Problem No.

The following transactions of the Angat Company were completed during the year 2010:

Jan 2 Purchased 20,000 share of Bulacan Auto Co. for P140 PER SHARE PLUS
BROKERAGE COSTS OF P4,5000. These shares were classified as held for
trading.

Feb 1 Purchased 20,000 shares of Malolos Company ordinary shares at P125 per
share plus brokerage fees of P19,000. Angat classifies these shares as
available for sale.

Apr 1 Purchased P2,000,000 of RP Treasury 7% bonds, paying 102.5 plus accrues

interest of P35,000. In addition, the company paid brokerage fees of P18,000.
Angat classified these bonds as held for trading.

Jul 1 Received semiannual interest on RP Treasury Bonds.

Aug 1 Sold P500,000 of RP Treasury 7% bonds at 103 plus accrued interest.

Oct 1 Sold 3,000 shares of Malolos at its fair value of P132 per share.

The market values of the shares and bonds on December 31, 2010, are as follows:

Bulacan Auto Co. P45 per share

Malolos Company P130 per share
RP treasury 7% bonds 102

Questions:

Based on the following above and the result of your audit, determine the following:

1. Gain or loss on sale of P50,0000 RP Treasury bonds on August 1, 2010

2. Disregarding income taxes, reclassification adjustment for other comprehensive
income on the sale of 3,000 Malolos share on October 1, 2010
3. Gain or loss on the sale of P3,000 Malolos share on October 1, 2010
4. Gain or loss arising from change in the fair value of securities to be recognized in
2010 profit or loss
5. Net unrealized gain in accumulated other comprehensive income in equity as of
December 31, 2010

Problem No. 2

During 2009, Pampanga Company purchased 9,000 ordinary shares of Angeles Company for
P16 per share, 6,000 ordinary shares of Apalit Company for P33 per share and P120,000 of
treasury notes at 101. These investments are intended to be held as ready sources of cash
and are classified as held of trading.

Also in 2009, Pampanga purchased 10,500 ordinary shares Arayat Company for P29 per
share. The securities are classified as available for sale.

During 2009, Pampanga received the following interest and dividend payment on its
investments:
 Angeles Company P1 per share dividend
Apalit Company P3 per share dividend
Arayat Company P2 per share dividend
Treasury notes 6% annual interest earned for 6 months

Fair values of the securities at December 31, 2009, were as follows:

Angeles Company P20 per share

Apalit Company P22 per share
Arayat Company P26 per share
Treasury notes 102

On March 23, 2010, the 6,000 ordinary shares of Apalit were sold for P17 per share. On
June 30, 2010, the treasury notes were sold 100.5 plus accrued interest.

Fair values of remaining securities at December 31, 2010, are as follows:

Questions:

Based on the above and the results of your audit, determine the following:

1. Total dividend income in 2009

2. Carrying amount of Trading Securities as of December 31,2009
3. Unrealized loss to be recognized in 2009 profit or loss
4. Total realized loss on sale of securities in 2010
5. Net unrealized gain in accumulated other comprehensive income in equity as of
December 31, 2010

Problem No. 3

San Fernando marketing company made investments in trading securities. An analysis of

these investments on December 31,2009 showed the foolowing:

Security Cost Fair Value

Maca Textile shares 6,000 shares P307,500 P270,000
Bebe,Inc.shares 2,250 shares 76,500 90,000
Virgo Co. 12% Bonds P300,000 269,000 280,000
Total P653,500 P640,000

On April 1, 2010, the company purchased as temporary investment, P200,000 face value,
9% Philippines treasury notes for P198,5000, which includes accrued interest. The notes
mature on July 1, 2011 and pay interest semiannualy on January 1 and July 1. The notes
were sold on December 1, 2010 for P206,500, which includes accrued interest.

On July 1, 2010, the shares of Bebe were sold P70,000. On December 31, 2010. Maca
Textile shares were quoted at P44 per share; Virgo bonds were quoted at P950 per P1,000
bond.

Questions:

Based on the above and the result of your audit, answer the following:
 1. The gain on the sale of Philippine treasury notes on December 1, 2010
2. The realized loss on sale of Bebe shares on July 1, 2010 is
3. The interest income for the year 2010 is
4. The carrying amount of the trading securities on December 31, 2010 is
5. The net unrealized loss that will be able recognized in 2010 profit or loss is

Problem no. 4

You were engaged by Balagtas Company to audit its financial statements for the year 2010.
During the course of your audit, you noted that the following trading securities were
properly reported as current assets at December 31, 2009:

COST FAIR VALUE

France Corporation, 5,000 shares,
Convertible preference shares P 450,000 P 487,500
Ces, Inc. 30,000 ordinary shares 675,000 742,500
Coo Co., 10,000 ordinary shares 618,750 450,000
P1,743,750 P1,680,000

The following sale and conversion transactions transpired during 2010:

Mar 1 Sold 12, 500 shares Ces for P33.75 per share.

