31,000,000 32,000,000 P 1,000,000
SHARES
KATOPTRIS INTERNATIONAL 40,000,000 37,000,000 (3,000,000)
SHARES
TOTAL 71,000,000 69,000,000 P (2,000,000)
4. On January 1, 2016, Mega Corp. acquired 10% of the outstanding voting stock of Penny,
Inc. On January 1, 2017, Mega gained the ability to exercise significant influence over
financial and operating control of Penny by acquiring an additional 20% of Penny’s
outstanding stock. The two purchases were made at prices proportionate to the value
assigned to Penny’s net assets, which equaled their carrying amounts. Mega does not elect
the fair value option to report its investment in Penny. For the years ended December 31,
2016 and 2017, Penny reported the following:
2016 2017
Dividends paid P200, 000 P300, 000
Net income P600, 000 P650, 000
In 2017, what amounts should Mega report as current year investment income and as an adjustment, before
income taxes, to 2016 investment income?
2017 Adjustment to 2016
Investment income investment income
a. P195, 000 P160, 000
b. P195, 000 P100, 000
c. P195, 000 P40, 000
d. P105, 000 P40, 000
Answer: C
Net income P650, 000
X 30%
Investment Income P 195, 000
Equity method Income P60, 000

Dividend Income (P20, 000)
Adjustment P 40, 000
5. Pare, Inc. purchased 10% of Tot Co.’s 100,000 outstanding shares of common stock on
January 1, 2017, for P50, 000. On December 31, 2017, Pare purchased an additional
20,000 shares of Tot for P150, 000. There was no goodwill as a result of either acquisition,
and Tot had not issued any additional stock during 2017. Tot reported earnings of P300,000
for 2017. Pare does not elect the fair value option to report its investment in Tot. What
amount should Pare report in its December 31, 2017 balance sheet as investment in Tot?
a. P170, 000
b. P200, 000
c. P230, 000
d. P290, 000
Answer: C
01/01/17 purchase P50, 000
Equity in earnings P30, 000
12/31/17 purchase P150, 000
BENEDICTO
1. The accounting records of Octavian Importers at January 1, 2016 included the following:
Assets:
Investment in Festus shares P 1,345,000
Less: Fair value adjustment (145,000)
P 1,200,000
Shareholders’ Equity:
Accumulated unrealized gains or losses P 145,000
No changes occurred during 2015 in the investment portfolio.
What is the accumulated unrealized gain or loss assuming the fair value of the Festus shares was
P1,175,000
P1,275,000
P1,375,000
a. 170,000, 70,000, (30,000)

b. (170,000), (70,000), 30,000
c. 25,000, (75,000), (175,000)
d. (25,000), 75,000, 175,000
Available-for-sale securities Cost Fair Value Accumulated

Unrealized Gain or
Loss
Festus shares – December 31, P 1,345,000 P 1,175,000 P (170,000)
2015
Festus shares – December 31, P 1,345,000 P 1,275,000 (70,000)
2015
Festus shares – December 31, P 1,345,000 P 1,375,000 30,000
2015
2. Wood Co. owns 2,000 shares of Arlo, Inc.’s 20,000 shares of P100 par, 6% cumulative,
nonparticipating preferred stock and 1,000 shares (2%) of Arlo’s common stock. During
2017, Arlo declared and paid dividends of P240,000 on preferred stock. No dividends
had been declared or paid during 2016. In addition, Wood received a 5% common stock
dividend from Arlo when the quoted market price of Arlo’s common stock was P10 per
share. What amount should Wood report as dividend income in its 2017 income
statement?
a. P12, 000
b. P12, 500
c. P24, 000
d. P24, 500
Answer: C
Dividends P200,000 x 6% x 2 = P 24, 000
3. The investments of Venti Enterprises included the following cost and fair value amounts:
Available-for-sale securities Cost 2015 2016

Alpha Company shares P 20,000,000 P 14,000,000 -
Bravo Company shares 35,000,000 35,000,000 P 37,000,000
Charlie Company shares 15,000,000 - 14,000,000
Delta Industries shares 45,000,000 46,000,000 50,000,000
Total P 115,000,000 P 95,000,000 P 101,000,000
Venti Enterprises sold its holdings of Alpha Company shares on June 1, 2016, for 15,000,000. On
September 12, it purchases the Charlie Company shares. What is the effect of the sale of the Alpha
Company shares on June 1, 2016 and the purchase of the Charlie Company Shares on Venti
Enterprises
shares 2016 pretax earnings?
Sale Purchase
a. (1,000,000) 15,000,000
b. 15,000,000 (15,000,000)
c. (5,000,000) 0
d. 0 0
Investment in Alpha Company P20,000,000

Cash (15,000,000)
Loss on sale of investments P 5,000,000
The sale of the Alpha Company shares decreased Venti’s pretax earnings by 5,000,000 while the
purchase of the Charlie Company shares had no effect on Venti’s earnings.
4. On March 4, 2016, Evan Co. purchased 1,000 shares of LVC common stock at P80 per
share. On September 26, 2016, Evan received 1,000 stock rights to purchase an
additional 1,000 shares at P90 per share. The stock rights had an expiration date of
February 1, 2017. On September 30, 2016, LVC’s common stock had a market value,
ex-rights, of P95 per share and the stock rights had a market value of P5 each. What
amount should Evan report on its September 30, 2016 balance sheet as the cost of its
investment in stock rights?
a. $4,000
b. $5,000
c. $10,000
d. $15,000
Answer: A
Common Stock 1, 000
Issue Price x P80
Cost P80, 000
X 5/100
Cost P4, 000
5. Chubby Bunny Technologies purchased a long-term investment 80,000,000 of 8%
quoted bonds, dated January 1, on January 1, 2016. Management has the positive intent
and ability to hold the bonds until maturity. For bonds of similar risk and maturity the
market yield was 10%. The price paid for the bonds was 66,000,000. Interest is received
semiannually on June 30 and December 31. Due to changing market conditions, the fair
value of the bonds at December 31, 2016, was 70,000,000. At what amount will Chubby
Bunny report its investment in the December 31, 2016, statement of financial position?
a. 70,000,000
b. 64,600,000
c. 66,200,000
d. 65,800,000
Investment in bonds – face amount P 80,000,000

Cash 66,000,000
Discount on bond investment P 14,000,000
Interest Revenue (66,000,000 x 10%) P

6,600,000
Cash (80,000,000 x 8%) 6,400,00
0
Discount on bond investment P 200,000
Investment in bonds P 80,000,000

Less: Discount in bond investment (14,000,000 –
200,000) 13,800,000
Amortized Cost P 66,200,000
BERNABE
1. On January 3, 2016, Falk Co. purchased 500 shares of Milo Corp. common stock for P36,000. On
December 2, 2018, Falk received 500 stock rights from Milo. Each right entitles the holder to
acquire one share of stock for P85. The market price of Milo’s stock was P100 a share immediately
before the rights were issued, and P90 a share immediately after the rights were issued. Falk sold
its rights on December 3, 2018, for P10 a right. Falk’s gain from the sale of the rights is
a. P0
b. P1, 000
c. P1, 400
d. P5, 000
Answer: C
Net Proceeds from Sale P 5, 000
Cost allocated to rights (P 3, 600)
Gain from sale P 1, 400
For No. 2-3 refer to data below:

On January 1, 2016 Piper Ltd bought 20% of the outstanding shares of Jason Construction Company
for 300,000,000 cash. At the date of acquisition of the shares, Jason’s net assets had a fair value of
900,000,000. Their book value was 800,000,000. The difference was attributable to the fair value of
Jason’s buildings and its land exceeding book value, each accounting for one-half of the difference
between the fair value and book value of Jason’s net assets. Jason’s net income for the year ended,
December 31, 2016, was 150,000,000. During 2016, Jason declared and paid cash dividends of
30,000,000. The buildings have a remaining life of 10 years.
2. What is the amount to be reported by Piper Ltd in its consolidated financial statements as
investment in Piper’s 2016 statement of financial position?
a. 323,000,000
b. 337,000,000
c. 322,000,000
d. 338,000,000
3. What is the amount to be reported by Piper Ltd in its consolidated financial statements as
investment revenue in the income statement?
a. 30,000,000
b. 29,000,000
c. 31,000,000
d. 28,000,000
Cost P 300,000,000
Share of income (150,000,000 x 20%) 30,000,000
Dividends (30,000,000 x 20%) (6,000,000)
Depreciation Adjustment
[(900,000,000 x 20%)-(800,000,000 x 20%)/2]/10 (1,000,000)
Investment in Jason Construction Shares P 323,000,000

Share of income P 30,000,000
Depreciation (1,000,000)
Adjustment
Investment Revenue P 29,000,000
4. In 2016, Chain, Inc. purchased a P1, 000, 000 life insurance policy on its president, of which Chain
is the beneficiary. Information regarding the policy for the year ended December 31, 2020, follows:
Cash surrender value, 1/1/20 P87, 000

Cash surrender value, 12/31/20 P108, 000
Annual advance premium paid 1/1/20 P40, 000
During 2020, dividends of P6, 000 were applied to increase the cash surrender value of the policy. What
amount should Chain report as life insurance expense for 2020?
a. $40,000
b. $25,000
c. $19,000
d. $13,000
Answer: C
CSV beg P87, 000
Cash Paid P40, 000
Insurance Expense (SQUEEZE) (P19, 000)
CSV end P108, 000
5. Gordon Corp. acquired a 25% interest in Ramsay Co. on January 1, 2015, for P5,000,000. At that
time, Octavius had 1,000,000, P1 par, ordinary shares issued and outstanding. During 2015,
Octavius paid cash dividends of P2.2 per share and thereafter declared and issued a 5% share
dividend when the market value was P2 per share. Ramsay's profit for 20015 was P4,800,000.
What should be the balance in Gordon’s investment in Ramsay Co. at the end of 2015?
a. 5,650,000
b. 5,890,000
c. 5,752,500
d. 5,512,500
Gordon Corp. Investment, Beg. P 5,000,000
Investment Income (4,800,000 x 25%) 1,200,000

Dividend Received (250,000 shares x 2.20) (550,000)
Gordon Corp. Investment, End P5,650,000
BISMONTE
Items 1-3 are based on the following data:
Lake Corporation’s accounting records showed the following investments at January 1, 2018:
Common stock:
Kar Corp. (1,000 shares) P 10, 000
Aub Corp. (5,000 shares) P100, 000
Real estate:
Parking lot (leased to Day Co.) P300, 000
Other:
Trademark (at cost, less accumulated amortization) P25, 000
Total investments P435, 000
Lake owns 1% of Kar and 30% of Aub. Lake’s directors constitute a majority of Aub’s directors. The Day lease,
which commenced on January 1, 2016, is for ten years, at an annual rental of P48,000. In addition, on January
1, 2016, Day paid a nonrefundable deposit of $50,000, as well as a security deposit of P8,000 to be refunded
upon expiration of the lease. The trademark was licensed to Barr Co. for royalties of 10% of sales of the
trademarked items. Royalties are payable semiannually on March 1 (for sales in July through December of the
prior year), and on September 1 (for sales in January through June of the same year). During the year ended
December 31, 2018, Lake received cash dividends P 1,000 from Kar, and P 15,000 from Aub, whose 2018 net
incomes were P75,000 and P150,000, respectively. Lake also received P48,000 rent from Day in 2018 and the
following royalties from Barr:
March 1 September 1
Year 2 P3, 000 P5, 000
Year 3 P4, 000 P7, 000
Barr estimated that sales of the trademarked items would total P20,000 for the last half of 2018.
1. In Lake’s year 3 income statement, how much should be reported for dividend revenue?
a. $16,000
b. $2,400
c. $1,000
d. $150
2. In Lake’s year 3 income statement, how much should be reported for royalty revenue?
a. $14,000
b. $13,000
c. $11,000
d. $9,000
3. In Lake’s year 3 income statement, how much should be reported for rental revenue?
a. $43,000
b. $48,000
c. $53,000
d. $53,800
Answers
1.: C
2.: D
3.: C
1:
Dividend Revenue P1, 000
2:
Royalty Payment P 7, 000
Royalty Revenue (P20, 000 x 2%) P2, 000
Royalty Revenue P9, 000
3:
Annual Rental Payment P48, 000
Nonrefundable deposit (P50, 000 / 10) P5, 000
Rental revenue P53,000
4. On January 2, 2015, Christina Company purchased 10% of Tosi Company’s outstanding
ordinary shares for P20,000,000. Christina is the largest single shareholder in Tosi and
Christina’s officers are majority of Tosi’s board of directors. Tosi reported net income of
P10,000,000 and paid dividend of P4,000,000. In its December 31, 2015 balance sheet,
what amount should Tosi report as investment in Christina Company?
a. 20,000,000
b. 20,600,000
c. 21,000,000
d. 21,400,000

Investment in Tosi, beg P20,000,000
Investment Income (10,000,000 x 10%) 1,000,000

