AC - IntAcctg1 Quiz 03 With Answers

On January 1, 2020, A Company purchased marketable equity securities to be held as “trading” for P5,000,000.
The entity also

paid commission, taxes and other transaction costs amounting to P200,000. The securities had a market value of P5,500,000 on
December 31, 2020 and the transaction costs that would be incurred on sale are estimated at P100,000. No securities were sold
during 2020.
1. What amount of unrealized gain or loss on these securities should be reported in the 2020 income statement? 500,000 gains
C Company acquired a financial instrument for P4,000,000 on March 31, 2020. The financial instrument is classified as financial
asset at fair value through other comprehensive income. The direct acquisition costs incurred amounted to P700,000. On
December 31, 2020, the fair value of the instrument was P5,500,000 and the transaction costs that would be incurred on the sale
of the investment are estimated at P600,000.
2. What amount of unrealized gain or loss on these securities should be reported in the 2020 income statement? P0
During 2020, M Company purchased 80,000 shares at P60 per shares. The investment was classified as trading. During the
year, the entity sold 20,000 shares for P70 per share. On December 31, 2020, the market price per share is P55.
3. What net amount of gain or loss should be recognized for 2020? (P100,000)
On January 1, 2020, R Company acquired 200,000 ordinary shares of U Company for P9,000,000. At the time of purchase, U
Company had outstanding 800,000 shares with a carrying amount of P36,000,000. On December 31, 2020, the following events
took place:
• U Company reported net income of P1,800,000 for the calendar year 2020.
• R Company received from U Company a dividend of P0.75 per ordinary share.
• The market value of U Company share had temporarily declined to P40.
R Company has elected to measure the investment at fair value through other comprehensive income.
4. What is the carrying amount of the investment n December 31, 2020? P8,000,000
Manu Company invested in stock of Gerry Company in 2023, 90,000 shares at a total cost of P8,000,000 and in 2024, 150,000
shares at a total cost of P13,200,000. On November 15, 2025, Gerry Company distributed 240,000 rights to Manu. Manu was
entitled to buy one new share of Gerry common stock for P100 and five of these rights until their expiration on December 15,
2025. At issue date, the rights had a market value of P15 each and the stock was selling ex-right at P135. On December 1, 2025
Manu used the rights to purchase 38,000 additional shares of Gerry Company, in determining the rights exercised, assume the
use of the first-in, first-out method.
5. The cost of Manu's new investment in Gerry stock acquired through exercise of stock rights at December 1, 2025 should be
6,650,000
On January 2, 2023 Mark Tristan Company bought 15% of Arctic Corporation's common stock for P3,000,000. Mark Tristan
Company accounts for this investment by the cost method. Arctic's net earnings for the years ended December 31, 2023 and
December 31, 2024 were P1,000,000 and P5,000,000, respectively. During 2024 Arctic declared a dividend of P7,000,000.
No dividends were declared in 2023.
6. How much should Mark Tristan show on its 2024 income statement as income from this investment? 900,000
The following transactions for the year 2004 relate to the permanent investment of Ricar Company
1/1 Purchased 10,000 shares of Asia Company P100 par value common for P720,000
2/15 Received a 20% stock dividend
6/30 Sold the stock dividends at P70 per share
8/1 Exchanged 5,000 shares of Asia common for 10,000 Asia preferred shares. At the time of exchange, Asia common is
selling at P70 and Asia preferred at P40
7. The gain on exchange to be recorded by Ricar on the August 1, 2004 transaction is 50,000
For the next three numbers

