Professional Documents
Culture Documents
PROBLEMS
Market values:
Ordinary shares 150 x 100 P15,000
Preference shares 300 x 150 45,000
Total P60,000
Allocation to:
Ordinary shares 59,500 x 15/60 P14,875
Preference shares 59,500 x 45/60 P44,625
7-2 (A Company)
a. Cash 18,000
Dividend Revenue 18,000
2,400 shares x 7.50
Cost per share:
B Corp. Ordinary (no change) P100
Chapter 7 – Investments in Equity Securities and Debt Securities
Unrealized Holding
MV12/31/06/ Market12/31/07 Gains(Losses)
X Co. P330,000 P288,000 P(42,000)
Z Co. 350,000 320,000 (30,000)
Total P680,000 P608,000 P(72,000)
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Chapter 7 – Investments in Equity Securities and Debt Securities
Unrealized Holding
Cost Market Gains(Losses)
X Co. P330,000 P288,000 P(42,000)
Z Co. 300,000 320,000 20,000
Total P630,000 P608,000
Required balance in Market Adjustment Account – cr P(22,000)
Balance before adjustment (10,000 + 40,000) – dr 50,000
Required adjustment P 72,000
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Chapter 7 – Investments in Equity Securities and Debt Securities
d. Cash 15,000
Gain on Sale of AFS Securities 1,500
Available for Sale Securities – Diana Ordinary 13,500
(54,000 / 1,000) x 250 shares = 13,500
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Chapter 7 – Investments in Equity Securities and Debt Securities
Market CV Unreal
Diana 1 (750 sh) 46,500 38,250 8,250
Diana 2 (125 sh) 7,750 7,625 125
Smith (1,000 x 115) 115,000 121,200 (6,200)
Total 169,250 167,075 2,175
7-9 (X Corporation)
2006
Jan. 1 Available for Sale Securities – Y Co. Ordinary 300,000
Cash 300,000
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Chapter 7 – Investments in Equity Securities and Debt Securities
Cash 30,550
FV Cost Unrealized
Darrel 480,000 364,000 116,000
Ghio 31,200 30,550 650
Total 511,200 394,550 116,650
5. Cash 200,000
Investment in Associates 200,000
20% x 1,000,000
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Chapter 7 – Investments in Equity Securities and Debt Securities
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Chapter 7 – Investments in Equity Securities and Debt Securities
31 Cash 900,000
Investment in Associates (30% x 3,000,000) 900,000
7-15 (E Corporation)
(a)
2006
Jan. 1 Investment in Associates – F Company 8,250,000
Cash (50,000 x 165) 8,250,000
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Chapter 7 – Investments in Equity Securities and Debt Securities
2006
Dec. 31 Cash 1,200,000
Held to Maturity Securities 47,367
Interest Revenue 1,152,633
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Chapter 7 – Investments in Equity Securities and Debt Securities
2006
June 1 Held to Maturity Securities – State Corp. Bonds 3,691,500
Cash 3,691,500
2007
Jan. 1 Interest Revenue 30,968
Interest Receivable 26,667
Held to Maturity Securities – State Corp. 4,301
Bonds
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Chapter 7 – Investments in Equity Securities and Debt Securities
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Chapter 7 – Investments in Equity Securities and Debt Securities
1 Cash 3,925,000
Loss on Sale of Held to Maturity Securities 94,435
Interest Revenue 133,333
Held to Maturity Securities–State Corp. Bonds 3,886,102
CV of HTM Securities sold:
As of June 1, 2009 3,858,658
Amortization June 1 to
Nov. 1, 2009 27,444
As of Nov. 1, 2008 3,886,102
Sales price 3,791,667
Loss on sale 94,435
1 Cash 3,925,000
Loss on Sale of Available for Sale Securities 94,435