Dividend Received (4,000,000 x 10%) (400,000)
Investment in Tosi, end P20,600,000
5. On April 1, 2015, Leo Co. purchased 25,000 ordinary shares of Valdez Co. at P180 per
share which reflected book value as of that date. At the time of the purchase, Valdez
had 100,000 ordinary shares outstanding. The shares are intended as a long-term
investment. The first quarter statement ending March 31, 2015 of Valdez recorded profit
of P480,000. For the year ended December 31, 2015, Valdez reported profit of
P2,400,000. Valdez paid Leo dividends of P60,000 on June 1, 2015 and again P60,000
on December 31, 2015. The shares of Valdez are selling at P190 per share on
December 31, 2015.
Leo is entitled to appoint two directors to the board, which consists of eight members. The remaining of
the voting rights are held by two other companies, each of which is entitled to appoint three directors.
The board makes decisions on the basis of simple majority. Because board meetings are often held at
very short notice, Leo does not always have representation on the board. Often the suggestions of the
representative of Leo are ignored, and the decisions of the board seem to take little notice of any
representations made by the director from Leo Corp.
Based on the above information, the carrying amount of the investment in Valdez Co. as of December 31,
2015 should be
a. 4,750,000
b. 4,500,000
c. 4,860,000
d. 4,950,000
Investment in Valdez Co, End (25,000 shares x 190 per share) P4,750,000
Though his percentage of share pass the threshold of having an Investment in Associate, Leo
Company does not have significant influence on Valdez Co.
BRIONES
1. On January 1, 2013, Reston Co. purchased 25% of Ace Corp.'s common stock; no
goodwill resulted from the purchase. Reston appropriately carries this investment at equity
and the balance in Reston’s investment account was P960,000 at December 31, 2013.
Ace reported net income of P600,000 for the year ended December 31, 2013, and paid
common stock dividends totaling P240,000 during 2013. How much did Reston pay for its
25% interest in Ace?
a. $870,000.
b. $1,020,000.
c. $1,050,000.
d. $1,170,000.
Answer: A
Earnings in equity (P150, 000)
Dividends P60, 000

Interest Payments P870, 000
2. Thalia Company owns 50% of Grace Company’s preference shares and 30% of its ordinary
shares. Grace’s shares outstanding at December 31, 2016 includes P20,000,000 of 10%
cumulative preference shares and P50,000,000 of ordinary shares. Grace reported profit of
P10,000,000 for the year 2016. What amount should Thalia report as share of profit of
associate for the year 2016?
a. 3,000,000
b. 3,400,000
c. 2,400,000
d. 4,400,000
Investment Income (10,000,000 x 30%) P3,000,000
3. On December 31, 2012, Patel Co. purchased equity investments as trading securities.
Pertinent data are as follows:
Fair Value
Investment Cost At 12/31/13
A P132, 000 P117, 000
B P168, 000 P186, 000
C P288, 000 P268, 000
On December 31, 2013, Patel transferred its investment in security C from trading to
available-for-sale because Patel intends to retain security C as a long-term investment.
What total amount of gain or loss on its securities should be included in Patel's income
statement for the year ended December 31, 2013?
a. $3,000 gain.
b. $17,000 loss.
c. $20,000 loss.
d. $35,000 loss.
Answer: B
Investment A (P15, 000)
Investment B P18, 000
Investment C (P20, 000)
Loss (P17, 000)
4. Ares Company bought 20% of Mars Corporation’s ordinary shares on January 1, 2016 for
P20,000,000. Carrying amount of Mars’ net assets at purchase date totaled P60,000,000.
Fair value and carrying amounts were the same for all items except for plant and inventory,
for which fair values exceed their carrying amounts by P15,000,000 and P5,000,000
respectively. The plant has a 5-year life. All inventory was sold during 2016. Goodwill, if
any, has an indefinite life. During 2016, Mars reported net income of P40,000,000 and paid
a P15,000,000 cash dividend. What amount should Ares report as investment income for
2016?
a. 6,200,000
b. 3,000,000
c. 6,400,000
d. 7,600,000

Profit for the year P 40,000,000
Amortization of Excess - PPE (15,000,000/5) (3,000,000)
Amortization of Excess - Inventory (5,000,000)

Total Adjusted Income P 32,000,000
Percentage of Ownership 20%
Investment Income P6,400,000
5. On, Jan 1, 2017, an entity acquired a building for P95, 000 which includes a P 5, 000
nonrefundable purchase taxes. The purchase agreement provided for payment to be made
in full on Dec. 31, 2017. Legal fees of P 2, 000 were incurred in acquiring the said building.
The building is held to earn lease rentals and for capital appreciation.
An appropriate discount rate is 10% per year.
The entity shall measure the initial cost of the building at:
a. P88, 364
b. P 97, 000
c. 102,, 000
d. P107, 000
Answer: A
Purchase price (P95, 000 / 110%) P86, 364
Legal Fees P2, 000
Cost P 88, 364
BULANADI
1. Faun Company acquired a 40% interest in Satyr Company for P1,700,000 on January 1,
2016. The shareholders' equity of Satyr Company on January 1 and December 31, 2016
is presented below:
January 1 December 31
Share capital 3,000,000 3,000,000
Revaluation - 1,300,000
surplus
Retained earnings 1,000,000 1,500,000
On January 1, 2016, all the identifiable assets and liabilities of Satyr Company were recorded at fair value.
Satyr Company reported profit of P650,000, after income tax expense of P350,000 and paid dividends of
P150,000 to shareholders during the current year.
The revaluation surplus is the result of the revaluation of land recognized by Satyr Company on December
31, 2016. Additionally, depreciation is provided by Satyr Company on the diminishing balance method
whereas Faun Company uses the straight-line. Had Satyr Company used the straight line, the
accumulated depreciation would be increased by P200,000. The tax rate is 35%. Faun Company should
report its investment in associate on December 31, 2016 at
a. P2,920,000
b. P2,550,000
c. P2,420,000
d. P1,900,000
Investment in Associate, beg P1,700,000
Investment Income (650,000 x 40%) 260,000

Dividend Received (1500,000 x 40%) (60,000)
Investment in Faun, end P1,900,000
For 2-3
On January 1, 2017, acquired an investment property in a remote location for P100, 000. After initial
recognition, the entity measures the property using the cost-depreciation-impairment model, because the fair
value cannot be measured reliably.
The following occurred in Dec. 31, 2017:
 Assessed the buildings useful life at 50 years from the acquisition date.
 Assessed that the entity will consume the buildings future economic benefits evenly over 50 years from
acquisition date
 Detained an unsolicited offer to purchase the building for P130, 000.
2. The entity should measure the carrying amount of the building on Dec. 31, 2017 at:
a. P98, 000
b. P100, 000
c. 130, 000
d. 127, 400
Answer: A
Cost P100, 000
Depreciation (P 100,00/ 50 years) (P 2, 000)
Carrying Amount P 98, 000
3. On December 31, 2018 the entity reassessed the remaining useful life of the investment
property as 73 years. The revised assessment is supported by new information that was
available for 2018.
The entity should measure the carrying amount of the building at December 31, 2018 at:
a. P130, 000
b. P96, 676
c. P126, 533
d. P97, 333
Answer: B
Depreciable Amount P 98, 000
Change in accounting assumptions x 73/74
4. Avril Company acquired 20% of the ordinary shares of Lavigne Company on January 1,
2015. At this date, all the identifiable assets and liabilities of Lavigne were recorded at
fair value. An analysis of the acquisition showed that P200,000 of goodwill was
acquired. Lavigne Company recorded a profit of P1,000,000 for 2016 and paid dividend
of P700,000 during the same year. The following transactions have occurred between
the two entities.
 In December 2016, Lavigne sold inventory to Avril for P1,500,000. This inventory had previously cost
Lavigne P1,000,000 and remains unsold by Avril in December 31, 2016.
 In November 2016, Avril sold inventory to Lavigne at a before tax profit of P300,000. Half of this was
sold by Lavigne before December 31, 2016.
 In December 2015, Lavigne sold inventory to Avril for P1,800,000. This inventory had cost Lavigne
P1,200,000. At December 31, 2015, this inventory remained unsold by Avril. However, it was all sold
by Avril in 2016.
Ignoring income tax, Avril company shall report a "share of profit of associate" in 2016 at
a. P200,000
b. P190,000
c. P160,000
d. P140,000
Income from own operations, Lavigne P 1,000,000
Unrealized Income (500,000)

Realized Income 600,000
Intercompany Profit (300,000)
Adjusted Income of Lavigne 800,000
Percentage of Ownership 20%
Share in Profit P 160,000
5. On July 1, 2012, Thomas Corporation acquired 25% of the shares of Newt, Inc. for
P1,000,000. At that date, the equity of Newt was P4,000,000, with all the identifiable
assets and liabilities being measured at amounts equal to fair value. The table below
shows the profits and losses made by Newt during 2012 to 2016:
Year Profit (Loss)
2012 P 200,000
2013 (2,000,000)
2014 (2,500,000)
2015 160,000
2016 300,000
What is the carrying amount of the investment in Newt, Inc. as of December 31, 2016?
a. P40,000
b. P15,000
c. P75,000
d. P 0

Investment Income (300,000*25%) P75,000
CABAS
1. On December 1, 2015, Kyle Company purchased a P3, 000, 000 tract of land for a
factory site. Kyle razed an old building on the property and sold the materials it
savaged from the demolition. Kyle incurred additional costs and realized salvage
proceeds during December 2015 as follows:
Demolition of old building 200,000

Legal fees for purchase contract and recording ownership 150,000
Title guarantee insurance 50,000
Proceeds from sale of salvaged materials 20,000
In the December 31, 2015 statement of financial position, what should be reported as carrying amount of land?
a. 3,380,000
b. 3,400,000
c. 3,180,000
d. 3,200,000
Solution: Answer a
Purchase Price 3,000,000

Demolition of old building 200,000
Legal fees for purchase contract 150,000
Title guarantee insurance 50,000
Proceeds from sale of salvaged materials (20,000)
Carrying amount of land 3,380,000
2. Teresa, Inc. acquired 30% of Agnes Corp.'s voting stock on January 1, 2015 for
P360,000. During 2015, Agnes earned P150,000 and paid dividends of P90,000.
Teresa's 30% interest in Agnes gives Teresa the ability to exercise significant
influence over Agnes’ operating and financial policies. During 2016, Agnes earned
P180,000 and paid dividends of P60,000 on April 1 and P60,000 on October 1. On
July 1, 2016, Teresa sold half of its stock in Agnes for P237,000 cash.
What should be the gain on sale of this investment in Teresa's 2016 income statement?
a. P57,000
b. P43,500
c. P52,500
d. P34,500
Investment in Associate, beg P 360,000
Income for two years [(150,000+90,000) x 30%] 72,000

Dividends for two years [(90,000+60,000) x 30%] (45,000)
Carrying Amount , July 1,2016 P 387,000
Selling Price of Half of the Investment P237,000

Carrying Amount of Half of Investment (387,000/2) 193,500
Gain on Sale of Investment 43,500
3. The Kathmadu Company acquired a building on Jan, 1, 2017 for P900, 000. At that
date the building had a useful life of 30 years. At Dec. 31, 2017 the building had a
fair value of P960, 000. The building was classified as an investment property and
recorded through the cost model
According to PAS 40, what amount should be recorded in the balance sheet and the income statement?
Balance Sheet Income Statement
A. P870, 000 Nil

B. P900, 000 Nil
C. P960, 000 P60, 000
D. P870, 000 (P30, 000)
Answer: D
Cost P 900, 000
Depreciation (P900,000/ 30 years) (P 30, 000)*
For questions 4-5:
On January 3, 2014, Frank Company purchased for P500,000 cash a 10% interest in Zhang Corp. On that
date the net assets of Zhang had a book value of P3,750,000. The excess of cost over the underlying equity in
net assets is attributable to undervalued depreciable assets having a remaining life of 10 years from the date of
Frank's purchase. The investment in Zhang Corp. is not intended for trading.
The fair value of Frank's investment in Zhang securities is as follows: December 31, 2014, P570,00; December
31, 2015, P525,000; December 31, 2016, P2,200,000.
On January 2, 2016, Frank purchased an additional 30% of Zhang's stock for P1,545,000 cash when the book
value of Zhang's net assets was P4,150,000. The excess was attributable to depreciable assets having a
remaining life of 8 years.
During 2014, 2015, and 2016 the following occurred:
Zhang Dividends Paid by

Net Income Zhang to Frank
2014 P350,000 P15,000
2015 400,000 20,000
2016 550,000 70,000
4. The adjustment to retained earnings as of January 1, 2016 as a result of the

acquisition of the additional 30% interest to Zhang Corp. is
a. 50,000
b. 40,000
c. 15,000
d. 7,000
5. The carrying amount of the investment in Zhang Corp. as of December 31, 2016
a. 2,200,000
b. 2,195,000
c. 2,160,000
d. 2,045,000
Adjustment in Investment Income (400,000 x 10%) 40,0000
Adjusted Investment in Associate P 2,060,000

