Intermediate accounting by robles empleo ch 7 answers

Chapter – Investments in Equity Securities and Debt Securities CHAPTER INVESTMENTS IN EQUITY SECURITIES AND DEBT SECURITIES PROBLEMS 7-1 (Dusit, Inc.) Classified as available for sale securities a Purchase price (10,000 shares x P33.50) P335,000 Broker’s commission Total cost b Purchase price (7,000 shares x P26.50) P185,500.00 Broker’s commission Transfer taxes (¼ x 1% x 185,500) Total cost c P58,000 1,500 45,000 P44,625 4,910.00 463.75 P190,873.75 Purchase price Transfer fees and other costs Total cost to be allocated P59,500 Market values: Ordinary shares 150 x 100 Preference shares 300 x 150 P15,000 Total P14,875 1,980 P336,980 Allocation to: Ordinary shares P60,000 59,500 x 15/60 Preference shares 59,500 x 45/60 d Market value of ordinary shares 2,000 shares x P200 P400,000 Classified as Trading Securities a Purchase price (10,000 shares x P33.50) P335,000 b Purchase price (7,000 shares x P26.50) P185,500 c 14,500 43,500 d Allocation to Ordinary Shares 58,000 x 15/60 P Allocation to Preference Shares 58,000 x 45/60 P Market value of ordinary shares 47 Chapter – Investments in Equity Securities and Debt Securities 2,000 shares x P200 P400,000 7-2 (A Company) a Cash Dividend Revenue 2,400 shares x 7.50 Cost per share: B Corp Ordinary (no change) b c 18,000 18,000 P100 Memo entry Received additional 600 shares of B Corp ordinary shares as stock dividends Revised cost per share: B Corp Ordinary (3,000 shares) Available for Sale Securities-B Corp Preference 80,000 Available for Sale Securities-B Corp Ordinary 80,000 Market values: Allocation: 80,000 Ordinary (2,400 x 125) 300,000 Preference (600 x 250) 150,000 Ordinary 240,000 x 300/450 160,000 Preference 240,000 x 150/450 Costs per share: B Corp Ordinary (2,400 shares) B Corp Preference (600 shares) d P 80 P 67 P133 Memo entry Received additional shares of B Corp ordinary shares on a 4-for-1 stock split Revised cost per share: B Corp Ordinary = P240,000/9,600 shares P 25 e Available for Sale Securities-C Ordinary Dividend Revenue 2,400/6 = 400 shares x 50 20,000 20,000 Costs per share: B Corp Common (2,400 shares) C Corp Common (400 shares) 7-3 10,000 (Victoria Court) Classified as FVPL Cash Gain on Sale of Trading Securities P100 P 50 170,000 Trading Securities 160,000 To record sale of Y Co Common Unrealized Loss on Trading Securities Trading Securities To record valuation at end of year 72,000 72,000 Unrealized Holding 48 Chapter – Investments in Equity Securities and Debt Securities X Co Z Co Total MV12/31/08 P330,000 350,000 P680,000 Market12/31/09 P288,000 320,000 P608,000 Classified as available for sale securities Cash Loss on Sale of Available for Sale Securities Market Adjustment-AFS Securities Available for Sale Securities Net Unrealized Gain/Loss on AFS Securities 40,000 Gains(Losses) P(42,000) (30,000) P(72,000) 170,000 40,000 30,000 200,000 To record sale of Y Co Common Net Unrealized Gain/Loss on AFS Securities Market Adjustment-AFS Securities 72,000 72,000 To record valuation at end of year Unrealized Holding Gains(Losses) P(42,000) 20,000 Cost Market X Co P330,000 P288,000 Z Co 300,000 320,000 Total P630,000 P608,000 Required balance in Market Adjustment Account – cr Balance before adjustment (10,000 + 40,000) – dr Required adjustment P(22,000) 50,000 P 72,000 7-4 (Inn Corporation) (1) Sales price (15,000 x 60 ) P900,000 Cost of shares sold: 12,000 shares P650,000 3,000 shares (1,300,000 