Multiple Choice.

Investment in Equity at FVPL and FVOCI

1. Which of the following are reported at fair value?

a. Debt investments.
b. Equity investments.
c. Both debt and equity investments.
d. None of these answers choices are correct.
2. Which of the following is not correct in regard to trading investments?
a. They are held with the intention of selling them in a short period of time.
b. Unrealized holding gains and losses are reported as part of net income.
c. Any discount or premium is not amortized.
d. All of these answer choices are correct.
3. Equity investments acquired by a corporation which are accounted for by recognizing
unrealized holding gains or losses as other comprehensive income and as a separate
component of equity are
a. non-trading where a company has holdings of less than 20%.
b. trading investments where a company has holdings of less than 20%.
c investments where a company has holdings of between 20% and 50%.
d. investments where a company has holdings of more than 50%.
4. Unrealized holding gains or losses on trading investments are reported in
a. equity.
b. net income.
c. other comprehensive income.
d. accumulated other comprehensive income.

5. Polska, Inc. purchased 400 ordinary shares of Millay Manufacturing as a trading

investment for P26,400. During the year, Millay Manufacturing paid a cash dividend of
P6.50 per share. At year-end, Milay Manufacturing shares were selling for P69 per
share. On the income statement for the year ended December 31, what is the total
amount of unrealized gain/loss and dividend revenue reported by Polska, Inc.?
a. P2,600
b. P1,200
c. P1,400
d. P3,800

6. Dumar Corporation purchased 800 ordinary shares of Viking Industries as a trading

investment for P14,880. During the year, Viking Industries paid a cash dividend of P3.20
per share. At year-end, Viking’s shares were selling for P17.40 per share. On the income
statement for the year ended December 31, what is the total amount of unrealized
gain/loss and dividend revenue reported by Dumar Corporation?
a. P1,600
b. P2,560
c. P960
d. P3,250

7. Loire Corporation purchased 1,600 ordinary shares of Comma Co. for P52,800. During
the year, Comma paid a cash dividend of P13 per share. At year-end, Comma shares
were selling for P38 per share. Loire Corporation purchased the shares to meet a non-
trading regulatory requirement. What amount of total income will Loire Corporation report
in its income statement for the year?
a. P-0-
b. P20,800
c. P8,000
d. P28,800

8. During 2016 Logic Company purchased 4,000 shares of Midi, Inc. for P30 per share.
The investment was classified as a trading investment. During the year Logic Company
sold 1,000 shares of Midi, Inc. for P35 per share. At December 31, 2016 the market
price of Midi, Inc.’s shares 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,
2016 related to its investment in Midi, Inc. shares?
a. (P8,000)
b. P5,000
c. (P3,000)
d. (P1,000)

Use the following information for the next three questions.

Instrument Corp. has the following investments which were held throughout 2015–2016:
Fair Value
Cost 12/31/15 12/31/16
Trading P300,000 P400,000 P380,000
Non-trading 300,000 320,000 360,000

9. What amount of gain or loss would Instrument Corp. report in its income statement for
the year ended December 31, 2016 related to its investments?
a. P20,000 gain.
b. P20,000 loss.
c. P140,000 gain.
d. P80,000 gain.

10. What amount would be reported as accumulated other comprehensive income related to
investments in Instrument Corp.’s statement of financial position at December 31, 2015?
a. P40,000 gain.
b. P60,000 gain.
c. P20,000 gain.
d. P120,000 gain.

11. What amount would be reported as accumulated other comprehensive income related to
investments in Instrument Corp.’s statement of financial position at December 31,
2016? P60,000

12. At December 31, 2016, Atlanta Co. has a share portfolio valued at P40,000. Its cost was
P33,000. If the Fair Value Adjustment account has a debit balance of P2,000, which of
the following journal entries is required at December 31, 2016?
a. Fair Value Adjustment 7,000
Unrealized Holding Gain or Loss-Equity 7,000
b. Fair Value Adjustment 5,000
Unrealized Holding Gain or Loss-Equity 5,000
c. Unrealized Holding Gain or Loss-Equity 7,000
Fair Value Adjustment 7,000
d. Unrealized Holding Gain or Loss-Equity 5,000
Fair Value Adjustment 5,000

13. Kramer Company's trading investments portfolio which is appropriately included in

current assets is as follows:
December 31, 2016
Fair Unrealized
Cost Value Gain (Loss)
Catlett Corp. P250,000 P200,000 P(50,000)
Lyman, Inc. 245,000 265,000 20,000
P495,000 P465,000 P(30,000)
Ignoring income taxes, what amount should be reported as a charge against income in
Kramer's 2016 income statement if 2016 is Kramer's first year of operation?
a. P0.
b. P20,000.
c. P30,000.
d. P50,000.
14. On its December 31, 2015, statement of financial position, Trump Co. reported its
investment in non-trading securities, which had cost P600,000, at fair value of P550,000.
At December 31, 2016, the fair value of the securities was P585,000. What should
Trump report on its 2016 income statement as a result of the increase in fair value of the
investments in 2016?
a. P0.
b. Unrealized loss of P15,000.
c. Realized gain of P35,000.
d. Unrealized gain of P35,000.
On its December 31, 2015 statement of financial position, Calhoun Company appropriately
reported a P10,000 debit balance in its Fair Value Adjustment account. There was no change
during 2016 in the composition of Calhoun’s portfolio of equity securities held as non-trading
securities. The following information pertains to that portfolio:
Security Cost Fair value at 12/31/16
X P125,000 P160,000
Y 100,000 95,000
Z 175,000 125,000
P400,000 P380,000
15. What amount of unrealized loss on these securities should be included in Calhoun's
equity section of the statement of financial position at December 31, 2016?
a. P30,000.
b. P20,000.
c. P10,000.
d. P0.

16. Valet Corp. began operations in 2016. An analysis of Valet’s equity investments portfolio
acquired in 2016 shows the following totals at December 31, 2016 for trading and non-
trading investments:
Trading Non-trading
Investments Investments
Aggregate cost P90,000 P110,000
Aggregate fair value 65,000 95,000
What amount should Valet report in its 2016 income statement for unrealized holding
loss?
a. P40,000.
b. P10,000.
c. P15,000.
d. P25,000.

17. At December 31, 2016, Jeter Corp. had the following equity investments that were
purchased during 2016, its first year of operation:
Fair Unrealized
Cost Value Gain (Loss)
Trading Investments:
Security A P 90,000 P 60,000 P(30,000)
B 15,000 20,000 5,000
Totals P105,000 P 80,000 P(25,000)

Non-trading Investments:
Security Y P 70,000 P 80,000 P 10,000
Z 85,000 55,000 (30,000)
Totals P155,000 P135,000 P(20,000)

All market declines are considered temporary. Fair value adjustments at December 31,
2016 should be established with a corresponding charge against
Income Equity
a. P45,000 P 0
b. P30,000 P30,000
c. P25,000 P20,000
d. P25,000 P 0