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Chapter 9
Investments

PROBLEM 1: TRUE OR FALSE

1. FALSE
2. TRUE
3. FALSE
4. FALSE
5. FALSE – FVOCI only
6. FALSE – financial assets classified as FVPL are initially
measured at fair value; the transaction costs are expensed.
7. TRUE
8. FALSE – OCI section of the statement of comprehensive
income
9. FALSE – 110 current fair value – 100 original cost = 10
cumulative gain, credit
10. FALSE – (15 – 10 = ₱5)

PROBLEM 2: MULTIPLE CHOICE – THEORY

1. D
2. D
3. B
4. B
5. D – the equity securities are irrevocably elected to be
measured at FVOCI

6. B
7. D
8. D
9. D
Choice (a) is incorrect. The account is a real account.
Choice (b) is incorrect. The account is presented in equity.
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Choice (c) is incorrect. Only the fair value change during the
period is presented in OCI; the cumulative balance is presented in
equity.
Choice (d) is correct. Reclassification adjustment to profit or loss is
prohibited.

10. B

PROBLEM 4: MULTIPLE CHOICE – COMPUTATIONAL

1. B (105 price in Market B* x 30,000 shares) = 3,150,000

* In the absence of evidence to the contrary, it is presumed that the

market where the entity would normally sell the asset or transfer the
liability is the principal market.

2. C
Solution:
Market New York London
Quoted Price 103 106
Transaction Costs (1) (5)
Net price 102 101

The “most advantageous market” is New York Stock Exchange

and the quoted price in this market is 103.

3. B – ₱2.00 Level 2 input x 1,000 shares = ₱2,000

4. A
 (6,000 x 5) fair value – 50,000 initial carrying amt. = (20,000) loss
 [(3,000 x 7.5) – 1,500] net proceeds – (30,000 x ½) carrying amt. =
6,000 gain

5. D
Solution:
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 Dec. 31, 20x1: (24,000 sh. x ₱20) – 200,000 = 280,000 gain

 Jan. 3, 20x2: [(24,000 sh. x ₱30) – 12,000] – 480,000 = 228,000 gain

6. A
Solution:
 Dec. 31, 20x1: (180,000 – 240,000) = (60,000)
 Dec. 31, 20x2: (210,000 – 180,000) = 30,000
 Feb. 2, 20x3: (41,200 – 1,200) – 110,000 = (70,000)

7. C – the fair value on Dec. 31, 2003

8. A
Solution:
 200,000 x 101% = 202,000
 202,000 – (200,000 x 98%) = 6,000 gain
 (200,000 x 110%) – 202,000 = 18,000 gain

9. C
Solution:
PV Present
Future cash flows PV @10%, n=3 factors value
200,00
150,263
Principal 0 PV of ₱1 0.751315
Interest (200K x 12%) 24,000 PV of ord. ann. 2.486852 59,684
Fair value on Dec. 31, 20x1 209,947
(196,000
Carrying amount before adjustment )
Gain recognized in profit or loss 13,947

10. D
Solution:
Held for trading - 20x1 976,203
Acquisitions during the year 124,450
Total 1,100,653
Held for trading - 20x2 836,234
Net proceeds from sale 223,769
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Total 1,060,003
Total net loss from fair value change and sale (40,650)

11. B
Solution:
  FVPL FVOCI
Fair value on 12/31/x1 (10,000 x 25) 250,000 250,000
Carrying amount (10,000 x 50); [(10,000 x 50) +
25,000] 500,000 525,000
(250,000 (275,000
Loss ) )

12. C
Solution:
Fair value on 12/31/x1 280,000
Fair value on 12/31/x2 270,000
(10,000
Unrealized loss recognized in OCI - 20x2 )

Initial carrying amount (12,000 x 20) + 10,000 250,000

Fair value on 12/31/x2 270,000
Cumulative gain recognized in equity - 12/31/x2 20,000

13. D
Solution:
 (6,000 x 5) – (50,000 + 2,500) = (22,500)
 [(6,000 x 7.5) – 3,000] – (50,000 + 2,500) = (10,500)

14. B (155,000 – 100,000) = 55,000

15. D 130,000 FV 12/31/03 – 150,000 cost = 20,000