Fair Value Model - PNL

Interest Income Principal x Nominal Rate

Direct Cost is Expensed

Fair Value Model-OCI

Interest Income CV of the Bonds x Effective Rate
Direct Cost is Capitalized

Per Clinet will Record Interest income

CA - 2,380,000 x 12% 285,600

Per GAAP
Principal -2,500,000 x 10% 250,000
Initial Direct Cost -80,000
Change in FV 250,000 420,000
(2,300,000 - 2,550,000) -134,400

Entry:
Dr Finance Cost 80,000
Dr Interest income 35,600
Dr Unrealized Gain-OCI 134,400
Cr Unrealized Gain-PNL 250,000

Darking Company

Dr Cash 2,460,000
Dr Transaction Cost 40,000
Dr Unrealized Gain 150,000
Cr FAFVOCI 2,650,000

Selling Price 2,500,000

Less:
Cost of FAFVOCI 2,425,000
Cummulative G/L 75,000

Dr Cummulative Gain 75,000

Cr Retained Earnings 75,000

FV 12/31/2020 5,310,000
CV 5,725,000
Adjustment -415,000

c.
Dr Interest Income 2,000
Cr FAFVOCI 2,000

T Investment 5,050,000
V Investment 5,310,000
Total Equity Investment 10,360,000

Problem #3
Selling Price 2900000
Carrying Value 2750000
Realized Gain on Sale 150000

Treaments of Debt
FAFVPL
Proceeds 1,100,000
Less:
Accrued Interest 50000
CV 1017591
Gain on Sale 32,409

AC
Interest Income Interest Received
(Effective Rate) (Nominal Rate)
1 Yr Amort 214624 200,000
6 Months Amort 108116 100000

SP 1,100,000
Less:
Accrued Interest 50000
CV 986933
Gain on Sale 63,067
SP 1100000
Less:
Accrued Interest 50000
CV 986933
Gain on Sale 63067 #5

AC
Interest Income Interest Received
(Effective Rate) (Nominal Rate)
1 Yr Amort 214624 200,000
6 Months Amort 108116 100000

Unrealized Gain 2018

FV @2018 2,035,182 8116
Less:
CA 2018 1,965,750
Unrealized Gain 2018 69,432

Sale
Dr Cash 1100000
Dr Unrealized Gain 34716
Cr FAFVOCI 1021649
Cr Gain on Sale 63067
Cr Retained Earnings 15284

#6
Alpha Shares 3100000

#7
Alpha 3,100,000
Delta 982,143
FAFVPL 4,082,143

#8
Alpha
FV 3,100,000
CV-2018 2750000
Unrealized Gain 350,000

#9

Delta
FV -2019 982143

CV-2018 1,017,591
Unrealized Loss -35448
Alpha
Unrealized Gain 350,000
Net Unrealized Gain 314,552

#10
Beta

Latest FV 1600000
Orig Cost 1500000
Unrealized Gain 100000

Delta

Latest FV 982143
Less:
Orig Cost 975,563
Amortizations
2018 7312
2019 8116
Unrealized Loss -8848
Unrealized Gain 100000
Accumulated G/L 91152 #10

Problem #4
Fair Value Cost
Aye 700000 540,000
Bee 1000000 1080000
See 1964947 1,923,000
Total 3664947 3,543,000
#2
Dee
Initial Recognition 2,400,000
Add:
Share in Net Income 280000
Less:
Dividends 250000
CV of Dee 2,430,000 #3

Income Statement
Expenses:
Transaction Cost
Aye -10,000
Bee -20,000
Dividend Income:
Bee 120000
Interest Income See 50000
Unrealized Gain 121,947
Share in Net income 280000
Income from Investments 541,947 #4

See 1,930,690

Dee
Initial Recognition 2,400,000
Non Current Invs 4,330,690 #5

Income Statement
Expenses:
Transaction Cost
Aye -10000
Bee -20000
Dividend Income:
Bee 120000
Interest Income See 57690
Unrealized Gain 80,000
Share in Net income 280000
Income from Investments 507690 #6

Problem #9
Black Corporation
Acquistion Cost 6000000
BV of Net Assets 4800000
Excess of Net Assets 1200000

Less: Excess over FV

Land 800,000 *30% 240000
Building 1.2m x 30% 360000
Goodwill 600000 #1

Percentage
Comprehensive income of Subsidiary 2,000,000
Add:
Unrealized Loss 500,000
Profit or Loss Statement 2,500,000 30%

