CASE 3

Ukiss Corp. had the following portfolio of financial instrument as of December 31, 2020. All securities were
engaged to audit the investment section of the company for the period ending 2021:

a. Ukiss purchased 120,000 Ethan shares designated as financial asset at fair value through profit or loss.
which included P2.50 per share transaction cost. Ethan shares were selling at P110 and P124 on Decemb
the Ethan shares were sold at P116 per share on July 1, 2021.
b. Ukiss bought 80,000 Miya Shares and designated as financial assets at fair value through other compre
per share plus 2.20 per share transaction cost. Miya shares were selling at P124 and P136 on December
shares were sold on August 1, 2021 at P126.40 per share.
c. Ukiss Corp. purchases 4,000,000 par, 10%, 3 year Care Company Bonds when the prevailing market ra
every December 31. Three-fourths of the Care Company bonds were sold on July 31, 2021 at total procee
2020 and 2021, respectively were 8% and 14%.

1. What is the realized gain or loss from sale of Miya's share in 2021

Answer: NO realized gain or loss from sale of Miya's share because these are designated as Equity
Comprehensive Income (EI@FVTOCI).

2. Assuming that the company's business model has no objective of holding the debt securities to
realized gain on sale of Care Company bonds on July 31, 2021?

January 1, 2020 (Effective Interest Rate: 12%)

Present Value of Principal Payment 2,847,121

Present Value of Interest Payment 960,733
Present Value of Bonds 3,807,853

December 31, 2020 (Effective Interest Rate: 8%)

Present Value of Principal Payment 3,429,355
Present Value of Interest Payment 713,306
Present Value of Bonds 4,142,661

July 31, 2021 (Sold 3/4 of Bonds)

Total Proceeds 3,500,000
Interest Revenue from Jan-Jul 175,000
Selling Price of Bonds 3,325,000
Carrying Value of Bonds Sold 3,106,996
Gain on Sale of Bonds (DI@FVTPL) 218,004

3. Assuming that the company's business model has an objective of holding the debt securities to
realized gain on sale of Care Company bonds on July 31, 2021?

January 1, 2020 (Effective Interest Rate: 12%)

 Present Value of Principal Payment 2,847,121
Present Value of Interest Payment 960,733
Present Value of Bonds 3,807,853

July 31, 2021 (Sold 3/4 of Bonds)

Total Proceeds 3,500,000
Interest Revenue from Jan-Jul 175,000
Selling Price of Bonds 3,325,000
Carrying Value of Bonds Sold 2,926,499
Gain on Sale of Bonds (DI@AC) 398,501

4. Assuming that the company's business model has no objective of holding the debt securities to collect c
value of investments that shall be presented in 2021 statement of financial position as financial asset at fa

EI@FVTPL (120,000*2/3)*P124 9,920,000

DI@FVTPL
PV of Principal Payment 877,193
PV of Interest Payment 87,719 964,912
Financial Assets @FVTPL, Dec.31,2021 10,884,912

5. Assuming that the company's business model has an objective of holding the debt securities to collect c
value of investments that shall be presented in 2021 statement of financial position as financial asset at fa

EI@FVTPL (120,000*2/3)*P124 9,920,000

Financial Assets @FVTPL, Dec.31,2021 9,920,000
020. All securities were acquired at the beginning of 2020. You were

through profit or loss. The shares were acquired at P120 per share
and P124 on December 31, 2020 and 2021, respectively. One-third of

through other comprehensive incom. The shares were acquired at P120

d P136 on December 31, 2018 and 2019, respectively. 35,000 of these

he prevailing market rate of interest was at 12%. Interest are collectible

1, 2021 at total proceeds of P3,500,000. Yield rate at December 31,

designated as Equity Instruments at Fair Value through Other

he debt securities to collect contractual cash flows, what is the

Interest
Date Revenue Carrying Value
(4M*10%)
1/1/2020 3,807,853
12/31/2020 400,000 4,142,661
7/31/2021 233,333 4,142,661

he debt securities to collect contractual cash flows, what is the

Interest
Interest Discount
Date Receivable Carrying Value
Revenue Amortization
(4M*10%)
 1/1/2020 3,807,853
12/31/2020 400,000 456,942 56,942 3,864,796
7/31/2021 233,333 270,536 37,202 3,901,998

t securities to collect contractual cash flows, what is the total carrying

as financial asset at fair value through profit or loss?

t securities to collect contractual cash flows, what is the total carrying

as financial asset at fair value through profit or loss?
CASE 7
On January 1, 2020 Girls Generation Company acquired 10% of the outstanding voting shares of Twice In
equity investments at fair value through other comprehensive income.
On July 1, 2021, Girls Generation gain the ability to exercise significant influence over financial and operat
the outstanding shares for 2,600,000. The two purchases were made at prices proportionate to the value a
amounts. For the years ended December 31, 2020 and 2021, Twice reported the following:

Year 2020
Dividends Paid 2,000,000
Profit for the year 6,000,000

1. How much is the amount recognized as unrealized gain (loss) in other comprehensive income in 2020?

Fair Value of EI@FVTOCI, December 31, 2020

Carrying Value of EI@FVTOCI, January 1, 2020
Unrealized Gain-Other Comprehensive Income 2020

2. What is the initial cost of the investment in associate upon reclassification?

Fair Value of Shares Acquired on January 1

Fair Value of Additional Shares Acquired
Initial Cost of Investment in Associate

3. What is the carrying value of the Investment in Associate as of December 31,2020?

Initial cost of Investment in Associate

Dividends received (3,000,000*6/12*30%)
Share in Profit of Associate (6,500,000*6/12*30%)
Carrying Value of Investment in Associate as of Dec.31,2021

4. How much is the investment income recognized in its December 31, 2021 statement of comprehensive

Dividend Income (3,000,000*6/12*10%)

Share in Profit of Associate
Investment Income recognized in SOCI, Dec. 31, 2021
e outstanding voting shares of Twice Inc. for 900000. These shares where designated as
me.
cant influence over financial and operating policies of Twice Inc. by acquring additional 20% of
de at prices proportionate to the value assigned to Twice's net assets is equal to their carrying
e reported the following:

2021
3,000,000
6,500,000

other comprehensive income in 2020?

1,380,000
900,000
480,000

1,300,000
2,600,000
3,900,000

ecember 31,2020?

3,900,000
(450,000)
975,000
4,425,000

31, 2021 statement of comprehensive income?

150,000
975,000
1,125,000
MC CASE 1
Game of Thrones had the following portfolio of financial instrument as of December 31, 2020. All securities were acq
Initial
Security Denomination Recorded
Value
Rhea Shares 150,000 shares P9,750,000
Lovey Shares 20,000 shares 900,000
Parren Shares 80,000 shares 5,040,000
12% Broken Co.
bonds, 4 years
P3,000,000 par ?
Audit notes:
a. Rhea shares were acquired and designated as financial assets at fair value through profit or loss. The shares wer
share transaction cost. Half of the Rhea shares were sold at P70 per share on August 31, 2021.
b. The Lovey shares were acquired primarily for purpose of being traded. Lovey was recorded at its fair value at the
c. Parren shares were acquired and designated as financial asset at fair value through other comprehensive income
excluded P1.50 per share transaction cost. One fourth of these shares were sold on September 30, 2021 at P67.50
d. The Broken Co. bonds were acquired when the prevailing market rate of interest was at 14%. Interest are collectib
bonds were sold on July 31, 2021 at total proceeds of P2,800,000.
e. Additional information on the securities are as follows:
Security FV 12/31/2020 FV 12/31/2021
Rhea Shares P63.50/share P62.00/share
Lovey Shares 45.00/share 40.00/share
Parren Shares 63.00/share 64.00/share
12% Broken Co.
bonds
? 13% yield; ?

1. How much is the realized gain or loss on sale of Rhea shares?

Number of Shares Sold 75,000

Selling price 8/31/2021 70.00
FV 12/31/2020 63.50 6.50
Gain on Sale of Rhea Shares 487,500

2. How much is the realized gain or loss from sale of Parren shares in 2021?

NO realized gain or loss from sale of Parren shares because these are designated as EI@FVTO

3. Assuming that the company's business model has an objective of holding the debt securities to collect c
circumstances warrants, what is the realized gain on sale of Broken Co. bonds?

Present Value of Principal Payment 1,776,241

Present Value of Interest Payment 1,048,936
Fair Value of DI@FVTOCI, Dec. 31, 2020 2,825,177
Interest Revenue (Jan-Jul) 230,723
Nominal Interest (Jan-Jul) 210,000
Discount Amortization 20,723
Carrying Value of Bonds, July 31, 2021 2,845,900
Carrying Value of Bonds Sold (3/4) 2,134,425
Total Proceeds 2,800,000
 Interest from Jan-Jul 157,500
Sales Price of Bonds 2,642,500
Realized gain on sale of DI@FVTOCI 508,075

4. Assuming that the company's business model is to collect contractual cash flows, how much is the total
comprehensive income in 2021?

Rhea Shares: (EI@FVTPL)

Gain on Sale 487,500
Unrealized Loss - P/L (112,500) 375,000
Lovey Shares: (EI@FVTPL)
Unrealized Loss - P/L (100,000)
Parren Shares: (EI@FVTOCI)
Unrealized Gain - OCI 240,000
Percentage of shares remaining 3/4
Remaining balance of Unrealized Gain 180,000
Unrealized Loss - OCI 210,000 (30,000)
Broken Co. Bonds (DI@AC):
Realized Gain on Sale 508,075
Interest Revenue (Jan-Jul) 230,723 738,798
Total Amount Recognized in Comprehensive Income 983,798

5. Assuming that the cash flows for debt securities is not representing an SPPI (Solely for Payment of Prin
investments reported at fair value at the end of 2021?