x 3,000/24,000) 162,500 812,500 Gain on sale P 87,500 (2) Sales price Cost of shares sold (1,800,000 x 15,000/36,000) Gain on sale (3) Sales price P900,000 Cost of shares sold: 12,000 shares P500,000 3,000 shares (1,300,000 x 3,000/24,000) 162,500 662,500 P900,000 750,000 P150,000 Gain on sale 7-5 P237,500 (Melody Corporation) a 2007 Lot (4 x 750) 2008 Lot (4 x 1,250) Total cost of stock rights received b Cost of stock rights exercised: 2005 Lot 49 P 3,000 5,000 P 8,000 P 3,000 Chapter – Investments in Equity Securities and Debt Securities 2006 Lot (750 x 4) 6,000 2,250 3,000 Cash paid (300 shares x P80) Total cost of new shares acquired thru stock rights Cost per share (8,400 / 300 shares) P c 24,000 P30,000 100 Sales price of stock rights (500 x 4.50) P Cost of stock rights sold 2008 Lot (500 x 4) Gain on sale d 225,400 50,000 P 2,000 250 Available for sale securities balance at December 31, 2009: 2007 Lot (60,000 – 3,000) P 57,000 2008 Lot (110,000 – 5,000) 105,000 2009 Lot 30,000 P192,900 Market value at December 31, 2009 (98 x 2,300 shares) Balance in unrealized gain/loss account at December 31, 2009 32,500 7-6 P (Anti Corporation) a Stock Rights – Pro Corp Ordinary Trading Securities – Pro Corp Ordinary 10,000 x b Cash Stock Rights – Pro Corp Ordinary c 50,000 50,000 P 50,000 50,000 Trading Securities – Pro Corp Ordinary Stock Rights – Pro Corp Ordinary Cash 10,000/5 = 2,000 shares 2,000 x 50 = 100,000 150,000 100,000 Trading Securities – Pro Corp Ordinary Unrealized Gain on Trading Securities 140,000 140,000 900,000 Market value, 12/31/06 (12,000 shares x 75) Carrying value, 12/31/07 (10,000 shares x 66) 660,000 Cost of stock rights received ( 50,000) Cost of new shares from exercise 150,000 760,000 Unrealized gain 140,000 7-7 (EDSA Company) (a) 150 – 135 2+1 = 50 P5.00 Chapter – Investments in Equity Securities and Debt Securities (b) 2,000 x 5,500 – (1,000 x 5) 145 – 135 2,000 x 7-8 = = P10,000 P500 Gain = P5.00 = P10,000 (Tolits Corporation) 2009 a Available for Sale Securities – Diana Ordinary Cash b Memorandum entry Received 500 additional shares of Diana ordinary shares as a result of 2-for-1 split c Available for Sale Securities – Smith Preference Cash (1,000 x 120) + 1,200 d e f f g 54,000 54,000 121,200 121,200 Cash Gain on Sale of AFS Securities Available for Sale Securities – Diana Ordinary (54,000 / 1,000) x 250 shares = 13,500 15,000 Stock Rights – Diana Ordinary Available for Sale Securities – Diana Ordinary 750 shares x 2,250 Available for Sale Securities – Diana Ordinary Stock Rights – Diana Ordinary Cash (60% x 750) x 3; 225 x 55 Cash Stock Rights – Diana Ordinary (40% x 750) x 1,500 13,500 2,250 13,725 1,350 12,375 900 Cash (100 x 56) Loss on sale of AFS Securities Available for Sale Securities – Diana Ordinary 13,725/ 225 = 61; 61 x 100 = 6,100 5,600 500 h Cash (1,000 x 100 x 8%) Dividend Revenue 8,000 i Market Adjustment – AFS Securities Unrealized Gains/Losses on AFS Securities 2,175 Market 51 Unreal 900 6,100 8,000 2,175 Chapter – Investments in Equity Securities and Debt Securities CV Diana (750 sh) 46,500 38,250 Diana (125 sh) 7,750 7,625 Smith (1,000 x 115) 115,000 121,200 Total 169,250 167,075 b P9,000 7-9 Gain on sale of AFS Securities Loss on sale of AFS Securities ( 500) Dividend revenue Total income recognized in profit or loss in 2006 8,250 125 (6,200) 2,175 P1,500 8,000 (X Corporation) 2008 Jan Dec 31 Available for Sale Securities – Y Co Ordinary Cash 300,000 Net Unrealized