Amortization of Excess (50,000)
Investment Income 150,000
Adjusted Net Income P 2,160,000
CAUBE
1. The Cone Company purchased an investment property on Jan 1, 2012 for a cost
of P220, 000. The property had a useful life of 40 years and at Dec 31, 2014 had
a fair value of P 300, 000. On January 2015 the property was sold for the net
proceeds of P290, 000. Cone Co. elects cost method for investment properties.
What is the gain or loss to be recognized in profit or loss?
a. P 86, 500 gain

b. P 81, 000 gain
c. P 10, 000 loss
d. P 92, 000 gain
Answer: A
Cost P 220, 000
Depreciation (P220, 000/ 40 x 3) (P 16, 500)
Carrying amount P203, 500
Issue price P290, 000
Gain P86, 500
2. On July 1, 2009, Divergent, Inc, paid P1,000,000 for 100,000 ordinary shares
(40%) of Abnegation Corporation. At that date the net assets of Abnegation
totaled P2,500,000 and the fair values of all of Abnegation's identifiable assets
and liabilities were equal to their book values. Abnegation reported net income
of P500,000 for the year ended December 31, 2009, of which P300,000 was for
the six months ended December 31, 2009. Abnegation paid cash dividends of
P250,000 on September 30, 2009. Divergent does not elect the fair value option
for reporting its investment in Abnegation. In its income statement for the year
ended December 31, 2009, what amount of income should Divergent report from
its investments in Abnegation?
a. P 80,000
b. P100,000
c. P120,000
d. P200,000
Investment Income (300,000 x 40%) P120,000
3. The Kuala Company’s accounting policy with respect to investment was to record
them at fair value at the end of each reporting period. One of the investments
was recorded at P 800, 000 on Dec. 31, 2015.
The property had been acquired on January 1, 2015 for a total of P 760, 000, made up of P 690, 000 to the
vendor, P 30, 000 for taxes and P 40, 000 to the professional advisers.
In accordance to PAS 40, the amount of gain to be recognized in profit or loss is:
a. P 40, 000
b. P 70, 000
c. P 80, 000
d. P 110, 000
Answer: A
Fair Value P800, 000
Cost (P 760, 000)
Gain P 40, 000
4. On December 1, 2016, Ambrosia purchased 200,000 shares representing 45

percent of the outstanding stock of Nectar for cash of P2,500,000. As a result of
this purchase, Ambrosia has the ability to exercise significant influence over the
operating and financial policies of Nectar. 45% of the profit of Nectar amounted
to P20,000 for the month of December and P350,000 for the year ended
December 31, 2016. On January 15, 2017, cash dividends of P0.30 per share
were paid to shareholders of record on December 31, 2016. Ambrosia's long-
term investment in Nectar should be shown in Ambrosia's December 31, 2016,
balance sheet at:
a. P2,520,000
b. P2,509,000
c. P2,460,000
d. P2,449,000
Investment in Nectar, Dec.1. 2009 P2,500,000

Investment in Associate P2,520,000
5. The Bucket Company had a single investment property which had originally cost
P 580, 000 on January 1, 2012. At Dec 31, 2014 its fair value was P600, 000 and
Dec 31, 2015 it had a fair value of P590, 000. On date of acquisition, the property
had a useful life of 40 years.
What amount of expense should Bucket recognize under each of the fair value method and cost method in its
2015 income statement?
a. P14, 750 ; P 14, 500

b. P 10, 000 ; P 14, 500
c. P 24, 500 ; P 10, 000
d. P 10, 000; P 14, 750
Answer: B
Fair value method
Fair Value 2014 P 600, 000
Fair Value 2015 (P 590, 000)
Expense P 10, 000
Cost Method
Cost P 580, 000
Useful Life 40 years
Depreciation Expense P 14, 500
DAGOHOY
1. Greek company acquired a 40% interest in an associate for P3,000,000. Greek is part of a consolidated
group. In the financial period immediately following the date on which it became an associate, the Roman
took the following action:
 revalued assets up to fair value by P500,000
 generated profits of P1,600,000
 declared a dividend of P300,000
The balance in the Greek’s account of ‘Shares in associate’, after equity accounting has been applied, is:
a. P3,000,000
b. P3,960,000
c. P3,720,000
d. P3,840,000
Answer c
Investment in Associate Jan. 2009 P3,000,000
Investment Income (1,600,000 x 40%) 640,000

Dividend Received (300,000 x 40%) (120,000)
Revaluation of Assets 200,000
Investment in Associate, Year End P3,720,000
2. Power Company purchased 15% of Bank Company’s 500,000 outstanding ordinary shares on January 2, 2016,
for P15,000,000. On December 31, 2016, Power purchased additional 125,000 shares of Bank for P35,000,000.
There was no goodwill as a result during 2016. Bank reported earnings of P20,000,000 for 2016. What amount
should Power report in its December 31, 2016 balance sheet as investment in Bank Company?
a. P50,000,000
b. P55,000,000
c. P58,000,000
d. P53,000,000
Answer a
No Significant Influence
First Investment P15,000,000
Second Investment 35,000,000
Total Investment P50,000,000
3. The Vergara Company owns three properties which are classified as investment properties. Information below is as
follows:
Property Cost Fair Value 2014 Fair Value 2015
1 270, 000 320, 000 350, 000
2 345, 000 305, 000 285, 000
3 330, 000 385, 000 360, 000
Each property had an estimated useful life of 50 years. The company elects the fair value method.
What is the gain or loss to be recognized in Vergara’s income statement?
a. P18, 900 loss

b. P15, 000 loss
c. P30, 000 gain
d. P 45, 000 loss
Answer: B
Property 1 P30, 000
Property 2 (P 20, 000)
Property 3 (P25, 000)

Loss P 15, 000
Perseus Company completed the construction of a food park at the end of 2015 for a total cost of P100 million. The
mall has an estimated economic life of 40 years. The park was constructed for the purpose of earning rentals by
letting out space in the food park to tenants. The company opted to use the fair value model to measure the food
park. An independent valuation expert was used by the company to fair value the food park on an annual basis.
According to the fair valuation expert the fair values of the food park at the end of 2016 and 2017 were P120 million
and P115 million, respectively.
a. 5,000,000
b. 10,000,000
c. 15,000,000
d. 20,000,000
Answer: A
Fair Value P115,000,000

Carrying Amount (120,000,000)
Loss (P5,000,000)
5. How much is the carrying amount of the shopping mall on December 31, 2017 if Perseus used the cost
model?
a. 100,000,000
b. 115,000,000
c. 97,500,000
d. 95,000,000
Answer: D
Cost – December 31, 2015 P100,000,00

0
Accumulated Depreciation (100,000,000/40 x (5,000,000)
2)
Carrying Amount – December 31, 2017 P95,000,000
DELA CRUZ
Taylor Co. owns 20,000 of the 50,000 outstanding shares of Swift, Inc. common stock. During 2013, Swift earns
₱1,200,000 and pays cash dividends of ₱960,000.
1. If the beginning balance in the investment account was ₱750,000, the balance at
December 31, 2013 should be
a. ₱1,230,000.
b. ₱990,000.
c. ₱846,000.
d. ₱750,000.
Answer C
₱750,000 + [(₱1,200,000 – ₱960,000) × (20,000 ÷ 50,000)] ₱846,000
2. Taylor should report investment revenue for 2013 of

a. ₱480,000.
b. ₱384,000.
c. ₱96,000.
d. ₱0.
Answer A
₱1,200,000 × (20,000 ÷ 50,000) ₱480,000
Brown Corporation earns ₱600,000 and pays cash dividends of ₱200,000 during 2012. Black Corporation owns
3,000 of the 10,000 outstanding shares of Brown.
3. What amount should Black show in the investment account at December 31, 2012 if the
beginning of the year balance in the account was ₱800,000?
a. ₱980,000.
b. ₱800,000.
c. ₱920,000.
d. ₱1,200,000.
Answer C
₱800,000 + (₱600,000 × .3) – (₱200,000 × .3) ₱920,000
4. How much investment revenue should Black report in 2012?

a. ₱200,000.
b. ₱180,000.
c. ₱120,000.
d. ₱600,000.
Answer B
Investment Revenue (600,000 × .3) ₱180,000
5. On January 1, 2016, the Pacita Corporation purchased marketable equity securities to be held as trading for
P2,000,000. The company also paid commission, taxes and other transaction costs amounting to P50,000. The
securities had the following market values at December 31, 2016 and 2017, respectively: P1,750,000 and
P2,100,000.
No securities were sold during 2016. What amount of unrealized gain or loss should be reported in the 2016
profit or loss section of the statement of comprehensive income?
a. P200,000 loss
b. P250,000 loss
c. P350,000 gain
d. P100,000 gain
Solution: Answer b
Marketable equitable securities P2,000,000
Securities 1,750,000
Gain (loss) P 250,000
Entienza
1. Hilton, Inc. has equity securities designated as at fair value through profit or loss that were purchased during 2016. At
the end of 2016, the securities had total market value of P525,000. As of December 31, 2017, the records show cost and
market values as follows:
Investment Cost Market Value
1 P100,000 P 90,000
2 190,000 210,000
3 250,000 235,000
The gain or loss that would be reported in profit or loss as a result of the valuation of the securities at the end of 2017 is
a. P 5,000
b. P 10,000
c. P 20,000
d. P 25,000
Solution: Answer b
Market Value – 2017 P535,000
Market Value – 2016 525,000
Gain P 10,000
2. Bayview Company bought 1,000 shares of PLDT shares as equity investments on January 10, Year 2 at P150 per share
and paid P2,250 as brokerage fee. The investments are held in the business model of collecting contractual cash flows
and selling the financial assets. On December 5, Year 1, a P10 dividend per share of PLDT had been declared to be paid
on April 30, Year 2 to shareholders of January 31, Year 2. There were no other transactions in Year 2 affecting the
investment in PLDT.
At what amount should the investment in equity securities be initially recognized on January 10, Year 2?
a. P142,250
b. P150,000
c. P152,250
d. P162,250
Solution: Answer a
Ordinary Shares (1,000xP150) P150,000
Brokerage Fee 2,250
Dividend (1,000xP10) ( 10,000)
Total P142,250
3. On December 30, 2015, Aloha Company purchased 10,000 ordinary shares of Sun Valley Corporation at P 150 per
share. At the same time of the purchase, Sun Valley has an outstanding 50,000 shares with a total shareholders’ equity
of P 7,500,000. For the year 2016, Sun Valley reported profit of P 3,000,000. On December 30, Aloha received a cash
dividend of P 50 per share. Aloha uses the equity method.
What is the investment carrying value at December 31, 2016?
a. P 2,600,000
b. P 2,100,000
c. P 1,600,000
d. P 1,500,000
Solution: Answer c
Ordinary Shares(10,000xP150) P1,500,000
600,000
Cash Dividend ( 500,000)
Investment Carrying Value (P 1,600,000)
Payat Co. owns 4,000 of the 10,000 outstanding shares of Mataba Corp. common stock. During 2013,
Mataba earns ₱360,000 and pays cash dividends of ₱120,000.
4. If the beginning balance in the investment account was ₱720,000, the balance at
December 31, 2013 should be
a. ₱720,000.
b. ₱816,000.
c. ₱864,000.
d. ₱960,000.
Answer B
₱720,000 + (₱360,000 × .4) – (₱120,000 × .4) ₱816,000
5. Payat should report investment revenue for 2013 of

a. ₱48,000.
b. ₱96,000.
c. ₱120,000.
d. ₱144,000.
Answer D
Investment Revenue (360,000 × .4) ₱144,000
GANAL
1. Holiday, Inc. had the following transactions in the ordinary shares of May Corporation:
January 5 Bought 4,000 ordinary shares. P 100 par, at P88
June 15 Received 10% bonus issue
August 31 Received P4 cash dividend for each ordinary share
October 10 Received stock rights to buy one new share at P 100 for every 5 shares held. Market value of
stock ex-right, P 156
November 15 Sold all stock rights at P4 per right
What is the revised cost per share after receipt of the bonus issue?
a. P75
b. P80
c. P85
d. P90
Solution: Answer b
Revised cost per share (P352,000/4,400) P 80
2. On January 1, 2016, Tom Company acquired 100,000 ordinary shares of Nette Company for P6,000,000. At the
date of purchase, Nette had 500,000 outstanding ordinary shares and shareholders’ equity of P20,000,000.
During the year 2016, Nette reported profit of P1,000,000 and declared and paid cash dividends of P1.50 per
share. The fair value of Nette’s share at December 31, 2016 was P68.
What amount shall Tom Company recognize in profit or loss for the year 2016 if it designated the investment as
at fair value through profit or loss?
a. P150,000
b. P200,000
c. P350,000
d. P950,000
Solution: Answer d
Cash Dividends (100,000x1.5) P150,000
Ordinary Shares (100,000x8) 800,000
Profit or Loss 950,000
3. What amount shall Tom Company recognize in profit or loss for the year 2016 if it is to exercise significant influence
over Nette Company as a result of the acquisition?
a. P150,000
b. P200,000
c. P350,000
d. P950,000
Solution: Answer b
Profit (loss) (6,000,000/P30) P200,000
4. On January 1, 2016, IBM Company paid P1,200,000 for 40,000 ordinary shares of Apple corp., which represent a
25% investment in the net assets of Apple. IBM has the ability to exercise significant influence over Apple. IBM
received a dividend of P3 per share from Apple in 2016. ‘The reported profit of Apple for the year ended December
31, 2016 was P640,000.
The balance of IBM’s Investment in Apple at December 31, 2016 should be
a. P1,200,000
b. P1,240,000
c. P1,360,000
d. P1,480,000
Solution: Answer b
Ordinary Shares P1,200,000
Cash Dividend ( 120,000)
Profit 160,000
P1,240,000
5. On January 1, 2016, Admiral Company purchased 10,000 ordinary shares of LTS Corporation, a large, publicly-
traded company listed on a major stock exchange. In December, LTS distributed a 20% bonus issue when the par
value was P100 per share and the market value was P500 per share.
How much income should Admiral Company report in 2016?
a. P0
b. P200,000
c. P1,000,000
d. P4,000,000
Solution: Answer a
Net income P 0
GREGORIO
1. Las Palmas, Inc. bought 40% of Adams’ outstanding ordinary shares on January 2, 2016, for P4,000,000. The
carrying amount of Adams net asset at the purchase date totaled P9,000,000. Fair values and carrying amounts
were the same for all items except for plant and inventories, for which fair values exceeded their carrying
amounts by P900,000 and P100,000, respectively. The plant has an 18-year life. All inventories were sold during
2016. During 2016, Adams reported profit of P1,200,,000 and paid a P200,000 cash dividend.
What amount should Las Palmas, Inc. report in its statement of comprehensive income from its investment in
Adams for the year ended December 31, 2016?
a. P480,000
b. P420,000
c. P360,000
d. P320,000
Solution: Answer b
Profit ( 0.40 x 1,200,000) P480,000