Net Unrealized Gain/Loss on AFS Securities 87,479
Interest Revenue 133,333
Available for Sale Securities–State CorpBonds 3,886,102
Market Adjustment – AFS Securities 87,479
Sales price (3,925,000–133,333) 3,791,667
Amortized Cost 3,886,102
Loss 94,435
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Chapter 7 – Investments in Equity Securities and Debt Securities
2005
June 1 Held to Maturity Securities – Blessie Corp. Bonds 5,353,150
Interest Revenue (5M x 12% x 5/12) 250,000
Cash 5,603,150
Dec. 31 Cash 600,000
Interest Revenue 562,267
Held to Maturity Securities – Blessie 37,733
2006
Dec. 31 Cash 600,000
Interest Revenue 531,542
Held to Maturity Securities – Blessie 68,458
2007
Dec. 31 Cash 600,000
Interest Revenue 524,696
Held to Maturity Securities – Blessie 75,304
2008
Sept. 1 Interest Receivable (3M x 12% x 8/12) 240,000
Held to Maturity Securities – Blessie 33,134
Interest Revenue (517,166 x 3/5 x 8/12) 206,866
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Chapter 7 – Investments in Equity Securities and Debt Securities
Amortized cost
2,068,662 – 33,134 = P2,035,528*
Market value 2M x 103.5% 2,070,000
Market Adjustment P 34,472
*or 5,088,821 x 2/5 = P2,035,528
Note: Instead of recognizing the unrealized gain or loss at the date of reclassification on
September 1, 2008 (the company demonstrating no ability to hold the securities until
maturity, hence the securities were reclassified as AFS), and adjusting the account again
at yearend, a single adjustment at yearend is made in the above entries. Both methods
would achieve the same effect of reflecting the AFS to market at balance sheet date
through the equity account Unrealized Gain or Loss on AFS.
Problems
MC12 B 535,000 – 525,000 = 10,000
MC13 D 307,500 + 269,500 = 577,000; (600 x 440) + (2,000 x 138) = 540,000
577,000 – 540,000 = 37,000; 12,900 + 13,500=26,400; 37,000–26,400=10,600
MC14 C 10,000 x 150 = 1,500,000; 20% x 3M = 600,000
10,000 x 50 = 500,000; 1,500,000 + 600,000 – 500,000 = 1,600,000
MC15 A 1,000 x 50 = 150,000 + 2,250 = 152,250; 152,250 – (1,000 x 10) = 142,250
MC16 C 3,000 x 120 = 360,000; 560,000 x 3,000/6,000 = 280,000
360,000 – 280,000 = 80,000
MC17 D 360,000 x 600/3600 = 60,000; 200,000 + 60,000 = 260,000
360,000 – 260,000 = 100,000
MC18 B 500 x 25 = 12,500 – 500 = 12,000
500 x 20 = 10,000; 12,000 – 10,000 = 2,000 gain
MC19 D 960-500 = 460 + 600 = 1,060; 1,060/10 = 106 shares
MC20 B 88 ÷ 1.10 = 80
MC21 A 352,000 – (4,400 x 4) = 334,400; 334,400 / 4,400 sh = 76
MC22 D See No. 21
MC23 B 1,200,000 – (3 x 40,000) + (25% x 640,000) = 1,240,000
MC24 B 40% x 450,000 = 180,000
150,000 ÷ 12 = 12,500; 180,000 – 12,500 = 167,500
MC25 A 25,000 x 180 = 4,500,000; 25% x (2,400,000 – 480,000) = 480,000
4,500,000 + 480,000 – 60,000 – 60,000 = 4,860,000
MC26 D 4,860,000 x 15/25 = 2,916,000
MC27 B 10,000 x 200 = 2,000,000; 4,860,000 x 10/25 = 1,944,000
2,000,000 – 1,944,000 = 56,000
MC28 A
MC29 C 500,000 + 1,500,000 + (10% x 3M) = 2,300,000
MC30 B 40% x 1,200,000 = 480,000; (40% x 900,000) ÷ 18 = 20,000
40% x 100,000 = 40,000; 480,000 – 20,000 – 40,000 = 420,000
MC31 C 4,000,000 + 420,000 – (40% x 200,000) = 4,340,000
MC32 B (1,000 x 140) + (900 x 170) + (800 x 200) = 453,000
(1,000 x 150) + (900 x 180) + (800 x 220) = 488,000
488,000 – 453,000 = 35,000; 35,000 – 20,000 = 15,000
MC33 A See No. 33
MC34 A
MC35 C 8,750,000 x 5% = 437,500
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Chapter 7 – Investments in Equity Securities and Debt Securities
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