LABADA CO.’s portfolio of trading securities includes the following on December 31, 2013:
Cost Fair value
15,000 ordinary shares of Camias 1,431,000 1,251,000
30,000 ordinary shares of Ganda 1,638,000 1,710,000
3,069,000 2,961,000
All the above securities have been purchased in 2013. In 2014, Labada Co. completed the following securities transactions:
Mar. 1 Sold 15,000 shares of Camias co. ordinary shares at P93, less brokerage commission of P13,500.
April 1 Bought 1,800 ordinary shares of Waston, Inc. at P135 plus commission taxes and other transaction costs of P4,950.
The Labada Co. portfolio of trading securities appeared as follows on December 31, 2014:
Cost Fair value
30,000 ordinary shares of Ganda 1,638,000 1,740,000*
1,800 ordinary shares of Waston 247,950 225,000**
1,885,950, 1,965,000
*net of P19,500 estimated transaction costs that would be incurred on the sale of securities
**net of P4,500 transaction costs that would be incurred on the sale of securities
8. What amount of unrealized gain on these securities should be reported in 2014 income statement? 36,000
9. What is the gain on sale of CamiasCo. Ordinary shares on March 1, 2014? 130,500
10. What amount should be reported as trading securities in Labada’s statement of financial position on December 31, 2014?
1,989,000
By 2012, Annalyn Company owned 300,000 shares of another entity’s 1,200,000 shares of P50 par, 10% cumulative, non-
participating preference share capital and 200,000 shares representing 5% of the investee’s ordinary share capital. The investee
declared P8,000,000 dividends in 2012. The entity then received the dividends in 2013. In addition, the entity received a 10%
stock dividend from the investee when the quoted market price of ordinary share was P20 during the 2013 and a cash dividend
of P0.50 per share.
11. What amount should be reported as dividend income for 2013? 110,000
On January 1, 2005, Mar Company purchased 25% of Core Company's common stock for P12,000,000. The stockholders'
equity of Core at the same date is P40,000,000. However several assets in Core's balance sheet had fair values different from
their book values. The fair value of inventory and building exceeded their carrying amounts by P500,000 and P4,000,000
respectively. Core's plant assets are being depreciated over their remaining useful life of ten years and Mar's policy is to
amortize any goodwill over five years. The inventory is already sold during the year. Core reported net income of P10,000,000 for
the year ended December 31, 2005 and paid Mar dividends of P1,000,000 during the year.
12. What is the carrying amount of Mar's investment in Core at December 31, 2005? 13,100,000
Karla Company acquired 20% of Victoria Company’ s voting stock for P50,000,000 on January 31, 2002. The 20% interest gave
Karla the ability to exercise significant influence over Victoria’s operating and financial policies. During 2002, Victoria earned
P8,000,000 and paid dividends of P5,000,000. Victoria reported earnings of P6,000,000 for the 6 months ended June 30, 2003,
and P10,000,000 for the year ended December 31, 2003. On July 1, 2003, Karla sold half of its stock in Victoria for P33,000,000
for cash. Victoria paid dividends of P3,000,000 on October 1, 2003.
13. In its 2003 income statement, what amount should Karla report as gain from sale of investment? 7,166,667
For the next 3 numbers

SANTOL Corporation invested its cash in non trading equity securities during 2013. On initial recognition, the entity made an
irrevocable election to present its securities at fair value through other comprehensive income. As of December 31, 2013, the
company’s portfolio consisted of the following:
Investee Company Shares Cost Fair Value
Kelly Inc. 30,000 P450,000 P425,000
Eloy Inc. 60,000 1,500,000 1,610,000
Yogi Enterprises 60,000 2,160,000 2,300,000
Totals P4,110,000 P4,335,000
During the year 2014, Santol sold 60,000 shares of Eloy Corporation for P1,600,000 and purchased 60,000 additional shares of
Kelly Inc. and 30,000 shares of Kongga company.
On December 31, 2014, Santol’s portfolio of non trading equity securities comprised the following:
Kelly Inc. 30,000 P450,000 P500,000
Kelly Inc. 60,000 1,300,000 1,450,000
Kongga Company 30,000 520,000 480,000
Yogi Enterprises 60,000 2,160,000 700,000
Totals P4,430,000 P3,130,000
During the year 2015, Santol sold all the Kelly Inc. shares for P2,300,000 and 15,000 shares of Kongga Company at a loss of
P90,000. On December 31, 2015, Santol’s portfolio of non-trading equity securities consisted of the following:
Yogi enterprises 60,000 2,160,000 4,200,000
Kongga Company 15,000 260,000 180,000
Totals P2,420,000 P4,380,000
14. What is the balance of the Unrealized gain on Non trading equity securities as of December 31, 2013? 225,000
15. What is the balance of the Non-Trading equity Securities as of December 31, 2014? 3,130,000
16. What is the balance of the Unrealized gain on Non trading equity securities as of December 31, 2015? 1,960,000
G Company acquired 40% interest in an associate, A Company, for P5,000,000 on January 1, 2020. At the acquisition date,
there were no differences between fair value and carrying amount of identifiable assets and liabilities.
A Company reported the following net income and dividend for 2020 and 2021:
2020 2021
Net income 2,000,000 3,000,000
Dividend paid 800,000 1,000,000
The following transactions occurred between G Company and A Company:
• On January 1, 2020, A Company sold an equipment costing P500,000 to G Company for P800,000. G Company
applied a 10% straight-line depreciation.
• On July 1, 2021, A Company sold equipment for P900,000 to G Company. The carrying amount of the equipment is
P500,000 at the time of sale.
The remaining life of the equipment is 5 years and G Company used the straight-line depreciation.
• On December 31, 2021, A Company sold an inventory to G Company for P2,800,000. The inventory had a cost of
P2,000,000 and was still on hand on December 31, 2021.
• On January 1, 2021, G Company sold an equipment to Alta Company for P3,000,000. The equipment had a cost of
P2,500,000.
G Company regarded this equipment as inventory whereas A Company intended to use it as a noncurrent asset. The remaining
useful life of the equipment is 10 years.
17. What is the investor’s share in the profit of the associate for 2020? 692,000
18. What is the investor’s share in the profit of the associate for 2021? 568,000
19. What is the carrying amount of the investment in associate on December 31, 2020? 5,372,000
20. What is the carrying amount of the investment in associate on December 31, 2021? 5,540,000

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On January 1, 2020, A Company purchased marketable equity securities to be held as “trading” for P5,000,000.

The entity also

For the next three numbers

For the next 3 numbers

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