Net Assets ( 0.40 x 900,000/18) ( 20,000)
Net Assets ( 0.40 x 100,000) 40,000
( 480,000 – 20,000 – 40,000 ) 420,000
2. Use the same information in no. 150. What is the investment carrying value reported in Las Palmas, Inc.
Statement of financial position at December 31, 2016?
a. P4,400,000
b. P4,380,000
c. P4,340,000
d. P4,400,000
Solution: Answer c
Outstanding Shares P4,000,000

420,000
( 80,000)
P4,340,000
Hope Company bought 20% of Prudence Company’s ordinary share on January 1, 2016 for 3,700,000. The
carrying amount of Prudence net Assets at purchase date totalled P16,000,000. Fair values and carrying
amounts were the same for all items except for land and inventory, for which the fair values exceed their
carrying amounts by P3,000,000 and P1,000,000 respectively. All inventories at
January 1, 2016 were sold during the year. During 2016, Prudence reported profit of P
5,500,000 and paid P1,500,000 cash dividends.
3. What amount should Hope Company report as income from investment in its 2016 profit or loss section of the
statement of comprehensive income?
a.P 300,000
b.P900,000
c.P1,000,100
d.P1,200,000
Solution: answer b
Income from Investment20% x 5.5M = 1,100,000; 1,100,000 – (20% x 1,000,000) P900,000
4. Use the same information given in #152. What amount should Hope Company report as investment in
associate on December 31, 2016?
a. P 3,700,000
b. P 4,300,000
c. P 4,500,000
d. P 4,600,000
Answer: B
Investment in associate 3,700,000 + 900,000 – (20% x 1,500,000) 4,300,000
5. On September 1, Year 2, the Lucky Company acquired P 1,000,000 face value, 12% bonds of Key Company at
104. The bonds were dated May 1, Year 2, and mature on April 30, Year 5, with interest payable each October 31
and April 30. The company did not elect to measure the securities at fair value.
What entry should Lucky Company make to record the purchase of the bonds on September 1, Year 2?
Debit Credit
a. Debt Investments 1,040,000

Interest Receivable 40.000
Cash 1,080,000
b. Debt Investments 1,080,000
Cash 1,080,000
c. Debt Investments 1,080,000
Interest receivable 40,000
Cash 1,040,000
d. Debt Investments 1,000,000
Premium on Debt Investments 80,000
Cash 1,080,000
Answer: A
Solution
Debt Investments (1.04 x 1,000,000) 1,040,000
Interest receivable = 1,000,000 x 12% x 4/12 40,000
IGNALAGIN
1. On July 1, Year 2, Marvel Company purchased P10 million of West Company’s 8% bonds due on July 1, Year 10. Based
on the company’s business model for the portfolio of investments, Marvel designates the bonds as investments
measured at amortized cost. The bonds, which pay interest semiannually on January 1 and July 1 were purchased for P
8,750,000 to yield 10%.
In its statement of comprehensive income for the year ended December 31, Year 2. Marvel Company should report
interest income of
a. P 350,000
b. P 400,000
c. P 437,500
d. P 500,000
Solution: Answer c
Interest Income (P8,750,000 x .05) P437,500
2. On July 1, Year 2, Superb Company purchased 4,000 of the P1,000 face amount, 8% bonds of Oat Corp. for P
3,692,000 to yield 10% per annum. The bonds, which mature on July 1, Year 5, pay interest semi-annually on January 1
and July 1. Superb classifies the securities as at amortized cost.
What is the investment carrying value at December 31, Year 2?
a. P 3,975,400
b. P 3,741,200
c. P 3,716, 600
d. P 3,667,400
Solution: Answer c
Bonds P3,692,000
24,600
P3,716,000
3. Use the same information given in #44. How much is the interest revenue reported by Superb Company in its
statement of comprehensive income for year ended December 31, Year 2?
a. P 200,000
b. P 190,000
c. P 184,600
d. P 160,000
Solution: Answer c
Interest Revenue (P3,692,000 x 10% /2) P184,600
4. On January 1, Year 2, Grand Company purchased for collection investment P 1,000,000 face value of Greek Company’s
8% bonds for P 912,400. The bonds were purchased to yield 10% interest. The bonds mature on January 1 Year 7, and
pay interest annually on January 1.
What amount should Grand Company report on its December 31, Year 2 statement of financial position for held for
collection investment?
a. P 1,00,000
b. P 923,640
c. P 912,400
d. P 901,160
Solution: Answer b
Bonds P912,400
Interest Income 11,242
P923,640
5. On June 1, Year 1, Fantastic Company purchased as held for collection securities 8,000 of the P1,000 face value, 8%
bonds of Universe Company for P7,383,000. The bonds were purchased to yield 10% interest. Interest is payable semi-
annually on December 1 and June 1. The bonds mature on June 1, Year 5.
On June 1, Year 2, Fantastic sold the bonds for P7,850,000. This amount includes the appropriate accrued interest.
What is the gain or loss on the sale of the bond investment?

a. P368,700
b. P366,240
c. P 48,700
d. P 46,242
Solution: Answer d
7,850,000 – (8M x .08 x 6/12) = 7,530,000 selling price; 7,383,000 x 5% = 369,150
8M x 4% = 320,000; 369,150 – 320,000 = 49,150
7,383,000 + 49,150 = 7,432,150 CV Dec. 1, Year 1;
7,432,150 x 5% = 371,608
371,608 – 320,000 = 51,608; 7,342,150 + 51,608 = 7,483,758 CV June 1, Yr 2.
Gain 7,530,000 – 7,483,758 = 46,242
ISIDRO
1. On July 1, 2015, Sprakenheit Company purchased P500,000 face value Swazzeg Company 8% bonds for P455,000 plus
accrued interest to yield 10%. The bonds were designated at fair value through profit or loss. The bonds mature on
January 1, 2019 and pay interest annually on January 1. On December 31, 2015, the bonds had a market value of
P472,500. On February 14, 2015 Sprakenheit sold the bonds for P460,000 plus accrued interest.
On its December 31, 2015 statement of financial position, what amount should Sprakenheit Company report as debt
investments?
a. P455,000
b. P457,750
c. P460,000
d. P472,500
Answer: D
Solution:
Debt Investment (Carrying amount is equal to FV) P472,500
2. Use the same information given in #160. What is the interest income reported by Sprakenheit for the year 2015?
a. P 18,200
b. P 20,000
c. P 22,750
d. P 25,000
Solution: Answer b
Interest Income (500,000 x .04) P 20,000
3. Use the same information given in #1. What is the gain(loss) on the sale of the securities in 2016?
a. P 12,500
b. P 5,000
c. P (5,000)
d. P(12,500)
Solution: Answer d
Bonds Price P460,000
Bonds (472,500)
Gain(loss) ( 12,500)
4. Shangri-la bought the shares of Crossing Inc., (classified available for sale as follows:
June 10,2012 2,000 shares at P100 200,000
December 5, 2012 3,000 shares at P120 360,000
560,000
The following were the transactions for 2013:
January 10 Received cash dividend at P10 per share
June 20 Received 20% bonus issue
December 10 Sold 3,000 shares at P120 per share
How much is the gain on the sale of the shares assuming the average cost approach is used?
a. P 0
b. P 60,000
c. P 80,000
d. P100,000
Solution: Answer c
3,000 shares @120 P360,000
3,000 shares @93.33 280,000

Gain on the sale of shares 80,000
5. Use the same information given in #163, assuming that the first in, first out method of identifying the shares sold
used, how much is the gain on the sale of the shares?
a. P 0
b. P 60,000
c. P 80,000
d. P100,000
Answer: D
Solution:
Cost of shares sold (for 2,400 shares, P200,000) + 600 /3,600 x 360,000 = 200,000 + 60,000 260,000
Gain ( 360,000 – 260,000) 100,000
LOPEZ
XYZ Company owns 25% of the ordinary shares of GHI

Corporation. All throughout the year 2015, GHI has 8% preference share with total par value of P10,000,000. GHI
declared P700,000 dividends on its preference shares. GHI reported profit of P3,000,000 during the year 2015.
Compute XYZ’s equity in the profit of GHI assuming
1. The preference shares of GHI are cumulative

a. P500,000
b. P525,000
c. P550,000
d. P575,000
Answer: C
GHI’s preference shares are cumulative

GHI’s profit for 2015 P3,000,000
Preference annual dividends (8% x P10M) 800,000
Profit attributable to ordinary shareholders 2,200,000
XYZ’s equity in GHI 25%
XYZ’s equity in profit of the GHI P 550,000
2. The preference shares of GHI are non cumulative

a. P500,000
b. P525,000
c. P550,000
d. P575,000
Answer: D
Solution:
GHI’s preference share are not cumulative

GHI’s profit for 2015 P3,000,000
Preference Dividends (declared only) 700,000
Profit attributable to ordinary shareholders P2,300,000
XYZ’s equity on GHI 25%
XYZ’s equity in profit of GHI P 575,000
3. In 2012, GG Company purchased P5,000,000 life insurance policy on its president and chief executive officer,
of which GG Company is beneficiary. Information regarding this policy for 2013 is as follows:
Cash surrender value, January 1 P100,000