Gains/Losses on AFS Securities Market Adjustment – AFS Securities 5,000 x (60 – 55) 25,000 Market Adjustment – AFS Securities Impairment Loss – AFS Securities Net Unrealized Gains/Losses on AFS Securities Available for Sale Securities – Y Co Ordinary 5,000 x (60-52) 25,000 40,000 300,000 25,000 2009 Dec 31 7-10 25,000 40,000 (Carlo Company) 2009 Apr May 15 Cash (5,000 x 25) Loss on Sale of Trading Securities Trading Securities – Avi Ordinary Available for Sale Securities – Ghio Preference Cash July 10 Memorandum entry Received 4,000 additional Darrel ordinary shares representing a 20% bonus issue Shares now held are 24,000 Nov 30 Cash (1 x 24,000) Dividend Revenue Unrealized Loss on Trading Securities Trading Securities – Avi Ordinary (5,000 x 26) – 139,000 Dec 31 31 Market Adjustment – AFS Securities Net Unrealized Gains/Losses on AFS 52 125,000 14,000 139,000 30,550 30,550 24,000 9,000 24,000 9,000 110,650 110,650 Chapter – Investments in Equity Securities and Debt Securities Securities 116,650 – 6,000 balance FV Unrealized Darrel 480,000 116,000 Ghio 31,200 650 Total 511,200 116,650 7-11 Cost 364,000 30,550 394,550 (Hostel Company) (a) Investment in Associates Cash 2,000,000 300,000 300,000 Memo Received 2,000 additional shares of Atlanta ordinary as 10% bonus issue Shares now held are 22,000 Investment in Associates Income from Associates 20% x 3,000,000 600,000 Cash Investment in Associates 20% x 1,000,000 200,000 (b) Investment in Associates Income from Associates 20% x 1,500,000 2,000,000 600,000 Investment cost P2,000,00 300,000 600,000 (200,000) P2,700,00 Share in income – 2009 Share in income – 2010 Share in dividends Carrying amount, December 31, 2010 7-12 200,000 (Byron, Inc.) 2009 Jan Dec 31 31 7-13 Investment in Associates – Pirates Ordinary Cash 5,160,000 Investment in Associates – Pirates Ordinary Income from Associates (30% x 3,600,000) 1,080,000 Cash (30% x 400,000) Investment in Associates – Pirates Ordinary (Barbie, Inc.) (a) 53 5,160,000 1,080,000 120,000 120,000 Chapter – Investments in Equity Securities and Debt Securities 2009 Mar Dec 31 31 31 Investment in Associates – Kitchie Cash Cash (30% x 800,000) Investment in Associates – Kitchie Investment in Associates – Kitchie Income from Associates (3.2M x 10/12) x 30% Income from Associates – Kitchie Investment in Associates – Kitchie 1,365,000 240,000 1,365,000 240,000 800,000 800,000 37,500 (30% x 750,000) / yrs = 45,000 45,000 x 10/12 = 37,500 37,500 (b) Acquisition cost, March 1, 2009 P1,365,000 Cash dividends received ( 240,000) Income from associates 800,000 Adjustment in reported income ( 37,500) Investment carrying value, December 31, 2009 P1,887,500 Income reported by Barbie from its investment in associates: (800,000 – 37,500) P 762,500 7-14 (Richmonde Corporation) (a) 2008 Jan Dec 31 31 Available for Sale Securities – Pen, Inc Cash 900,000 Cash Dividend Revenue 10% x 2,000,000 200,000 Market Adjustment – AFS Securities Net Unrealized Gains/Losses on AFS Securities 480,000 900,000 200,000 480,000 2009 Jan Investment in Associates – Pen, Inc Net Unrealized Gains/Losses on AFS Securities Market Adjustment – AFS Securities Retained Earnings Available for Sale Securities – Pen, Inc Acquisition cost 900,000 Share in income (10% x 6M) 600,000 Share in dividends (10% x 2M) 54 1,300,00 480,000 480,000 400,000 900,000 Chapter – Investments in Equity Securities and Debt Securities (200,000) Carrying amount, 12/31/05 1,300,000 Investment in