ACCTG 212 | Intermediate Accounting 1

Quiz No. 1 | November 5, 2021

Instructions: On a clean sheet of paper, write your answers and attach them to this Quiz’ submit
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PROBLEM NO. 1
On January 1, 2021, X Company acquired 5,000 shares of P40 par value ordinary shares of Y Company
at P65 per share. These shares are to be held as financial assets as fair value through profit or loss.
Broker’s commissions paid amounts to P5,000. At the end of the reporting period, the fair value of Y
Company’s shares is P80 per share.

1. Prepare journal entries in the books of X. (5/3/1 points)

Investment in Y Company 325,000 (5,000 x P65)

Broker’s commission 5,000 (given)

Cash 330,000 (325,000 + 5,000)

Investment in Y Company 75,000

Unrealized gain on FAFVPL 75,000
2. How much will be reported as unrealized gain? (5/3/1 points)
Fair value at the end of the year
5,000 shares x P80 400,000
Less: Initial measurement 325,000
Unrealized gain 75,000

PROBLEM NO. 2
On January 1, 2021, X Company acquired 5,000 shares of P40 par value ordinary shares of Y Company
at P65 per share. These shares are to be held as financial assets as fair value through other
comprehensive income. Broker’s commissions paid amounts to P5,000. At the end of the reporting
period, the fair value of Y Company’s shares is P80 per share.

1. Prepare journal entries in the books of X. (5/3/1 points)

Investment in Y Company 330,000 (5,000 x P65) + 5,000
Cash 330,000

2. How much will be reported as unrealized gain? (5/3/1 points)

Fair value at the end of the year
5,000 shares x P80 400,000
Less: Initial measurement 330,000
Unrealized gain 70,000

PROBLEM NO. 3
During 2020, X Company purchased trading securities with the following cost and market value on
December 31, 2020:

Cost Market Value

A - 1,000 shares 400,000 500,000

B - 10,000 shares 1,900,000 1,800,000

C - 20,000 shares 3,000,000 2,800,000

5,300,00 5,100,000

The entity sold 10,000 shares of Security B on January 15, 2021 for P150 per share.
 1. What amount of unrealized gain or loss should be reported in the income statement for 2020?
(BONUS: 5 points, wrong question)
Market Value - Cost
A- 500,000 - 400,000 = 100,000
B- 1,800,000 - 1,900,000 = (100,000)
C- 2,800,000 - 3,000,000 = (200,000)
Unrealized Loss (200,000)

2. What amount should be reported as gain/loss on sale of trading investment in 2021? (5/3/1
points)
Selling price (10,000 shares x P150) 1,500,000
Carrying value of Security B 1,800,000
Loss on sale of trading investment (300,000)

PROBLEM NO. 4
On January 1, 2021, X Company acquired a bond investment from Y Company for P855,809, a price to
yield 12% interest payable annually every December 31 for five years. The instrument has a face value of
P1,000,000 and a stated interest rate of 8%. X Company designated the instrument at amortized cost.
1. How much is the initial measurement of this debt investment? (2/0 points)
855,809 (Given)
2. How much will be reported as interest revenue on December 31, 2021? 102,697 (3/1 points)
3. How much is the carrying value of the investment on December 31, 2022? 903,927 (3/1 points)

Interest Interest Discount Carrying value

receivable revenue amortization
(Face value x Stated rate) (Carrying value x
Effective/yield rate)

January 1, 2021 855,809

December 31, 2021 80,000 102,697 22,697 878,506

December 31, 2022 80,000 105,421 25,421 903,927

December 31, 2023 80,000 108,471 28,471 932,398

December 31, 2024 80,000 111,888 31,888 964,286

December 31, 2025 80,000 115,714 35,714 1,000,000

Amortization table, first 4 lines (4/1 points)

PROBLEM NO. 5
On January 1, 2021, X Company acquired a bond investment from Y Company for P1,079,854, a price to
yield 8% interest payable annually every December 31 for five years. The instrument has a face value of
P1,000,000 and a stated interest rate of 10%. X Company designated the instrument at fair value through
other comprehensive income. On December 31, 2021, the bonds were quoted at 110. How much is the
gain (loss) in the fair value of the debt investment?

Interest Interest revenue Premium Carrying value

(Carrying value x
receivable Effective/yield rate)
amortization
(Face value x Stated rate)

January 1, 2021 1,079,854

December 31, 2021 100,000 86,388 13,612 1,066,242

Amortization table (4/1 points)

Fair value, 12/31/2021

P1,000,000 x 1.1 1,100,000
Less: Carrying value 1,066,242
Gain 33,758 (4/1 points)