Annual premium paid on January 1, 2015 200,000
Dividends earned on the policy 20,000
The dividends were applied to increase the cash surrender value.
If the life insurance expense reported by the GG Company in 2015 was P160,000, what is the cash surrender
value on December 31?
a. P120,000
b.P140,000
c. P160,000
d. P200,000
Answer: B
Solution
Cash surrender value 100,000 + (200,000 – 160,000) 140,000
4. On November 1, 2012, Horton Co. purchased Lopez, Inc., 10-year, 9%, bonds with a face value of P500,000,
for P450,000. An additional P15,000 was paid for the accrued interest. Interest is payable semiannually on
January 1 and July 1. The bonds mature on July 1, 2019. Horton uses the straight-line method of amortization.
Ignoring income taxes, the amount reported in Horton's 2012 income statement as a result of Horton's
available-for-sale investment in Lopez was
a. P8,750.
b. P8,333.
c. P7,500.
d. P6,666.
Answer: A
Solution
(P500,000 × .045) + (P50,000 × 2/80) – P15,000 P8,750
5. During 2010, Hauke Co. purchased 3,000, P1,000, 9% bonds. The carrying value of the bonds at December 31,
2012 was P2,940,000. The bonds mature on March 1, 2017, and pay interest on March 1 and September 1.
Hauke sells 1,500 bonds on September 1, 2014, for P1,482,000, after the interest has been received. Hauke uses
straight-line amortization. The gain on the sale is
a. P0.
b. P7,200.
c. P12,000.
d. P16,800.
Answer: B
Solution:
Discount amortization: P60,000 × 8/50 P9,600
Gain (P2,940,000 + P9,600) ÷ 2 = P1,474,800; P1,482,000 – P1,474,800 P7,200
LUBARBIO
On January 3, 2012, Moss Co. acquires P400,000 of Adam Company’s 10-year, 10% bonds at a price of P425,672 to yield
9%. Interest is payable each December 31. The bonds are classified as held-to-maturity.
1. Assuming that Moss Co. uses the effective-interest method, what is the amount of interest revenue that would
be recognized in 2013 related to these bonds?
a. P40,000
b. P42,568
c. PP8,312
d. P38,160
Answer: D
Solution
(P425,672  .09) – (P400,000  .10) = (P1,688)
Interest Revenue (P425,672 – P422)  .09 P38,160
2. Assuming that Moss Co. uses the straight-line method, what is the amount of premium amortization that would
be recognized in 2014 related to these bonds?
a. P2,568
b. P1,688
c. P1,840
d. P2,008
Answer: A
Solution
Premium amortization (P425,672 – P400,000) ÷ 10 P2,568
Richman Co. purchased P600,000 of 8%, 5-year bonds from Carlin, Inc. on January 1, 2012, with interest payable on July
1 and January 1. The bonds sold for P624,948 at an effective interest rate of 7%. Using the effective interest method,
Richman Co. decreased the Available-for-Sale Debt Securities account for the Carlin, Inc. bonds on July 1, 2012 and
December 31, 2012 by the amortized premiums of P2,124 and P2,196, respectively.
3. At December 31, 2012, the fair value of the Carlin, Inc. bonds was P636,000. What should Richman Co. report as
other comprehensive income and as a separate component of stockholders’ equity?
a. P0
b. P4,320
c. P11,052
d. P15,372
Answer: D
Solution:
P636,000 – (P624,948 – P2,124 – P2,196) P15,372
4. At February 1, 2013, Richman Co. sold the Carlin bonds for P618,000. After accruing for interest, the carrying
value of the Carlin bonds on February 1, 2013 was P620,250. Assuming Richman Co. has a portfolio of available-
for-sale debt investments, what should Richman Co. report as a gain (or loss) on the bonds?
a. P0.
b. (P2,250).
c. (P13,122).
d. (P17,622).
Answer:
Solution:
P620,250 – P618,000 P2,250
5. During 2012 Logic Company purchased 6,000 shares of Midi, Inc. for P30 per share. The investment was
classified as a trading security. During the year Logic Company sold 1,500 shares of Midi, Inc. for P35 per share.
At December 31, 2012 the market price of Midi, Inc.’s stock was P28 per share. What is the total amount of gain/
(loss) that Logic Company will report in its income statement for the year ended December 31, 2012 related to
its investment in Midi, Inc. stock?
a. (P12,000)
b. P7,500
c. (P4,500)
d. (P1,500)
Answer: D
Solution:
[(P35 – P30)  1,500] – [(P30 – P28)  4,500] (P1,500)
MACARANAS
1. Valet Corp. began operations in 2013. An analysis of Valet’s equity securities portfolio acquired in 2013
shows the following totals at December 31, 2013 for trading and available-for-sale securities:
Trading Available-for-Sale
Securities Securities
Aggregate cost P90,000 P110,000
Aggregate fair value 70,000 95,000
What amount should Valet report in its 2013 income statement for unrealized holding loss?
a. P35,000.
b. P5,000.
c. P15,000.
d. P20,000.
Answer: D
Solution
P90,000 – P70,000 = P20,000
Rich, Inc. acquired 30% of Doane Corp.'s voting stock on January 1, 2012 for P600,000. During 2012, Doane
earned P240,000 and paid dividends of P150,000. Rich's 30% interest in Doane gives Rich the ability to exercise
significant influence over Doane's operating and financial policies. During 2013, Doane earned P300,000 and
paid dividends of P90,000 on April 1 and P90,000 on October 1. On July 1, 2013, Rich sold half of its stock in
Doane for P396,000 cash.
2. Before income taxes, what amount should Rich include in its 2012 income statement as a result
of the investment?
a. P240,000.
b. P150,000.
c. P72,000.
d. P45,000.
Answer: C
Solution
P240,000 × 30% = P72,000.
3. The carrying amount of this investment in Rich's December 31, 2012 balance sheet should be
a. P600,000.
b. P627,000.
c. P672,000.
d. P690,000.
Answer: A
Solution
P600,000 + P72,000 – (P150,000 × 30%) P627,000
4. What should be the gain on sale of this investment in Rich's 2013 income statement?
a. P96,000.
b. P82,500.
c. P73,500.
d. P60,000.
Answer: C
Solution
P627,000 – (P90,000 × 30%) + (P300,000 × 50% × 30%) P645,000

P396,000 – (P645,000 ÷ 2) P73,500
5. On January 1, 2013, Reston Co. purchased 25% of Ace Corp.'s common stock; no goodwill resulted from the
purchase. Reston appropriately carries this investment at equity and the balance in Reston’s investment account
was P960,000 at December 31, 2013. Ace reported net income of P600,000 for the year ended December 31,
2013, and paid common stock dividends totaling P240,000 during 2013. How much did Reston pay for its 25%
interest in Ace?
a. P870,000.
b. P1,020,000.
c. P1,050,000.
d. P1,170,000.
Answer: A
Solution
P960,000 – (P600,000 × 25%) + (P240,000 × 25%) P870,000
MAYUGA
The summarized balance sheets of Showtime Company and Eat Bulaga Company as of December 31,
2012 are as follows:
Showtime Company
Balance Sheet
December 31, 2012
Assets ₱1,200,000
Liabilities ₱ 150,000
Capital stock 600,000
Retained earnings 450,000
Total equities ₱1,200,000
Eat Bulaga Company
Balance Sheet
December 31, 2012
Assets ₱900,000
Liabilities ₱225,000
Capital stock 555,000
Retained earnings 120,000
Total equities ₱900,000
1. If Showtime Company acquired a 20% interest in Eat Bulaga Company on December 31, 2012 for ₱195,000 and the
fair value method of accounting for the investment were used, the
amount of the debit to Equity Investments (Eat Bulaga) would have been
a. ₱135,000.
b. ₱111,000.
c. ₱195,000.
d. ₱180,000.
`Answer C
Acquisition cost P195,000
2. If Showtime Company acquired a 30% interest in Eat Bulaga Company on December 31, 2012 for ₱225,000 and the
equity method of accounting for the investment were used, the
amount of the debit to Equity Investments (Eat Bulaga) would have been
a. ₱285,000.
b. ₱225,000.
c. ₱180,000.
d. ₱202,500.
Answer B
3. If Showtime Company acquired a 20% interest in Eat Bulaga Company on December 31, 2011 for ₱135,000 and during
2013 Eat Bulaga Company had net income of ₱75,000 and paid a
cash dividend of ₱30,000, applying the fair value method would give a debit balance in the
Equity Investments (Eat Bulaga) account at the end of 2013 of
a. ₱111,000.
b. ₱135,000.
c. ₱150,000.
d. ₱144,000.
Answer B
4. If Showtime Company acquired a 30% interest in Eat Bulaga Company on December 31, 2012 for ₱210,000 and during
2013 Eat Bulaga Company had net income of ₱75,000 and paid a
cash dividend of ₱30,000, applying the equity method would give a debit balance in the
Equity Investments (Eat Bulaga) account at the end of 2013 of
a. ₱210,000.
b. ₱223,500.
c. ₱232,500.
d. ₱201,000.
Answer B
₱210,000 + (₱75,000 × .3) – (₱30,000 × .3) ₱223,500
5. Taurus Company purchased bonds with a face amount of ₱600,000 between interest
payment dates. Taurus purchased the bonds at 102, paid brokerage costs of ₱9,000, and
paid accrued interest for three months of ₱15,000. The amount to record as the cost of
this long-term debt investment is
a. P636,000.
b. P621,000.
c. P612,000.
d. P600,000.
Answer B
Cost (₱600,000 × 1.02) + ₱9,000 ₱621,000
MORENO
Use the following information for questions 1 and 2
3N Corp. has the following investments which were held throughout 2012–2013:
Fair Value
Cost 12/31/12 12/31/13
Trading ₱450,000 ₱600,000 ₱570,000
Available-for-sale 450,000 480,000 540,000
1. What amount of gain or loss would 3N Corp. Report in its income statement for the year ended December 31, 2013
related to its investments?
a. ₱30,000 gain.
b. ₱30,000 loss.
c. ₱210,000 gain.
d. ₱120,000 gain.
Answer B
₱570,000 – ₱600,000 ₱30,000 loss
2. What amount would be reported as accumulated other comprehensive income related to

investments in 3N Corp.’s balance sheet at December 31, 2012?
a. ₱60,000 gain.
b. ₱90,000 gain.
c. ₱30,000 gain.
d. ₱180,000 gain.
Answer C
₱480,000 – ₱450,000 ₱30,000 gain
On its December 31, 2012 balance sheet, Bruno Company appropriately reported ₱10,000 debit balance in its Fair Value
Adjustment (available-for-sale) account. There was no change during 2013 in the composition of Bruno’s portfolio of
equity investments held as available-for-sale securities. The following information pertains to that portfolio:
Security Cost Fair value at 12/31/13
X ₱125,000 ₱160,000
Y 100,000 85,000
Z 175,000 125,000
₱400,000 ₱370,000
3. What amount of unrealized loss on these securities should be included in Bruno's
stockholders' equity section of the balance sheet at December 31, 2013?
a. ₱40,000.
b. ₱30,000.
c. ₱10,000.
d. ₱0.
Answer B
(₱400,000 – ₱370,000) ₱30,000
4. The amount of unrealized loss to appear as a component of comprehensive income for

the year ending December 31, 2013 is
a. ₱40,000.
b. ₱30,000.
c. ₱10,000.
d. ₱0.
Answer A
₱10,000 + ₱30,000 ₱40,000
5. On August 1, 2012, Margaux Company acquired ₱600,000 face value 10% bonds of Celine
Corporation at 104 plus accrued interest. The bonds were dated May 1, 2012, and mature
on April 30, 2017, with interest payable each October 31 and April 30. The bonds will be
held to maturity. What Cash should be recorded on August 1, 2012?
a. ₱639,000
b. ₱609,000
c. ₱600,000
d. ₱624,000
Answer A
Debt Investments: ₱600,000 × 1.04 ₱624,000

Interest Revenue: ₱600,000 × .05 × 3/6 ₱15,000
Cash: ₱624,000 + ₱15,000 ₱639,000
OCHADA
Use the following information for 1 and 2
On January 3, 2012, Kathara Co. acquires ₱400,000 of Juvil Company’s 10-year, 10% bonds at a price of
₱425,672 to yield 9%. Interest is payable each December 31. The bonds are classified as held-to-maturity.
1. Assuming that Kathara Co. uses the effective-interest method, what is the amount of interest revenue that
would be recognized in 2013 related to these bonds?
a. ₱40,000
b. ₱42,568
c. ₱38,312
d. ₱38,160
Answer D
(₱425,672 × .09) – (₱400,000 × .10) = (₱1,688)

Interest Revenue (₱425,672 – ₱1,688) × .09 ₱38,160
2. Assuming that Kathara Co. uses the straight-line method, what is the amount of premium
amortization that would be recognized in 2014 related to these bonds?
a. ₱2,568
b. ₱1,688
c. ₱1,840
d. ₱2,008
Answer A
Premium Amortization (₱425,672 – ₱400,000) ÷ 10 ₱2,568
Questions 3 and 4 are based on the following information:

Richman Co. purchased ₱600,000 of 8%, 5-year bonds from Poorman, Inc. on January 1, 2012, with interest
payable on July 1 and January 1. The bonds sold for ₱624,948 at an effective interest rate of 7%. Using the
effective interest method, Richman Co. decreased the available-for-sale Debt Investments account for the
Poorman, Inc. bonds on July 1, 2012 and December 31, 2012 by the amortized premiums of ₱2,124 and
₱2,196, respectively.
3. At December 31, 2012, the fair value of the Poorman, Inc. bonds was ₱636,000. What should Richman Co.
report as other comprehensive income and as a separate component of
stockholders’ equity?
a. ₱0
b. ₱4,320
c. ₱11,052
d. ₱15,372
Answer D
₱636,000 – (₱624,948 – ₱2,124 – ₱2,196) ₱15,372
4. At February 1, 2013, Richman Co. sold the Poorman bonds for ₱618,000. After accruing for
interest, the carrying value of the Carlin bonds on February 1, 2013 was ₱620,250.
Assuming Richman Co. has a portfolio of available-for-sale debt investments, what should
Richman Co. report as a gain (or loss) on the bonds?
a. ₱0.
b. (₱2,250).
c. (₱13,122).
d. (₱17,622).
Answer B
₱618,000 - ₱620,250 = (₱2,250)
5. On August 1, 2012, Kim Bok Joo Co. acquired 400, ₱1,000, 9% bonds at 97 plus accrued
interest. The bonds were dated May 1, 2012, and mature on April 30, 2018, with interest
paid each October 31 and April 30. The bonds will be added to Kim Bok Joo’s available-for sale
portfolio. What is the debt investment that should be recorded in August 1, 2012?
a. 397,000
b. 409,000
c. 388,000
d. 400,000
Answer C
Debt Investments: 400 × ₱1,000 × .97 ₱388,000
OLORES
Icelle Company purchased ₱600,000 of 10% bonds of Goldie Co. on January 1, 2013, paying ₱564,150. The bonds mature
January 1, 2023; interest is payable each July 1 and January 1. The discount of ₱35,850 provides an effective yield of
11%. Icelle Company uses the effective interest method and plans to hold these bonds to maturity.
1. On July 1, 2013, Icelle Company should increase its Debt Investments account for the
Goldie Co. bonds by
a. ₱3,588.
b. ₱2,056.
c. ₱1,794.
d. ₱1,028.
Answer D
(₱564,150 × .055) – (₱600,000 × .05) ₱1,028
2. For the year ended December 31, 2013, Icelle Company should report interest revenue
from the Goldie Co. bonds of:
a. ₱63,588.
b. ₱62,113.
c. ₱62,052.
d. ₱60,000.
Answer B
₱564,150 × .055 = ₱31,028

