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Investments in General
NAME: Date:
Professor: Section: Score:

QUIZ:
1. According to PFRS 9, a financial instrument is recognized
a. when the instrument has probable economic benefits that can be measured reliably.
b. only when the entity becomes a party to the contractual provisions of the instrument.
c. when the entity enters into a binding contract to deliver a variable number of its own equity
instrument.
d. only when the instrument requires receipt of another financial instrument under conditions that
are potentially favorable.

2. Which of the following is a financial liability?

a. Income tax payable
b. Unearned revenue
c. Warranty obligation
d. Lease liability

3. During the period, an entity acquires an investment. The entity has a “hold to collect and sell”
business model. The investment should be classified as
a. investment measured at fair value through other comprehensive income.
b. investment measured at amortized cost.
c. investment measured at fair value through profit or loss.
d. any of these

4. Which of the following is measured at fair value with fair value changes recognized in profit or loss?
a. Held to maturity investments
b. Financial assets designated at FVPL
c. FVOCI
d. All of these

5. If an entity’s business model’s objective is to hold investments in order to collect contractual cash
flows that are solely payments for principal and interests, then investments should be classified as
a. subsequently measured at fair value through other comprehensive income.
b. subsequently measured at amortized cost.
c. subsequently measured at fair value through profit or loss.
d. any of these

6. Under PFRS 9, financial assets are classified

a. on the basis of the entity’s business model only.
b. based on the nature of the financial assets, i.e., debt or equity instrument.
c. as financial assets subsequently measured at FVPL, FVOCI (election), FVOCI (mandatory) or
Amortized cost.
d. all of these
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7. According to PFRS 9, if an asset or a liability measured at fair value has a bid price and an ask price,
the price within the bid-ask spread that is most representative of fair value in the circumstances is
used to measure fair value. Bid price is
a. the maximum price at which market participants are willing to sell an asset.
b. the maximum price at which market participants are willing to buy an asset.
c. the minimum price at which market participants are willing to sell an asset.
d. the price that an entity will incur to bid farewell to an asset.

8. The following are taken from the records of Lunch Co. as of year-end.
Cash 10,400 Investment in subsidiary 44,000
Accounts receivable 12,000 Treasury shares 44,800
Allowance for bad debts (1,600) Investment in bonds 9,600
Note receivable 4,000 Land 112,000
Interest receivable 1,600 Building 208,000
Claim for tax refund 9,600 Accum. depreciation (52,000)
Advances to suppliers 4,800 Investment property 40,000
Inventory 60,000 Biological assets 24,000
Prepaid expenses 4,000 Intangible assets 56,000
Petty cash fund 800 Deferred tax assets 48,000
Investment in equity Cash surrender value 9,600
securities 10,400
Investment in associate 16,000 Sinking fund 16,000

How much are the total financial assets disclosed in the notes?
a. 142,400 b. 132,000 c. 132,800 d. 92,800

Use the following information for the next three questions:

On January 1, 20x1, ABC Co. purchased 1,000 shares of XYZ, Inc. for ₱250,000. Commission paid to broker
amounted to ₱10,000. The equity securities were designated by management to be measured at fair value
through profit or loss. On December 31, 20x1, the shares are quoted at ₱200 per share. It was estimated
that transaction cost of ₱20 per share will be incurred if the shares were sold on that date.

9. How much is the unrealized gain (loss) on change in fair value recognized in the 20x1 profit or loss?
a. (70,000) b. (50,000) c. (40,000) d. 60,000

10. On January 3, 20x2, all the shares were sold at ₱300 per share. Commission paid for the sale amounted
to ₱60,000. How much is the realized gain (loss) from the sale?
a. 60,000 b. (10,000) c. 40,000 d. (40,000)

11. If ABC Co. uses an allowance account to account for changes in fair values, how much is the balance
of this account on December 31, 20x1?
a. 70,000 debit c. 40,000 credit
b. 50,000 debit d. 50,000 credit

Use the following information for the next three questions:

On Jan. 1, 20x1, Three Co. purchased 10,000 shares of AM, Inc. for ₱1,000,000. Three Co. paid broker’s
commission of ₱15,000 on the acquisition. Three Co. made an irrevocable choice to subsequently measure
the shares at fair value through other comprehensive income. The quoted prices per share on Dec. 31,
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20x1 and Dec. 31, 20x2 were ₱90 and ₱108, respectively. On Jan. 3, 20x3, Three Co. sold all the shares at
₱105 per share. Three Co. paid broker’s commission of ₱16,000 on the sale.

12. How much is the unrealized gain (loss) recognized in Three Co.’s 20x1 profit or loss?
a. 115,000 b. (115,000) c. (85,000) d. 0

13. How much is the unrealized gain (loss) recognized in Three Co.’s 20x2 other comprehensive income?
a. 180,000 b. 65,000 c. (115,000) d. 0

14. How much is the cumulative gain (loss) transferred to retained earnings on Jan. 3, 20x3?
a. 19,000 b. 34,000 c. (19,000) d. (34,000)

15. On January 1, 20x1, ABC Co. purchased ₱1,000,000 bonds at a price that reflects a yield rate of 14%.
The bonds mature on January 1, 20x4 and pay 12% annual interest. The bonds are classified as held
for trading securities. On December 31, 20x1, the bonds are selling at a yield rate of 10%. How much
is the unrealized gain (loss) on the change in fair value recognized in ABC’s 20x1 profit or loss?
a. 78,336 b. 83,561 c. 81,144 d. 0

“Go ahead and be lazy; sleep on, but you will go hungry.” (Proverbs 19:15)

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