Rhea shares (EI@FVTPL)

P62*75000 4,650,000
Lovey shares (EI@FVTPL)
P40*20000 800,000
Parren Shares (EI@FVTOCI)
P64*60000 3,840,000
Broken Co. Bonds (DI@FVTPL)
PV of Principal Payment 519788
PV of Interest Payment 212504 732,291
Total Investments reported at FV for 2021 10,022,291
1, 2020. All securities were acquired at the end of 2020.

h profit or loss. The shares were acquired at P65 per share which included P1.50 per
t 31, 2021.
recorded at its fair value at the time of purchase.
h other comprehensive income. The shares were acquired at P63 per share which
September 30, 2021 at P67.50 per share.
as at 14%. Interest are collectible every December 31. Three-fourths of Broken Co.

are designated as EI@FVTOCI.

he debt securities to collect contractual cash flows and to sell when

s?
 flows, how much is the total amount recognized by Game of Thrones in

PI (Solely for Payment of Principal and Interest), how much is the total
MC CASE 2
Momshie purchased investments during the year under audit (2021) as follows:
a. Purchased 10,000 shares of Atorni Black Corporation for P12 per share on April 1, 2021. The shares were design
through other comprehensive income. A 1.5 per share transaction cost was incurred on the same date. At Decemeb
P14.50 per share. A P2 per share dividends were declared and received on these shares.
b. On January 1, 2021, purchased P400,000, 2%, 3-year bonds when the prevailing rate of interest was at 4%. the b
interest annually every December 31 of each year. You noted that the company's business model related to this inve
cash flows and to sell the investment when circumstances warrants. The bond at the end of the year is quoted at 107
c. On January 31, 2021, purchased 45,000 shares representing 15% of the voting shares of the Old Ryan Spaghetti
September 1, 2021, purchased additional 75,000 shares of The Old Ryan Spaghetti House for P12 per share. During
House declared and paid cash dividends of P3 per share on March 24 and P5 per share on October 6. In addition, th
Old Ryan Spaghetti House during the period which were incurred evenly during the year:
Unrealized gain (loss) - OCI
Forex Translation Loss
Net Income
Dividends Paid

Determine the following as a result of your audit:

1. How much is the unrealized gain (loss) in profit or loss during 2021 related to equity investments?

NO unrealized gain (loss) in profit or loss.

2. How much is the amount of recognized in other comprehensive income in 2021 related to the debt inves

PV of Principal Payment 355,599

PV of Interest Payment 22,201
PV of Bonds on January 1, 2021 377,799
Interest Revenue for 2021 15,112
Nominal Interest for 2021 8,000 7,112
Carrying Value on December 31, 2021 384,911
Fair Value on December 31, 2021 428,000
Amount recognized in Comprehensive Income for 2021 43,089

3. How much is the total investment reported at fair value at the end of 2021?

Fair Value of Bonds (DI@FVTOCI) on December 31, 2021 428,000

Fair Value of Shares (EI@FVTOCI) on December 31, 2021 145000
Total Investment reported at Fair Value for 2021 573,000

4. How much is the balance of investment in associate at the end of 2021?

Initial Cost of Investment 1,440,000

Dividends Received (600,000)
Unrealized Gain-OCI 60,000
Forex Translation Loss (16,000)
Share on Profit of Associate (SOPA) 750,000
Carrying Value of Investment in Assoc., Dec. 31, 2021 1,634,000

5. How much is the total investment income in 2021?

Atorni Black Corporation Shares:
Dividend Income 20,000
The Old Ryan Spaghetti House Shares:
Dividend Income 135,000
Share in Profit of Associate 750,000
Bonds (DI@FVTOCI):
PV of Principal Payment 355,599
PV of Interest Payment 22,201
PV of Bonds 377,799
Interest Revenue 4% 15,112
Total Investment Income in 2021 920,112
 , 2021. The shares were designated as financial asset at fair value
on the same date. At Decemeber 31, the shares were trading at
hares.
rate of interest was at 4%. the bonds is dated January 1 and paid
siness model related to this investment is to collect contractual
end of the year is quoted at 107.
hares of the Old Ryan Spaghetti House for P8 per share. On
House for P12 per share. During the year, the Old Ryan Spaghetti
hare on October 6. In addition, the following were reported by the
year:
P450,000
120,000
5,625,000
2,400,000

to equity investments?

2021 related to the debt investment?

Interpolation for percentage of significant influence:

Number of shares purchased on Jan. 31, 2021 45000
Percentage representation 15%
Total No. of shares outstanding-TORSH 300000
No. of shares held on Sept. 1, 2021 120000
Percentage of significant influence 40%