Amortization of Excess
1,200,000/5Yrs 240000 30%

Unrealize Loss 500,000 30%

Beg Balance 6,000,000

Add:
Share in Comprehensive Income 528000
Less:
Dividends 240000
CV 6,288,000

Dillution:
Cost of New Shares 1500000
Less:
CV of Shares Deemed Sold 1048000
Dillution Gain 452000
Recycling of OCI -25000
Dillution Gain 427000 #5
Dillution:
Cost of New Shares 1500000
Less:
CV of Shares Deemed Sold 948000
Dillution Gain 552000
Recycling of OCI -25000
Dillution Gain 527000 #6

Realized Unrealized
Proceeds 3600000
FMV of Remaining Portion 5400000
Less:
CV of Portion Sold 2515200
CV of Unsold Portion 3772800
1084800 1627200
Recycling:
Unrealized Loss Sold 60000
Unrealized Loss on Unsold 90000
Adjusted Cessation Gain 1024800 1537200
#8

Problem #11
2014
Insurance Expense 96000
Lesss:Average Increase in CSV
25,200*1/3 8400
Insruance Expense 87600 #1

2015
Insurance Expense 96000
Less: Increase in CSV
30,000-25200 -4800
Dividends -8000
83200 #2

2016
Insurance Expense 96000
Increase in CSV
39600-30,000 -9600
Dividends -9600
 76800 #3

2017
Insurance Expense 80,000
Increase in CSV
50400-39600 x 10/12 -9,000
Dividends -11200
59,800 #4

Proceeds from Life insurance 4,000,000

CSV as of OCT
39,600
Increase in CSV
9000 48,600
Gain on Life Insurance 3,951,400 #5

JOINT VENTURE
Problem #1 Reiner Balance
Year 500,000
1 280000 780,000
2 -800000 0
3 600000 580000

Problem #2
Itodori
Net Income 600000
Downstream
(40,000x20%) -8000
(90,000x2.75/3)
Upstream
(60,000x40%x40%)
(50,000x(1.5/2) x60% 22,500
Investment Income 614500

Dividends Received -240000

Add:
Beginning Balance 1,000,000
Ending Balance 1,374,500
 2,380,000 FV 2,550,000
Add: Interest Income 285,600 Less:
Less: Payment -250,000 CA 2,415,600
CV 2,415,600 Unrealized Recorded 134,400
Dr Cash 1,100,000
Cr Gain on Sale 32,409
Cr Interest Receivable 50,000
Cr FAFVPL-Debt 1017591

CV
Amortization 1,951,126

14,624 1,965,750
8116 1,973,866 CV at date of Sale

Dr Cash 1,100,000
Cr Gain on Sale 63,067 #4
Cr Investment in AC 986933
Cr AR 50000
 CV
Amortization 1,951,126

14,624 1,965,750
8116 1,973,866

2,043,298

Delta PV Factor
1,000,000 Principal 0.892857142857143 892857
100000 Interest 0.892857142857143 89286
1,100,000 982143
Delta PV Factor
1,000,000 Principal 0.892857142857143 892857
100000 Interest 0.892857142857143 89286
1,100,000 982143

G/L
160,000 Aye Investment
-80000 Initial Recognition
41,947 Cost
121,947 #1 29.50-0.5 580000
Less:
Dividends On 40000
Initial Recognition 540000

Effective Interest Nominal

57690 50000
 Short Cut
Acquistion Cost 6000000
FV of NA 5400000
18000000 x 30% 600000 GW

Understatement= Deduct
Overstatement = Add

Amount Allocated

750000

-72000
678000 #2
-150000
528000 #3

Initial Percentage 30%

New Percentage 25%

Percentage Sold 16.666666670000000%

Total
3600000
5400000

2515200
3772800
2712000

60000
90000
2562000 #7
Berthold Balance
500,000
420000 920,000 -280,000
-1200000 0
900000 620,000

Megumi
400,000

-82,500

-9600

307,900

-160000

2,000,000
2,147,900
See See PV PV Factor
Cost 1,973,000 Principal 2,000,000 0.807216 1614432
Less: Interest 100000 3.50515 350515
Interest On 50000 1964947
Initial Recognition 1,923,000
Amortization CV
1,923,000
7690 1,930,690