(₱564,150 + ₱1,028) × .055 = ₱31,085;
Interest Revenue ₱31,028 + ₱31,085 ₱62,113
Mabait Co. purchased ₱1,000,000 of 8%, 5-year bonds from Magalang, Inc. on January 1, 2012, with interest payable on
July 1 and January 1. The bonds sold for ₱1,041,580 at an effective interest rate of 7%. Using the effective-interest
method, Mabait Co. decreased the available-for-sale Debt Investments account for the MAgalang, Inc. bonds on July 1,
2012 and December 31, 2012 by the amortized premiums of ₱3,540 and ₱3,660, respectively.
3. At December 31, 2012, the fair value of the Magalang, Inc. bonds was ₱1,060,000. What
should Mabait Co. report as other comprehensive income and as a separate component
of stockholders' equity?
a. ₱25,620.
b. ₱18,420.
c. ₱7,200.
d. No entry should be made.
Answer A
₱1,060,000 – (₱1,041,580 – ₱3,540 – ₱3,660) ₱25,620
4. At April 1, 2013, Mabait Co. sold the Magalang bonds for ₱1,030,000. After accruing for
interest, the carrying value of the Magalang bonds on April 1, 2013 was ₱1,033,750. Assuming
Mabait Co. has a portfolio of available-for-sale Debt Investments, what should Mabait Co.
report as a gain or loss on the bonds?
a. (₱29,370).
b. (₱21,870).
c. (₱3,750).
d. ₱ 0.
Answer C
Loss P(1,033,750 – P1,030,000) P3,750
5. On October 1, 2012, Dayana Co. purchased to hold to maturity, 2,000, ₱1,000, 9% bonds
for ₱1,980,000 which includes ₱30,000 accrued interest. The bonds, which mature on
February 1, 2021, pay interest semi-annually on February 1 and August 1. Dayana uses the
straight-line method of amortization. The bonds should be reported in the December 31,
2012 balance sheet at a carrying value of
a. ₱1,950,000.
b. ₱1,951,500.
c. ₱1,980,000.
d. ₱1,980,500.
Answer B
Bonds 2012 ₱1,950,000 + (₱50,000 × 3/100) ₱1,951,500
PAGTAKHAN
1. Nadine Corporation purchased 25,000 shares of common stock of the James
Corporation for ₱40 per share on January 2, 2010. James Corporation had 100,000
shares of common stock outstanding during 2013, paid cash dividends of ₱120,000 during
2013, and reported net income of ₱400,000 for 2013. Nadine Corporation should report
revenue from investment for 2013 in the amount of
a. ₱30,000.
b. ₱70,000.
c. ₱100,000.
d. ₱110,000.
Answer C
₱400,000 × (25,000 ÷ 100,000) = ₱100,000
2. Pak Co. acquired a 60% interest in Gannon Corp. on December 31, 2012 for
₱1,260,000. During 2013, Gannon had net income of ₱800,000 and paid cash dividends of
₱200,000. At December 31, 2013, the balance in the investment account should be
a. ₱1,260,000.
b. ₱1,740,000.
c. ₱1,620,000.
d. ₱1,860,000.
Answer C
₱1,260,000 + (₱800,000 × .6) – (₱200,000 × .6) ₱1,620,000
3. The following information relates to Finacc Company for 2013:

Realized gain on sale of available-for-sale securities ₱30,000
Unrealized holding gains arising during the period on
available-for-sale securities 70,000
Reclassification adjustment for gains included in net income 20,000
Finacc’s 2013 other comprehensive income is
a. P50,000.
b. P80,000.
c. P100,000.
d. P120,000.
Answer B
₱30,000 + ₱70,000 – ₱20,000 ₱80,000
4. On October 1, 2012, Heart Co. purchased 800 of the ₱1,000 face value, 8% bonds of Joy,
Inc., for ₱936,000, including accrued interest of ₱16,000. The bonds, which mature on
January 1, 2019, pay interest semi-annually on January 1 and July 1. Heart used the
straight-line method of amortization and appropriately recorded the bonds as available-for sale.
On Heart's December 31, 2013 balance sheet, the carrying value of the bonds is
a. ₱920,000.
b. ₱912,000.
c. ₱908,800.
d. ₱896,000.
Answer D
₱936,000 – ₱16,000 = ₱920,000
15
P920,000 – (P120,000 × )= P896,000
75
5. Maliit Corp. began operations in 2013. An analysis of Maliit’s equity securities portfolio
acquired in 2013 shows the following totals at December 31, 2013 for trading and
available-for-sale securities:
Trading Available-for-Sale
Securities Securities
Aggregate cost ₱90,000 ₱110,000
Aggregate fair value 70,000 95,000
What amount should Maliit report in its 2013 income statement for unrealized holding
loss?
a. ₱35,000.
b. ₱5,000.
c. ₱15,000.
d. ₱20,000.
Answer D
Unrealized loss(90,000 – 70,000) ₱20,000
PENDELILANG
1. At December 31, 2013, Ziedan Co. has a stock portfolio valued at ₱120,000. Its cost was
₱99,000. If the Securities Fair Value Adjustment (Available-for-Sale) has a debit balance
of $6,000, what is the unrealized gain on December 31, 2013?
a. ₱27,000
b. ₱15,000
c. ₱21,000
d. ₱6,000
Answer B
(₱120,000 – ₱99,000) – ₱6,000) ₱15,000
2. Cheska Company's trading securities portfolio which is appropriately included in current

assets are as follows:
December 31, 2012
Fair Unrealized
Cost Value Gain/ (Loss)
Pangit Corp. ₱250,000 ₱205,000 ₱(45,000)
Maganda, Inc. 245,000 265,000 20,000
₱495,000 ₱470,000 ₱ (25,000)
Ignoring income taxes, what amount should be reported as a charge against income in
Cheska's 2012 income statement if 2012 is Cheska's first year of operation?
a. ₱0.
b. ₱20,000.
c. ₱25,000.
d. ₱45,000.
Answer C
Unrealized loss P25,000
3. On its December 31, 2012, balance sheet, Duterte Co. reported its investment in available for sale securities, which
had cost ₱600,000, at fair value of ₱550,000. At December 31, 2013, the fair value of the securities was $585,000. What
should Duterte report on its 2013
income statement as a result of the increase in fair value of the investments in 2013?
a. ₱0.
b. Unrealized loss of ₱15,000.
c. Realized gain of ₱35,000.
d. Unrealized gain of ₱35,000.
Answer: A
4. During 2012, Moana Company purchased 40,000 shares of Stitch Corp. common stock
for ₱630,000 as an available-for-sale investment. The fair value of these shares was
₱600,000 at December 31, 2012. Moana sold all of the Holmes stock for ₱17 per share on
December 3, 2013, incurring ₱28,000 in brokerage commissions. Moana Company should
report a realized gain on the sale of stock in 2013 of
a. ₱22,000.
b. ₱50,000.
c. ₱52,000.
d. ₱80,000.
Answer A
Gain [(40,000 × ₱17) – ₱28,000] – ₱630,000] ₱22,000
5. On January 2, 2013 Donny Company purchased 25% of the outstanding common stock of
Shawn, Inc. and subsequently used the equity method to account for the investment. During
2013 Shawn, Inc. reported net income of ₱630,000 and distributed dividends of ₱270,000. The
ending balance in the Equity Investments account at December 31, 2013 was ₱480,000
after applying the equity method during 2013. What was the purchase price Donny Company
paid for its investment in Shawn, Inc?
a. ₱255,000
b. ₱390,000
c. ₱570,000
d. ₱705,000
Answer B
X + [(₱630,000 – ₱270,000) × .25] = ₱480,000

X + ₱90,000 = ₱480,000
X ₱390,000
PROVIDAL
1. On November 1, 2012, Alena Company purchased 900 of the ₱1,000 face value, 9%
bonds of Pirena, Incorporated, for ₱948,000, which includes accrued interest of ₱13,500.
The bonds, which mature on January 1, 2017, pay interest semi-annually on March 1 and
September 1. Assuming that Alena uses the straight-line method of amortization and that
the bonds are appropriately classified as available-for-sale, the net carrying value of the
bonds should be shown on Alena's December 31, 2012, balance sheet at
a. ₱900,000.
b. ₱934,500.
c. ₱933,120.
d. ₱948,000.
ANSWER: C
Bonds ₱948,000 – ₱13,500 = ₱934,500

₱934,500 – (₱34,500 × 2/50) = ₱933,120.
2. On November 1, 2012, Amihan Co. purchased Cardo, Inc., 10-year, 9%, bonds with a face
value of ₱500,000, for ₱450,000. An additional ₱15,000 was paid for the accrued interest.
Interest is payable semi-annually on January 1 and July 1. The bonds mature on July 1,
2019. Amihan uses the straight-line method of amortization. Ignoring income taxes, the
amount reported in Horton's 2012 income statement as a result of Amihan's available-for sale
investment in Cardo was
a. ₱8,750.
b. ₱8,333.
c. ₱7,500.
d. ₱6,666.
Answer A
(₱500,000 × .045) + (₱50,000 × 2/80) – ₱15,000 = ₱8,750.
3. On October 1, 2012, Kathniel Co. purchased to hold to maturity, 500, ₱1,000, 9% bonds for
₱520,000. An additional ₱15,000 was paid for accrued interest. Interest is paid
semiannually on December 1 and June 1 and the bonds mature on December 1, 2016.
Kathniel uses straight-line amortization. Ignoring income taxes, the amount reported in
Kathniel's 2012 income statement from this investment should be
a. ₱11,250.
b. ₱10,050.
c. ₱12,450.
d. ₱13,650
Answer B
(₱500,000 × .09 × 3/12) – (₱20,000 × 3/50) = ₱10,050
4. During 2010, Lizquen Co. purchased 3,000, ₱1,000, 9% bonds. The carrying value of the
bonds at December 31, 2012 was ₱2,940,000. The bonds mature on March 1, 2017, and
pay interest on March 1 and September 1. Lizquen sells 1,500 bonds on September 1,
2014, for ₱1,482,000, after the interest has been received. Lizquen uses straight-line
amortization. The gain on the sale is
a. ₱0.
b. ₱7,200.
c. ₱12,000.
d. ₱16,800.
Answer B
Discount amortization: ₱ 60,000 × 8/50 = ₱ 9,600

(₱ 2,940,000 + ₱ 9,600) ÷ 2 = ₱ 1,474,800;
₱ 1,482,000 – ₱ 1,474,800 = ₱ 7,200 gain
5. During 2012 Luigi Company purchased 6,000 shares of Mario, Inc. for ₱30 per share. The
investment was classified as a trading security. During the year Luigi Company sold
1,500 shares of Mario, Inc. for ₱35 per share. At December 31, 2012 the market price of
Mario, Inc.’s stock was ₱28 per share. What is the total amount of gain/(loss) that Luigi
Company will report in its income statement for the year ended December 31, 2012
related to its investment in Mario, Inc. stock?
a. (₱12,000)
b. ₱7,500
c. (₱4,500)
d. (₱1,500)
Answer D
[(₱35 – ₱30) × 1,500] – [(₱30 – ₱28) × 4,500] = (₱1,500)
PUNZALAN
Harry Corporation had the following portfolio of equity investment at fair value through other comprehensive
income at December 31, Year 2:
Purchase Price FV 12/31/Year 2

Jackson ordinary shares (5,000) P225,000 P250,000
Monterey preference (3,500) 133,000 140,000
Garcia ordinary shares (1,000) 180,000 178,000
On April 30, Year 3, Harry sold all the Jackson shares at P54 per share. In addition, on July 31, Year 3, 3,000 of
Barney Corporation shares were acquired at P59.
The December 31, Year 3 fair values were: Monterey, P135,000; Garcia, P190,000; and Barney, P200,000.
Harry has the policy of transferring the equity account to retained earnings at the date the equity investment is
derecognized.
1. How much gain or loss shall be recognized on the sale of Harry shares on April 30, Year 3?
a. P20,000
b. P25,000
c. P30,000
d. 0
Answer: A
Sales price (5,000 x 54) P270,000

CV at date of sale 250,000
Gain on sale of Harry shares P 20,000
2. What should be the cumulative balance of Unrealized Gains and Losses on Equity Investments at December 31, Year
3?
a. P23,000
b. P25,000
c. P33,000
d. P35,000
Answer: D
Solution:
Cumulative balance of Unrealized Gains and Losses
(in equity) P 35,000
# of FV, 12/31/ Unrealized

shares Cost Year 3 Gain (Loss)
Monterey Preference 3,500 P133,000 P135,000 P 2,000
Garcia Ordinary 1,000 180,000 190,000 10,000
Barney Corporation 3,000 177,000 200,000 23,000
P490,000 P525,000 P35,000
Melody Corporation holds ordinary shares of Music, Inc. acquired as follows:
Date of Acquisition Shares Total Cost