Associates – Pen, Inc 2,600,00 Cash Dec 31 Investment in Associates – Pen, Inc 1,950,00 Income from Associates (30% x 6,500,000) 31 (b) Cash Investment in Associates (30% x 3,000,000) 900,000 Cost transferred from Available for Sale Securities 1,950,00 900,000 1,300,00 2,400,000 1,950,000 (900,000) 4,750,000 Additional investment Share in income Share in dividends Carrying amount, December 31, 2009 7-15 2,600,00 (E Corporation) (a) 2008 Jan Investment in Associates – F Company 8,250,00 Cash (50,000 x 165) 8,250,00 Aug Cash Investment in Associates – F Company 210,000 Dec 31 Investment in Associates – F Company Income from Associates 170,000 Cash Investment in Associates – F Company 210,000 Investment in Associates – F Company Income from Associates – F Company 250,000 25% x 680,000 210,000 170,000 2009 Dec 31 31 25% x 1,000,000 210,000 250,000 2010 Jan Cash (20,000 x 170) 3,400,00 Investment in Associates – F Company Gain on Sale of Investment in Associates Acquisition cost Share in income (2006) Share in dividends (2006) Share in dividends (2007) Share income (2007) 55 8,250,000 170,000 (210,000) (210,000) 250,000 3,300,00 100,000 Chapter – Investments in Equity Securities and Debt Securities Investment carrying amount Portion sold Cost of investment sold 8,250,000 40% 3,300,000 Available for Sale Securities – F Company Investment in Associates – F Company 4,950,00 4,950,00 8,250,000 – 3,300,000 Dec 31 31 Cash Dividend Revenue 120,000 Market Adjustment-AFS Securities Net Unrealized Gains/Losses on AFS Securities 750,000 120,000 750,000 (30,000 x 190) - 4,950,000 = 750,000 (b) Cost/Carrying Value, beg of year 2008 P8,250,000 2009 P8,210,000 2010 P8,250,000 Income from associates Cash dividends received Sale of shares Market adjustment Carrying value, end of year 170,000 (210,000) 250,000 (210,000) (3,300,000) 750,000 P8,210,000 P8,250,000 P5,700,000 7-16 10 11 12 13 14 15 7-17 A and B A B and C A and B B C C A B A, B and C C A B A C (Abu Company) (a) Date 01/01/07 12/31/07 12/31/08 12/31/09 12/31/10 12/31/11 Interest Received Interest Revenue Premium Amortization Carrying Value 1,200,000 1,200,000 1,200,000 1,200,000 1,200,000 1,158,450 1,152,633 1,146,002 1,138,442 1,129,827* 41,550 47,367 53,998 61,558 70,173* 8,274,646 8,233,096 8,185,729 8,131,731 8,070,173 8,000,000 *rounded off (b) 56 Chapter – Investments in Equity Securities and Debt Securities 2007 Jan Dec 31 Held to Maturity Securities Cash 8,274,646 Cash Held to Maturity Securities Interest Revenue 1,200,000 Cash Held to Maturity Securities Interest Revenue 1,200,000 8,274,646 41,550 1,158,450 2008 Dec 31 7-18 47,367 1,152,633 (South Company) a Journal entries in 2006 and 2007 (1) Securities are classified as financial assets at fair value through profit and loss 2008 June Dec Trading Securities – State Corp Bonds Cash 3,691,500 Cash Interest Revenue (4M x 8% x ½) 3,691,500 160,000 160,000 31 Interest Receivable Interest Revenue (4M x 8% x 1/12) 26,667 31 Trading Securities – State Corp Bonds Unrealized Gain on Trading Securities 188,500 26,667 188,500 4M x 0.97 = 3,880,000 3,880,000 – 3,691,500 = 188,500 2009 Jan Interest Receivable Interest Revenue 26,667 June Cash Interest Revenue 160,000 Dec Cash Interest Revenue 160,000 31 Interest Receivable Interest Revenue 26,667 Trading Securities – State Corp Bonds Unrealized Gain on Trading Securities 80,000 Dec 31 26,667 160,000 160,000 26,667 80,000 4M x 0.99 = 3,960,000 3,960,000 – 3.880,000 = 80,000 (3) Securities are classified as held-to-maturity securities To facilitate computation, a partial amortization table is presented below Interest Interest Amortization HTM Date Received Revenue of Discount Carrying Value June 1, 2008 Dec 1, 2008 3,691,500 160,000 184,575 57 24,575 3,716,075 Chapter – Investments in Equity Securities and Debt Securities June 2009 Dec 2009 June 2010 Dec 2010 June 2011 Dec 2011 1, 160,000 185,804 25,804 3,741,879 1, 160,000 187,094 27,094 3,768,973 1, 160,000 188,449 28,449 3,797,422 1, 160,000 189,871 29,871 3,827,293 1, 160,000 191,365 31,365 3,858,658 1, 160,000 192,933 32,933 3,891,591 2008 June Dec 31 Held to Maturity Securities – State Corp Bonds Cash 3,691,50 Cash Held to Maturity Securities – State Corp Bonds Interest Revenue (see above table) 160,000 24,575 Interest Receivable Held to Maturity Securities – State Corp Bonds Interest Revenue 26,667 4,301 Interest Revenue Interest Receivable Held to Maturity Securities – State Corp Bonds 30,968 3,691,500 184,575 30,968 160,000 x 1/6 = 26,667; 25,804 x 1/6 = 4,301 2009 Jan June Dec 31 26,667 4,301 Cash Held to Maturity Securities – State Corp Bonds Interest Revenue(see above table) 160,000 25,804 Cash Held to Maturity Securities – State Corp Bonds Interest Revenue (see above table) 160,000 27,094 Interest Receivable Held to Maturity Securities – State Corp Bonds Interest Revenue 26,667 4,742 185,804 160,000 x 1/6 = 26,667; 28,449 x 1/6= 187,094 31,409 4,742 (3) Securities are classified as available for sale securities To facilitate computation, a partial amortization table is presented below Date Interest Received Interest Revenue 58 Amortization of Discount HTM Carrying Value Chapter – Investments in Equity Securities and Debt Securities June 1, 2008 Dec 1, 2008 June 1, 2009 Dec 1, 2009 June 1, 2010 Dec 1, 2010 June 1, 2011 Dec 1, 2011 3,691,500 160,000 160,000 184,575 185,804 24,575 25,804 3,716,075 3,741,879 160,000 187,094 27,094 3,768,973 160,000 188,449 28,449 3,797,422 160,000 189,871 29,871 3,827,293 160,000 191,365 31,365 3,858,658 160,000 192,933 32,933 3,891,591 2008 June Dec 31 31 Available for Sale Securities – State Corp Bonds Cash Cash Available for Sale – State Corp Bonds Interest Revenue (see above table) Interest Receivable Available for Sale Securities – State Corp Bonds Interest Revenue 160,000 x 1/6 = 26,667 25,804 x 1/6 = 4,301 Market Adjustment – AFS Securities Net Unrealized Gain/Loss on AFS Securities 3,691,500 3,691,500 160,000 24,575 184,575 26,667 4,301 30,968 159,624 159,624 4M x 0.97 = 3,880,000 Amortized cost 3,691,500+ 24,575 + 4,301 = 3,720,376 Market Adjustment P 159,624 2009 Jan Interest Revenue Interest Receivable Available for Sale Securities – State Corp Bonds June Cash Available for Sale Securities – State Corp Bonds Interest Revenue(see above table) 160,000 25,804 Cash Available for Sale Securities – State Corp Bonds Interest Revenue (see above table) 160,000 27,094 Interest Receivable Available for Sale Securities – State Corp 26,667 4,742 Dec 31 59 30,968 26,667 4,301 185,804 187,094 Chapter – Investments in Equity Securities and Debt Securities Bonds Interest Revenue 31,409 160,000 x 1/6 = 26,667 28,449 x 1/6 = 4,742 Dec 31 Market Adjustment – Available for Sale Securities Unrealized Gain or Loss on AFS 26,661 26,661 Market value (4M x 99%) P3,960,000 Amortized Cost (3,768,973 + 4,742) 3,773,715 Cumulative UG/L P 186,285 Before adjustment 159,624 Increase in UG/L P 26,661 2011 Journal