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Investments – Additional Concepts Drill

1. It refers to purchase or sale of a financial asset under a contract whose terms require delivery of the
asset within the time frame established generally by regulation or convention in the marketplace
concerned.
a. normal way c. special way
b. regular way d. no way

2. According to PFRS 9, which of the following represents a commencement of a financial asset’s

impairment accounting?
a. Reclassification of the financial asset from Amortized cost to FVPL
b. Reclassification of the financial asset from FVPL to Amortized cost
c. Reclassification of the financial asset from Amortized cost to FVOCI
d. Reclassification of the financial asset from FVOCI to Amortized cost

Use the following information for the next two questions:

On December 29, 20x1, an entity commits itself to purchase a financial asset for ₱10,000. The transaction
will be settled on January 4, 20x2. On December 31, 20x1 and on January 4, 20x2, the fair value of the
asset is ₱12,000 and ₱15,000, respectively.

3. If the financial asset is measured at fair value through profit or loss and that the entity uses the
settlement date accounting, on what date and at what amount is the financial asset initially
recognized?
a. December 29, 20x1, ₱10,000
b. January 4, 20x2, ₱10,000
c. January 4, 20x2, ₱12,000
d. January 4, 20x2, ₱15,000

4. If the financial asset is measured at fair value through other comprehensive income and that the
entity uses the trade date accounting, what amount of gain (loss) on fair value change is recognized
on December 31, 20x1 and how is that gain (loss) recognized? a. ₱2,000 gain in other comprehensive
income
b. ₱3,000 gain in other comprehensive income
c. ₱2,000 gain in profit or loss
d. zero gain or loss

Use the following information for the next two questions:

On Jan. 1, 20x1, Cloudy Day Co. acquires ₱2,000,000 face amount, 10% bonds for ₱1,903,927. The bonds
are due on Jan. 1, 20x4 but pay annual interest every Dec. 31. The yield rate is 12%. Cloudy changes its
business model for managing financial assets on Sept. 1, 20x2. Cloudy only reports annually every Dec.
31. The bonds are quoted at 101 on Sept. 1, 20x2, 103 on Dec. 31, 20x2 and 104 on Jan. 1, 20x3.

5. The bonds are reclassified from amortized cost to fair value through profit or loss. How much is the
gain (loss) on reclassification and where is that amount presented?
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a. 128,471 in P/L c. 115,714 in P/L

b. (143,292) in OCI d. 115,714 in OCI

6. The bonds are reclassified from fair value through profit or loss to amortized cost. What is the
amount of premium or discount to be amortized over the remaining life of the bonds subsequent to
the reclassification date?
a. 80,000 discount c. 115,714 discount
b. 80,000 premium d. 115,714 premium

7. On March 31, 20x1, Likkig, Inc. declares cash dividends of ₱40 per share to shareholders of record
on
April 15, 20x1, to be distributed on April 30, 20x1. On April 9, 20x1, Ceecee Co. purchases 10,000
Likkig shares for ₱400 per share. The investment is classified as investment in equity securities
measured at FVOCI. How much is the initial carrying amount of the investment? a. 4,000,000 b.
4,400,000 c. 3,600,000 d. 3,890,664

8. Devin Co holds 10,000 shares of Eureka, Inc. as investment in equity securities. On April 1, 20x1,
Devin receives shares with fair value of ₱520,000 and aggregate par value of ₱400,000 as share
dividend. How much is the dividend income?
a. 520,000 b. 400,000 c. 120,000 d. 0

9. On April 1, 20x1, Jean Co. received ₱480,000 cash dividends, one-third of which represents
liquidating dividends. How much is the dividend revenue?
a. 160,000 b. 320,000 c. 80,000 d. 0

10. On March 31, 20x1, Bogart Co. received from its investment in equity securities 10,000 stock rights
to subscribe to new shares at ₱60 per share for every 4 rights held. Immediately after issuance of
stock rights, the shares were selling at ₱80 per share. How much is the initial carrying amount of the
stock rights?
a. 20,000 c. 50,000
b. 40,000 d. cannot be determined

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*COC_AJCG,CPA,MBA*