September 19, Year 2 750 P60,000
July 16, Year 1 1,250 110,000
The shares above were classified as equity investments at fair value through other comprehensive income. Fair
values on December 31, Year 1 and Year 2 were P85 and P90, respectively.
In Year 3, Melody Corp. received 2,000 rights to purchase Music, Inc. ordinary shares at P80 per share. Five
rights are required to purchase one share. Melody used rights to purchase additional 300 shares of Music, Inc.
when each share sells at P100. Subsequently Melody sold the remaining rights at P4.50 each.
At December 31, Year 3, Music Inc. ordinary shares sell at P98.
3. Determine the amount of the equity account Unrealized Gains or Losses on Equity Investments at Fair Value
through Other Comprehensive Income at the end of Year 1
a. P3,250
b. P3,500
c. P3,750
d. P4,000
Answer: C
Unrealized Gains or Losses on Equity Investments through OCI

Fair value (1,250 x 85) P106,250
Cost 110,000
Unrealized Loss, end of Year 1 P 3,750
4. Determine the amount of the equity account Unrealized Gains or Losses on Equity Investments at Fair Value
through Other Comprehensive Income at the end of Year 2
a. P10,000
b. P11,000
c. P20,000
d. P80,000
Answer: A
Total FV, Dec. 31, Year 2 (2,000 x 90) P180,000

Total cost (110,000 + 60,000) 170,000
Cumulative balance, end of Year 2 P 10,000
5. Determine the amount taken to other comprehensive income as a result of the change in fair value for
Year 2
a. P10,000
b. P13,000
c. P13,750
d. P15,750
Answer: C
Fair value (2,000 x 90) P180,000

Carrying value/Cost (106,250+60,000) 166,250
Unrealized gain for Year 2 P 13,750
ROLDAN
Kisses Company purchased 200 of the 1,000 outstanding shares of Marco Company's common stock
for ₱600,000 on January 2, 2013. During 2013, Marco Company declared dividends of₱100,000 and reported
earnings for the year of ₱400,000.
1. If Kisses Company used the fair value method of accounting for its investment in Marco
Company, its Equity Investments (Marco) account on December 31, 2013 should be
a. ₱580,000.
b. ₱660,000.
c. ₱600,000.
d. ₱680,000.
Answer C
Acquisition cost ₱600,000
2. If Kisses Company uses the equity method of accounting for its investment in Marco
Company, its Equity Investments (Marco) account at December 31, 2013 should be
a. ₱580,000.
b. ₱600,000.
c. ₱660,000.
d. ₱680,000.
Answer C
₱600,000 + (₱400,000 × .2) – (₱100,000 × .2) ₱660,000
Dyosa, Inc. acquired 30% of Darna Corp.'s voting stock on January 1, 2012 for ₱600,000. During 2012, Darna earned
₱240,000 and paid dividends of ₱150,000. Dyosa's 30% interest in Darna gives Dyosa the ability to exercise significant
influence over Darna's operating and financial policies. During 2013, Darna earned ₱300,000 and paid dividends of
₱90,000 on April 1 and ₱90,000 on October 1. On July 1, 2013, Dyosa sold half of its stock in Doane for ₱396,000 cash.
3. Before income taxes, what amount should Dyosa include in its 2012 income statement as a
result of the investment?
a. ₱240,000.
b. ₱150,000.
c. ₱72,000.
d. ₱45,000.
Answer C
₱240,000 × 30% ₱72,000
4. The carrying amount of this investment in Dyosa's December 31, 2012 balance sheet
should be
a. ₱600,000.
b. ₱627,000.
c. ₱672,000.
d. ₱690,000.
Answer B
₱600,000 + ₱72,000 – (₱150,000 × 30%) ₱627,000
5. What should be the gain on sale of this investment in Dyosa's 2013 income statement?
a. ₱96,000.
b. ₱82,500.
c. ₱73,500.
d. ₱60,000.
Answer C
₱627,000 – (₱90,000 × 30%) + (₱300,000 × 50% × 30%) = ₱645,000.
Gain on sale of investment ₱396,000 – (₱645,000 ÷ 2) ₱73,500
SANDAGON
On January 1, Year 3, Inna Corporation had 30,000 ordinary shares of NPE Company acquired during Year 2 for a
total consideration of P1,800,000 , including P30,000 directly attributable costs.
On December 31, Year 2, the NPE shares were selling at P65 per share. In July Year 3, Inna Corporation received
a 20% bonus issue. Subsequently, it sold 15,000 shares at 70 per share. Market value of NPE ordinary at
December 31, Year 3 was P72 per share.
The shares were designated at Equity Investments at Fair Value through Other Comprehensive Income.
1. What total amount shall be reported in profit or loss in the statement of comprehensive income for Year 3?
a. P237,500
b. P374,500
c. P612,000
d. P0
Answer: C
Gain on sale P237,500

Unrealized gain on equity investments at FVPL 374,500
Total amount reported in profit or loss P612,000
2. How much total income shall be reported in profit or loss in the statement of comprehensive income for Year
3 as a result of this investment?
a. P1,050,000
b. P462,000
c. P1,512,000
d. P0
Answer: D
3. At what amount should the investment be shown on December 31, Year 3 statement of financial position?
a. P1,050,000
b. P462,000
c. P1,512,000
d. P0
Answer: C
Solution:
Equity Investments at Fair Value through OCI P1,512,000
(1,050,000 + 462,000)
4. What is the amount that will be shown in the equity section of the statement of financial position at
December 31, Year 3 relating to the investment account?
a. P1,050,000
b. P462,000
c. P1,512,000
d. P0
Answer: B
Unrealized Gain or Loss in Equity , 12/31 Year 3 P 462,000

(150,000 + 570,000 – 300,000 + 42,000)
Anti. Corp purchased 10,000 shares of Pro. Corp at P60 per share. The shares represent less than 5% ownership
in Pro Corp. The shares are classified as financial assets at fair value through profit or loss. Market Value at
December 31, Year 1 was P66. At the beginning of Year 2, Pro Corp. issued rights to purchase one ordinary share
for every five rights submitted plus P50. Immediately after the rights were issued, the ordinary share was selling
for P70 per share.
5. At what amount should the unrealized gain be reported in equity?

a. P126,000
b.P150,000
c.P226,000
d. P276,000
Answer: A
Market value (12,000 shares x 78) 936,000
Carrying value before adjustment (660,000 + 150,000) 810,000
Unrealized gain 126,000
STA. ANA
The following information relates to Absolute Company for the year 2015:
Land Held as Investment Property (at cost) P5,000,000

Fair Value at January 1,2015 6,000,000
Fair Value at December 31, 2015 6,800,000
Estimated disposal cost 300,000
Building Held as Investment Property

Construction was completed at January 1,2015 at a total cost of P20,000,000
Estimated useful life is 40 years with no residual value
Fair value at January 1, 2015 19,000,000
Fair Value at December 31,2015 20,000,000
Estimated disposal cost 500,000
Rent revenue recognized during 2015 3,000,000

Compensation paid to personnel for administrative and security 200,000
Real property taxes applicable to 2015 120,000
Costs of maintenance paid to an outsourced company 340,000
1. Using the cost model determine the amount of investment property that will be shown on December 31, 2015
statement of financial position.
a. P26,800,000
b. P23,500,000
c. P25,000,000
d. P25,300,000
Answer: B
Cost Model
Investment Property at December 31, 2015

Land P 5,000,000
Building
Cost 20,000,000
Accumulated Depreciation (20,000,000/40 x3) 1,500,000 18,500,000
Total Investment Property P23,500,000
2. Using the fair value model determine the amount of investment property that will be shown on December
31, 2015 statement of financial position.
a. P26,800,000
b. P23,500,000
c. P25,000,000
d. P25,300,000
Answer: A
Fair Value Model

Investment Property at December 31, 2013
Land P 6,800,000
Building 20,000,000
Total Investment Property P26,800,000
3. Using the cost model determine the accounts and amounts taken to profit or loss relating to the investment
property.
a. P2,180,000
b. P3,980,000
c. P1,960,000
d. P3,760,000
Answer: C
Cost Model
Rent Revenue P 3,000,000

Depreciation Expense (500,000)
Administrative and Security Salaries (200,000)
Property Taxes (120,000)
Maintenance (340,000)
Profit P 1,960,000
4. Using the fair value model determine the accounts and amounts taken to profit or loss relating to the
investment property.
a. P2,180,000
b. P3,980,000
c. P1,960,000
d. P3,760,000
Answer: D
Fair Value Model
Rent Revenue P3,000,000

Change in Fair Value of Investment Property
Land 800,000
Building 1,000,000
Depreciation Expense (500,000)
Administrative and Security Salaries (200,000)
Property Taxes (120,000)
Maintenance (340,000)
Profit P3,760,000
On January 1, Year 1, Narito Company purchased 1,000,000 face value 5-year based of Wolf Corporation for
P108,660, a price that yields 5% on a stated interest rate of 7%. Interest is payable annually at December 31.
The bond investment is measured at amortized cost.
On December 31, Year 3, after paying the periodic interest, Narito negotiated for a modification of interest from
7% to 4.5% for the remaining term of the bonds, due to continuous decline in the market rate of interest.
5. How much is the impairment loss at Year 3?

a. P0
b. P4,653
c. P5,653
d. P10,333
Answer: B
Solution:
Carrying Value, December 31, Year 3 P103,720
Present Value of future cash inflows
10,000 x 0.9070 90,700
4,500 X 1.8594 8,367 99,067
Impairment Loss P 4,653
TABARA
Problem F
On January 1, 2014 , Annabeth Company purchased P1,000,000 12% bonds of Tirisa Company for P1,063,394 , a price
that yields 10% . Interest on these bonds is payable every December 31. The bonds mature on December 31, 2017 . On
April 1, 2016 to pay a maturing obligation , Annabeth sold P600,000 face value bonds at 101 plus accrued interest .
Market Value on these bonds on different dates is as follows:

December 31. 2014 108
December 31. 2015 106
December 31. 2016 104
Assume that the debt investments is intended to speculate on fluctuations or fair value and is held for trading.
1. How much is the interest income for the year ended Dec. 31, 2014 ?
a.P127,607
b.P120,000
c.106,399
d.P100,000
Answer: B
Face Amount of Investment (1,000,000*12%) P120,000
2. What amount of gain/loss should Annabeth report on the sale of the bond investment on April 1,2016?
a.P30,000 gain
b.P30,000 loss
c.12,344 gain
d.12,344 loss
Answer: B
Selling Price of Investment (600,000*101) P606,000
Carrying Amount of Investment (600,000*1.06) 636,000
Loss on Sale of Investment P 30,000
3. At what amount should the bond investments be shown on December 31,2015 and December 31,2016 statement of
financial position?
a.P1,000,000 and P400,000

b.P1,034,706 and P1,018,177
c.P1,000,000 and P416,000
d.P1,060,000 and P416,000
Answer: D
December 31,2015 (1,000,0000 *1.06) P1,060,000

December 31,2016 (400,000 *1.04) P416,000
Assume that the company intended to collect the principal interest over the term of the bonds and designated the
investment at amortized cost.
4. At what amount should the investment debt investments be shown in December 31,2014 statement of financial
position?
a.P1,000,000
b.P1,063,394
c.P1,034,706
d.P1,049,733
Answer: D
Interest Date Interest Due Effective Interest Amortization Carrying Amount

01/01/2014 1,063,394
12/31/14 120,000 106,339 13,661 1,049,733 (d)
5. At what amount should the investment debt investments be shown in December 31,2015 statement of financial
position?
a.P1,000,000
b.P1,063,394
c.P1,034,706
d.P1,018,733
Answer: C
Interest Date Interest Due Effective Interest Amortization Carrying Amount

01/01/2014 1,063,394
12/31/14 120,000 106,339 13,661 1,049,733
12/31/15 120,000 104,973 15,027 1,034,706 (c)
TARREGA
On January 1, 2014, Solidbank grants a 10-year P10,000,000 non-interest bearing advance to its vice-president. The
market rate of interest is 12%
1. What is the amortized cost of the receivable on December 31, 2015?
a. P0
b. P3,606,400
c. P3,652,768
d. P4,039,168
Answer: D
Solution:
Amortized Cost at December 31, 2015 (3,220,000 + 386,400 + 432,768) 4,039,168
2. At what amount should the receivable from the vice president be taken up by Solidbank on January
1, 2014?
a. P3,220,000
b. P6,780,000
c. P10,000,000
d. P0
Answer:
Receivable (P10,000,000 x 0.3220) P3,220,000
3. How much interest income shall be taken up by Solidbank during 2014?