entry/entries to record sale of investment on November 1, (a) Securities are classified as financial assets at fair value through profit and loss 2011 Nov Cash Loss on Sale of Trading Securities Interest Revenue Trading Securities – State Corp Bonds 3,925,00 128,333 Acc Int = 4M x 8% x 5/12 = 133,333 Sales price (3,925,000–133,333) 3,791,667 Carrying value (4 M x 0.98) 3,920,000 Loss on sale 128,333 133,333 3,920,000 (b) Securities are classified as held-to-maturity securities 2011 Nov 1 Held to Maturity Securities – State Corp Bonds Interest Revenue 32,933 x 5/6 = 27,444 Cash Loss on Sale of Held to Maturity Securities Interest Revenue Held to Maturity Securities–State Corp Bonds CV of HTM Securities sold: As of June 1, 2011 3,858,658 Amortization June to Nov 1, 2011 27,444 As of Nov 1, 2011 3,886,102 Sales price 3,791,667 60 27,444 27,444 3,925,00 94,435 133,333 3,886,10 Chapter – Investments in Equity Securities and Debt Securities Loss on sale 94,435 (c) Securities are classified as available for sale securities 2011 Nov 1 Available for Sale Securities – State Corp.Bonds Interest Revenue 27,444 27,444 Cash Loss on Sale of Available for Sale Securities Net Unrealized Gain/Loss on AFS Securities Interest Revenue Available for Sale Securities–State CorpBonds Market Adjustment – AFS Securities Sales price (3,925,000–133,333) 3,791,667 Amortized Cost 3,886,102 Loss 94,435 Amortized Cost 12/1/08 P3,827,293 Discount Amort 12/1/08 – 12/31/08 31,365 x 1/6 5,228 Amortized Cost 12/31/08 P3,832,521 MV 12/31/08 4M x 98% 3,920,000 Unrealized Gain on 12/31/08 87,479 7.19 3,925,00 94,435 87,479 133,333 3,886,10 87,479 P Raffy Company) To facilitate computation, a partial amortization table is presented below Date June 1, 2007 Dec 31, 2007 Dec 31, 2008 Dec 31, 2009 Dec 31, 2010 2007 June Interest Received Interest Revenue Amortization of Discount 350,000 312,267 37,733 HTM Carrying Value 5,353,150 5,315,417 600,000 531,542 68,458 5,246,959 600,000 524,696 75,304 5,171,655 600,000 517,166 82,834 5,088,821 Held to Maturity Securities – Blessie Corp Bonds Interest Revenue (5M x 12% x 5/12) Cash 61 5,353,15 250,000 5,603,15 Chapter – Investments in Equity Securities and Debt Securities Dec 31 Cash Interest Revenue Held to Maturity Securities – Blessie 600,000 Cash Interest Revenue Held to Maturity Securities – Blessie 600,000 Cash Interest Revenue Held to Maturity Securities – Blessie 600,000 Interest Receivable (3M x 12% x 8/12) Held to Maturity Securities – Blessie Interest Revenue (517,166 x 3/5 x 8/12) 240,000 562,267 37,733 2008 Dec 31 2009 Dec 31 531,542 68,458 524,696 75,304 2010 Sept 1 Cash (3,090,000 + 240,000) Gain on sale of HTM Securities Interest Receivable Held to Maturity Securities – Blessie 3,330,00 33,134 206,866 20,141 240,000 3,069,85 CV of HTM securities sold: As of 12/31/07 (5,171,655 x 3/5) 3,102,993 Amort from 1/1/08-9/1/08 33,134 CV as of 9/1/08 3,069,859 Sales price 3,090,000 Gain on sale 20,141 Available for Sale Securities – Blessie Held to Maturity Securities 2,068,66 2,068,66 5,171,655 – 3,102,993 = 2,068,662 Dec 31 Cash Interest Revenue Available for Sale Securities – Blessie 240,000 2M x 12% = 240,000 5,171,655 – 3,102,993 = 2,068,662 2,068,662 x 10% = 206,866 240,000 – 206,866 = 33,134 Dec 31 Market Adjustment – AFS Unrealized Gain or Loss on AFS Amortized cost 2,068,662 – 33,134 = P2,035,528* Market value 2M x 103.5% 2,070,000 Market Adjustment P 34,472 *or 5,088,821 x 2/5 = P2,035,528 206,866 