Multiple Choice Long Problems

1 D 16 C 1) 1,245,000
2 D 17 C 2) 30,224,663
3 C 18 A 3) 800,000 unrealized loss
4 C 19 C 4) 303,872 overstatement
5 A 20 C 5) 31,465 overstatement
6 D 21 A 6) 45,708
7 B 22 A 7) 2,025 gain
8 C 23 B 8) 10,600 loss
9 D 24 A
10 A 25 D
11 A 26 B
12 D 27 A
13 B 28 D
14 C 29 A
15 B 30 B
For items 16 to 18

Fair value, 12/31/19 (100k shares * P15) 1,500,000

Fair value, 12/31/18 (100k shares * P12) (1,200,000)
Unrealized gain - P/L, 2019 300,000

Per client Per audit

Transaction cost (100,000)
Dividend income 100,000
Unrealized gain, 2017 [(P16 - P10) * 100k shares] 600,000
Unrealized loss, 2018 [(P12 - P16) * 100k shares] (400,000)
Totals 0 200,000

Income for 2017 and 2018 200,000

Recorded income for 2017 and 2018 0
Understatement in RE, beg. 200,000

AJE:
Unrealized Gain - P/L 200,000
Retained Earnings 200,000

For items 19 to 21

Unadjusted net income, 2018 2,840,000

Amortization - bldg (P750k / 5 years) 150,000
Amortization - inventory (120,000)
Adjusted net income, 2018 2,870,000
M: Interest in investee 30%
Share in the net income 861,000

Initial cost 3,381,000

Share in the net income, 2018 861,000
Share in the OCI, 2018 (P400k * 30%) 120,000
Dividend, 2018 (P8.50 * 30,000 shares) (255,000)
CV, 12/31/18 4,107,000
Share in the net income, 2019 [(P3,150k + P150k) * 30%] 990,000
Share in the OCI, 2019 (P490k * 30%) 147,000
Dividend, 2019 (P9.20 * 30,000 shares) (276,000)
CV, 12/31/19 4,968,000

For items 22 to 25

Amortization Table

Date Interest Income Interest ReceivedCarrying Value

January 1, 2018 1,824,800
December 31, 2018 182,480 160,000 1,847,280
December 31, 2019 184,728 160,000 1,872,008

Market value, 1/1/20 (P2,000,000 * 1.06) 2,120,000

Carrying amount, 1/1/20 (1,872,008)
Gain 247,992

*No gain or loss on reclassification will be recognized in the income statement for reclassification from financial asset at amortized cost to FVOCI.

For items 26 to 30
 Date Interest Income Interest Received Amortized Cost
December 31, 2014 1,086,565
December 31, 2015 54,328 70,000 1,070,893
December 31, 2016 53,545 70,000 1,054,438
December 31, 2017 52,722 70,000 1,037,160
December 31, 2018 51,858 70,000 1,019,018
December 31, 2019 *50,982 70,000 1,000,000
*due to rounding off
 1,859,644

al asset at amortized cost to FVOCI.

 Unrealized Gain Unrealized Gain
(Loss) - OCI, (Loss) - OCI,
presented in the presented as part
Fair Value SFP of OCI in the SCI

1,065,000 (5,893) (5,893)

1,075,000 20,562 26,455
1,056,500 19,340 (1,222)
1,030,000 10,982 (8,358)
1,000,000 0 (10,982)
PROBLEM 1

Investment in associate, July 1, 2018 1,200,000

Dividend received (60,000)
Share in the net income
Income of investee from July 1 to December 31 (P840k/2) 420,000
Multiply by percentage of ownership 25% 105,000
Investment in associate, Dec. 31, 2018 1,245,000
Investment in APOL shares, Dec. 31, 2018 (10k sh * P122) 1,220,000
Investment in CHERRY shares, Dec. 31, 2018 (200k sh * P15) 3,000,000
Investment in DURIAN debt security (see amortization table) 4,759,663
Investment properties, December 31, 2018
Investment properties, Jan. 2, 2018 (P30M - P6M) 24,000,000
2018 Depreciation (P24M / 6) (4,000,000) 20,000,000
Carrying value of all investments, Dec. 31, 2018 30,224,663

Investment in CHERRY shares, Dec. 31, 2018 3,000,000

Initial cost of investment in CHERRY shares (200k sh * P19) (3,800,000)
Unrealized gain (loss) - OCI, presented in the Dec. 31, 2018 SFP (800,000)

2017 Recorded Per Audit

APOL shares
Transaction cost (50,000)
Dividend income 100,000 100,000
Unrealized gain - PL 50,000 100,000
Financial Assets at AC
Interest income as difference of cash outflow and face value 360,600
Interest income at year-end 500,000 556,728
Totals 1,010,600 706,728

Overstatement in RE, Dec. 31, 2017 (P1,010,000 - P706,728) 303,872

2018 Recorded Per Audit

APOL shares
Unrealized loss - PL (80,000) (80,000)
BANANA shares
Dividend income 60,000
Unrealized gain - PL 140,000
Share in the net income 105,000
DURIAN debt security
Interest income at year-end 500,000 563,535
Totals 620,000 588,535

Overstatement in 2018 NI (P620,000 - P588,535) 31,465

PROBLEM 2

Interest income from Potty

Jan. 1 - July 1 (P400k * 7% * 6/12) 14,000
Interest income from KeyTurn
Jan. 1 - April 1 (P600k * 7.5% * 3/12) 11,250
April 1 - Dec. 31 (P300k * 7.5% * 9/12) 16,875 28,125
Interest income from Tall (P250k * 8% * 2/12) 3,333
Dividend income (200sh * P1.25) 250
Total interest and dividend income 45,708

Gain on sale of KeyTurn bonds

Selling price (P300k * 102%) 306,000
Brokerage fees (1,000)
 Net sales price 305,000
Carrying amount (P609,450/2) (304,725) 275
Gain on sale of Potty bonds
Selling price (P400k * 97.5%) 390,000
Brokerage fees (1,250)
Net sales price 388,750
Carrying amount (387,000) 1,750
Total gain 2,025

Carrying Amount Fair Value Gain (Loss)

Corgi 121,500 110,000 (11,500)
KeyTurn 304,725 305,250 525
Newton 58,000 58,375 375
Tall 252,500 252,500 0
Unrealized gain (loss) (10,600)
Amortization Table
Date Interest Income Interest Received Carrying Value
January 1, 2017 4,639,400
December 31, 2017 556,728 500,000 4,696,128
December 31, 2018 563,535 500,000 4,759,663