a. P386,400
b. P813,600
c. P1,200,000
d. P0
Answer:
Interest Income (12% x P3,220,000) P386,400
Problem G
The Mapagmahal Company acquired a 30% equity interest in Baywatch Company for P4,000,000 on Jan. 1, 2015 . In the
year 2015.Baywatch earned profits of P800,000 and paid no dividends . In the year 2016 , Baywatch incurred losses of
320,000 and paid P100,000 dividends
4. In Mapagmahal’s consolidated statement of financial position at Dec. 31, 2016 what should be the carrying amount of
interest in Baywatch?
a P4,000,000
b.P4,114,000
c.P4,144,000
d.P4,380,000
Answer: B
Investment in Associate, beginning P4,000,000

Net Profit two years (800,000-320,000)*30% 144,000
Dividends received (100,000*40%) (40,000)
Investment in Baywatch , Dec.31,2016 P4,114,000
5. In Mapagmahal’s consolidated statement of financial position at Dec. 31, 2016 what should be the carrying amount of
interest in Baywatch under cost method?
a. P4,000,000
b. P4,114,000
c. P4,144,000
d. P4,380,000
Answer: A
Cost Method (no change in carrying amount) P4,000,000
TERREN
Problem E
On January 2,2014 ,Kristine Company purchased Bolagdan Company , 9% bonds with a face value of P4,000,000 and
P3,670,000. Kristine Company intends to collect the contractual cash flows from the bonds ,and as such the instruments
were designated as Held for collection and were measured at amortized cost .The effective interest rate on this
investment is 10%. The bonds are dated January 1,2014 and mature on December 31,2023. The bonds pay interest semi
-annually on June 30 and December 31. Kristine’s accounting year is the calendar year.
On November 30,2016 , P1800,000of the bonds were sold at 98 plus accrued interest .As a result of the change in
Kristine’s business model for this portfolio of investment ,Kristine reclassified the portfolio as at fair value through profit
or loss.
The fair value of the bonds was 98 on December 31,2014 , 96 on December 31,2015 ,and 98.5 at December 31,2016.
1. What is Kristine’s Interest Revenue for the year ended December 31,2014 ?
a. P376,400
b. P370,000
c. P380,000
d. P386,400
Answer: A
Interest Revenue (P188,000 + P188,400) P376,400
2. At what amount should this investment be presented on December 31,2014 ,statement of Financial Position ?
a.P3,768,000
b.P3,776,400
c. P3,785,220
d.P3,760,000
Answer: B
Kristine Company
Interest Date 9% Interest 10% Effective Discount Amortized
Paid Interest Amortization Cost ,end
Jan. 1 ,2014 P3,760,000
June 30 ,2014 P180,000 188,000 8,000 3,768,000
December 31,2014 P180,000 188,400 8,400 3,776,400
3. What amount of Financial Asset shall be presented as part of current assets on December 31 ,2015 as a result of the
above statement ?
a.P3,776,400
b.P3,794,481
c.P 0
d. P3,760,000
Answer: C NO CURRENT ASSET SHALL BE REPORTED.
4. What amount of gain/loss shall be recognized upon sale of the securities at November 30,2016 ?
A. P48, 279
B. P48, 000
C. P22, 000
D. P44, 000
Answer: A
Selling Price on Nov. 30(1.8 M * 98%) P1,764,000
Carrying amount 1,711,892
10,210*1.8/4*5/6 3,829 (1,715,721)
Gain on Sale on Nov . 30 P48,279
5. At what amount should the investment be shown on December 31,2016 statement of financial position?
a.P2, 552, 000
b.P2, 884, 000
c.P2, 000, 000
d.P2, 167,000
Answer: D
Investment – December 31, 2016 (P2,200,000 *.985) P2,167,000
TRINILLA
Problem D
On March 31 2016, Gray Company purchased 120,000 ordinary shares of Len Company for
P 1,700,000 representing 30% of Len’s Outstanding ordinary shares and an underlying equity of P1,400,000 in Len’s Net
assets on January 2, 2016 . The excess of the acquisition cost over the equity acquired cannot be attributed to any
tangible asset. As a result of Gray’s 30% ownership of Len, Gray has the ability to exercise significant influence over the
Len’s financial and operating policies.
Len paid quarterly dividend of P0.50 per ordinary share on each of these dates. Len’s profit for the year ended Dec
31,2016 was P1,200,000 that was earned evenly throughout the year .At December 31,2016 each ordinary share of Len
Company was selling at P16 .
1. What is the Gray’s Income for the year 2016?

a. P360,000
b.P330,000
c.P300,000
d.P270,000
Answer: D
Annual Income (P1,200,000/12 P100,000 *9 months) P900,000
Income for 2016 (P900,000 * 30%) P270,000
2. What is the investment carrying amount at December 31,2016

a.P1,920,000
b.P1,790,000
c.P1,730,000
d.P1,700,000
Answer: B
Acquisition Cost P1,700,000 Investment Income
270,000
Dividend Received (180,000)
Carrying Amount ,December 2016 P1,790,000
3.What is the amount of dividend income that the company would recognize at the year end?
a.P240,000
b.P180,000
c.P 120,000
d. P0
Answer: D No Dividend Income to be reported
4. Assuming the excess of acquisition cost over the underlying equity acquired is attributable to a piece of equipment
with a remaining life of 5 years on the date of investment acquisition and depreciation on a straight line basis, what is
the investment carrying amount at December 31, 2016?
a.P1,920,000
b.P1,790,000
c.P1,730,000
d.P1,700,000
Answer: B
Amortization of Excess
P300,000/5 years= 60,000 *9/12 months 45,000
Acquisition Cost P1,700,000
Amortization of Excess (45,000)
Dividend Received (180,000)
Carrying Amount ,December 2016 P1,790,000
On June 1, 2016, Ralphy Company purchased for P5,353,150 (including transaction costs) plus accrued interest
P5,000,000 12% bonds of Blessing Corporation. These investments are classified as held to maturity securities. The
bonds, which mature on December 31, 2014 pay interest annually on December 31. Using a financial calculator, the yield
is computed at 10%.
On September 1, 2019, in response to some liquidity problems, Ralphy Corporation sold P3,000,000 of the bonds at 103
plus accrued interest. The bonds are quoted in the market at the following prices, at selected dates.
June 1. 2016 107 Dec. 31, 2018 104

Dec. 31, 2016 105 Sept 1, 2019 103
Dec. 31, 2017 106 Dec 31, 2019 103.5
5. What amount should be reported as gain/loss on the sale of investment?

a. 12,339 gain
b. 12,339 loss
c. 20,141 gain
d. 20,141 loss
Answer: C
CV of HTM securities sold:
As of 12/31/11 (5,171,655 x 3/5) 3,102,993
Amort from 1/1/12-9/1/12 33,134
CV as of 9/1/12 3,069,859
Sales price 3,090,000
Gain on sale 20,141
VERGARA
During 2014, Katniss Company acquired 16,000 shares of Effie Company’s 300,000 shares. The shares are not intended
to be traded in the near term and Katniss Company does not have the ability to exercise significant influence over the
policies of Effie Company. The market values are as follows:
Dec. 31, 2014 - P 235,000
Dec. 31, 2015 - P 241,000
Dec. 31,2016 - P222,000
1.How much is the unrealized loss on the equity investment recognized in profit or loss of 2016 ?
a.P19,000
b.P11,310
c.P9,000
d.P0
Answer: D No gain or loss to be recognized in the profit /loss because the shares are designated as Investment through
Other Comprehensive Income.
2. How much will the equity investments be reported in the Katniss Company December 31, 2016 statement of financial
position?
a.P233,310
b.P222,000
c. P241,000
d.P235,000
Answer: B
December 31, 2016 MV - P222,000
A company has various equity investment at fair value through profit or loss transactions during 2015 and 2016 . The
acquisition cost of all the securities in it’s portfolio during 2015 was P532,000 . At December 31 2015 and December 31
2016, the market value of these equity investments were P541,000 and P512,000 respectively . In 2017 , all of these
securities were sold for P550,000
3. Assuming no other transactions are noted regarding these financial assets at fair value through profit or loss, what is
the amount of unrealized gain/loss reported in the 2016 income statement related to these securities?
a.P29,000 gain
b.P29,000 loss
c.P20,000 gain
d.P20,000 gain
Answer:
December 31,2016 MV P512,000
December 31,2015 MV 541,000
Loss P29,000
4.What is the gain on sale reported in A company’s 2017 income statement ?

a.P38,000
b.P18,00
c.P9,000
d.P0
Answer: A
Selling Price P550,000

December 31,2016 MV 512,000 Gain on Sale
P38,000
5. Assuming that the securities held by A Company are classified as fair value through other comprehensive income
,what is the gain on sale reported in A company’s 2016 income statement ?
a.38,000
b.P18,00
c.P9,000
d.P0
Answer: D NO REALIZED GAIN OR LOSS UPON SALE
VILLAVIZA
Park Company bought the ordinary shares of Lee Young Company designated as equity securities at fair value through
other comprehensive income as follows:
June 20,2015 -1,000 shares for P101,600
November 5, 2015 -3,000 shares at P104 per share
On January 25,2016 , Park Company received cash dividend of 4.50 per share. On June 14, 2016, it received a 10% bonus
issue and on July 18, 2016. Park sold 1,500 shares at P95 per share.
Market Values of ordinary shares:

Dec 31, 2015 P106.70 per share
Dec 31, 2016 P96.00 per share
1. At how much would the equity investments be reported at December 31, 2015?
a.P431,600
b.P426,800
c.P413,600
d. P384,00
Answer: B
4,000 ordinary shares * P106.70 per shares (FMV December 31, 2015) P426,800
2.How much is the dividend revenue reported in Park’s statement of comprehensive income for the year ended
December 31 , 2016?
a.P19,800
b.P18,000
c.P13,500
d.P4,500
Answer: B
4,000 ordinary shares * P4.50 per share P18,000
3.What is the revised carrying amount per share of Lee Young Company ordinary shares after the receipt of bonus issue
on June 14,2016?
a.P97.00
b.P94.00
c.P96.00
d.P95.00
Answer: A
Bonus Issue = 4,000 shares * 1.10 4,400 ordinary shares
Carrying Amount = P426,800 /4,400 ordinary shares P97.00 per share
4. How much is the gain /loss on the sale of Lee Young Company ordinary shares on July 18,2016 ?
a.P4,500
b.P3,000
c.P1,500
d. 0
Answer: D NO REALIZED GAIN OR LOSS UPON SALE
5. At how much would the remaining equity investment be reported at December 31, 2016?
a. 299,100
b.278,400
c. 240,000
d. 214,000
Answer: B
Ordinary shares 4,400 -1,500(sold) 2,900 shares
2,900 shares * P96.00 per share P278,400

Aguilan: Question No. 1 Answer B

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Aguilan: Question No. 1 Answer B

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AGUILAN

Land held for long-term capital appreciation P15,000,000

Question No. 1 Answer b

Land held for long-term capital appreciation P15,000,000

Sheeran’s net income P150, 000

Ed’s share of Sheeran’s equity P60, 000

Income from investment P52, 000

Question No. 3 Answer a

Cost P198, 000

Accrued Interest (4, 500)

Carrying amount (Apr. 1, 2016) P194, 000

Amortized Discount (P6, 000 x 7/15) 2,800

Carrying Amount P196, 800

Financial asset at fair value through profit or loss P3, 200,000

Financial asset at fair value through other P3, 400,000

Comprehensive income (3,200,000+200,000)

Question No. 2 Answer a

Fair Value - 2017 P7,000,000

Initial cost P18, 000,000

Depreciation expense (18,000,000÷40) (P 450,000)

Carrying amount P17, 550,000

Question No. 4 Answer d

Aggregate cost as of 12/31/17 P170, 000

Unrealized losses P26, 000

FV Trading Investment (12/31/17) P155, 000

Cost (available for sale) P150, 000

Question No. 3 Answer c

Initial Investment P26,000

Cost Fair value

FV of Securities 12/31/17 P160, 000

Trading securities Available for sale securities

2. The depreciation expense in 2016 is

Fair Value - 2015 P104,000,000

Question No. 2 Answer d

If investment property is accounted for fair value method, there is no depreciation.

Question No. 3 Answer c

Fair Value - 2016 P118,000,000

Question No. 4 Answer b

Fair Value - 2016 P118,000,000

Carrying Amount - 2016 P116,000,000

Aggregate cost as of 12/31/17 P150, 000

Question No. 1 Answer b

Market Value of bonds on December 31, 2015 P920,000

Question No. 2 Answer a

Sales Price P950,000

Question No. 3 Answer d

Financial Asset held for trading – FVPL P920,000

Cost Fair value

5. During year 1, Rex Company purchased marketable equity securities as a short-term

Security Cost Fair value

Cost P17, 000

Question No. 1 Answer a

Fair Value of Bonds – January 1, 2014 P1,000,000

Capital gains distributions P145, 000

Carrying amount P575, 000

Fair Value of Security (530, 000)

Loss from 2016 P75, 000

Loss from 2017 45,000

Accumulated OCI P120, 000

Question No. 1 Answer b

Initial Investment P30,000

Fair Value 12/31/16 P575, 000

Fair Value 12/31/17 (P490, 000)