33,134 34,472 34,472 Note: Instead of recognizing the unrealized gain or loss at the date of reclassification on September 1, 2010 (the company demonstrating no ability to hold the securities until maturity, hence the securities were reclassified as 62 Chapter – Investments in Equity Securities and Debt Securities AFS), and adjusting the account again at yearend, a single adjustment at yearend is made in the above entries Both methods would achieve the same effect of reflecting the AFS to market at balance sheet date through the equity account Unrealized Gain or Loss on AFS 7-21 10 11 12 13 14 15 B A B A B A A A B B C B A A B and C and C and C and C and C MULTIPLE CHOICE QUESTIONS Theory MC1 MC2 MC3 MC4 B B A C MC5 MC6 MC7 MC8 D D A D MC9 MC10 MC11 D B C Problems MC12 MC13 B D MC14 C MC15 MC16 A C MC17 D MC18 B MC19 MC20 MC21 MC22 MC23 MC24 D B A D B B MC25 A MC26 MC27 D B MC28 A 535,000 – 525,000 = 10,000 307,500 + 269,500 = 577,000; (600 x 440) + (2,000 x 138) = 540,000 577,000 – 540,000 = 37,000; 12,900 + 13,500=26,400; 37,000–26,400=10,600 10,000 x 150 = 1,500,000; 20% x 3M = 600,000 10,000 x 50 = 500,000; 1,500,000 + 600,000 – 500,000 = 1,600,000 1,000 x 50 = 150,000 + 2,250 = 152,250; 152,250 – (1,000 x 10) = 142,250 3,000 x 120 = 360,000; 560,000 x 3,000/6,000 = 280,000 360,000 – 280,000 = 80,000 360,000 x 600/3600 = 60,000; 200,000 + 60,000 = 260,000 360,000 – 260,000 = 100,000 500 x 25 = 12,500 – 500 = 12,000 500 x 20 = 10,000; 12,000 – 10,000 = 2,000 gain 960-500 = 460 + 600 = 1,060; 1,060/10 = 106 shares 88 ÷ 1.10 = 80 352,000 – (4,400 x 4) = 334,400; 334,400 / 4,400 sh = 76 See No 21 1,200,000 – (3 x 40,000) + (25% x 640,000) = 1,240,000 40% x 450,000 = 180,000 150,000 ÷ 12 = 12,500; 180,000 – 12,500 = 167,500 25,000 x 180 = 4,500,000; 25% x (2,400,000 – 480,000) = 480,000 4,500,000 + 480,000 – 60,000 – 60,000 = 4,860,000 4,860,000 x 15/25 = 2,916,000 10,000 x 200 = 2,000,000; 4,860,000 x 10/25 = 1,944,000 2,000,000 – 1,944,000 = 56,000 63 Chapter – Investments in Equity Securities and Debt Securities MC29 MC30 C B MC31 MC32 C B MC33 MC34 MC35 MC36 A A C C MC37 MC38 C B MC39 D MC40 MC41 MC42 D B D 500,000 + 1,500,000 + (10% x 3M) = 2,300,000 40% x 1,200,000 = 480,000; (40% x 900,000) ÷ 18 = 20,000 40% x 100,000 = 40,000; 480,000 – 20,000 – 40,000 = 420,000 4,000,000 + 420,000 – (40% x 200,000) = 4,340,000 (1,000 x 140) + (900 x 170) + (800 x 200) = 453,000 (1,000 x 150) + (900 x 180) + (800 x 220) = 488,000 488,000 – 453,000 = 35,000; 35,000 – 20,000 = 15,000 See No 33 8,750,000 x 5% = 437,500 3,692,000 x 5% = 184,600; 4M x 4% = 160,000 184,600 – 160,000 = 24,600; 3,692,000 + 24,600 = 3,716,600 See No 36 912,400 x 10% = 91,240; 1,000,000 x8% = 80,000 91,240-80,000 = 11,240; 912,400 + 11,240 = 923,640 7,850,000 – (8M x 08 x 6/12) = 7,530,000; 7,383,000 x 5% = 369,150 8M x 4% = 320,000; 369,150 – 320,000 = 49,150 7,383,000 + 49,150 = 7,432,150; 7,432,150 x 5% = 371,608 371,608 – 320,000 = 51,608; 7,342,150 + 51,608 = 7,483,758 7,530,000 – 7,483,758 = 46,242 500,000 x 4% = 20,000 460,000 – 472,500 = 12,500 64 ... 2009 Share in income – 2010 Share in dividends Carrying amount, December 31, 2010 7-12 200,000 (Byron, Inc.) 2009 Jan Dec 31 31 7-13 Investment in Associates – Pirates Ordinary Cash 5,160,000... reported income ( 37,500) Investment carrying value, December 31, 2009 P1,887,500 Income reported by Barbie from its investment in associates: (800,000 – 37,500) P 762,500 7-14 (Richmonde Corporation)