April 1 Sold 2,500 shares of Coo for P45 per share.

Sep 21 converted 2,500 shares of France’s preference shares into 7,500 ordinary
shares of France, when the market price was P80.25 per share for the preference shares
and P40.50 per share for the ordinary shares.

The following 2010 dividend information pertains to shares owned by BALAGTAS.

Jan 2 Coo issued a 10% share dividend when the market price of Coo’s
ordinary share was P49.50 per share
Mar 31 &
Sep 30 France paid dividends of P2.50 per share on its preferences shares, to
shareholders of record on March 15 and Sept 15, respectively. France
did not pay dividend on its ordinary shares during 2010.

Market prices per share of the securities were as follows:

12/31/2010 12/31/2009
France Corp., preference 92.25 97.50
France Corp., ordinary 42.75 38.25
Ces, Inc., ordinary 22.50 24.75
Coo., ordinary 40.50 45.00

All of the foregoing shares are listed in the Philippines Stock exchange. Declines in market
value from cost would not be considered permanent.
Questions:

Based on the above and the result of your audit, you are to provide the answer to the
following:

1. How much is the gain on sale 12,500 Coo shares?

2. How much is the gain or loss on sale of 2,500 Coo shares?
3. How much is the gain or loss on conversion of 2,500 France preference shares into
15,000 ordinary shares.
4. How much is the total dividend income for the year 2010?
5. How much should be reported as unrealized loss on trading securities in the
company’s income statement for the year 2010?

Problem No. 5

You were able to obtain the following ledger details of trading securities in connection with
your audit of the Bocaue Corporation for the year ended December 31, 2010:

Particulars Date Ref. DR CR

Purchase of GOOD Co. 1-14 CV P960,000
4,000 shares

Purchase of LUCK Co. 2-20 CV 1,200,000

4,800 shares

Sale of LUCK Co. 1,600 shares 3-01 CR 360,000

Receipt of GOOD share

Dividend-offsetting credit
to Retained earnings 5-31 JV 88,000

Sale of GOOD shares

3,200 shares 8-15 CR 784,000

Sale of GOOD shares

800 shares 10-1 CR 184,000

From the Philippine stock exchange, the GOOD dividends were analysed as follows:

KIND DECLARED RECEORD PAYMENT RATE

Cash 01/02/10 01/15/10 01/31/10 P20/share
Share 05/02/10 05/15/10 05/31/10 10%
Cash 08/01/10 08/30/10 09/15/10 P30/share

At December 31, 2010, GOOD and LUCK share were selling at P210 and P240 per share,
respectively.

Questions:

Based on the above and the result of your audit, determine the following:
 1. Gain or loss on sale of 1,6000 LUCK shares on March 1, 2010
2. Gain on sale of 3,200 GOOD shares on Aug 15, 2010
3. Gain or loss on sale of 800 GOOD share on Oct 1, 2010
4. Dividend income for the year 2010
5. Carrying amount of trading securities as of December 31, 2010

Problem No. 6

In connection with you audit of the financial statements of the Guiguinto Company for the
year 2010, the following Available for sale Securities and dividend income accounts were
presented to you:

Available for Sale Securities

Date Description Ref. Debit Credit

01/08 Purchased 20,000 ordinary shares

, par value P50, BUSTOS Co. VR-69 P780,000

03/30 10,000 shares BUSTOS Co.

Received as share dividend CJ-30 500,000

04/03 Sold 10,000 shares @ P25 CR-44 P250,000

12/02 Sold 4,000 shares @ P60 CR-65 240,000

Dividend Income

Date Description Ref. Debit Credit

03/30 Share dividend SJ-8 P500,000

08/30 BUSTOS Company Ordinary CR-52 100,000

The following information was obtained during your examination:

1. From independent sources, you determine the following dividend information:

Type of Dividend Date Declared Date Record Date of Payment Rate

Share 02/14/10 02/28/10 03/30/10 50%

Cash 08/01/10 08/15/10 08/30/10 P5/share
Cash 12/01/10 12/15/10 01/02/10 20%

2. Closing market quotation as at December 31, 2010:

Bid Asked
BUSTOS Company common 13-3/4 16-1/2
Questions:

1. How much is the gain or loss on the April 3, 2010 sale?

2. How much is gain on the December 2, 2010 sale?
3. How much is the total dividend income for the year 2010?
4. How much is the adjusted balance of available for sale securities as of December 31,
2010?
5. How much should the entity report as the net unrealized loss on AFS at December 31,
2010 in accumulated other comprehensive income in equity?

Problem No. 7

The Guagua Corporation had acquired interest in a promising local company, the Florida
Silver Company. During your audit of the company’s accounts for the year 2010, which was
a first audit, you obtained the following:

Investments in Florida Silver Company

1/2/08 30,000 sh. P1,050,000 7/15/10 50,000 sh. P2,000,000
7/2/09 90,000 sh. 5,400,000
3/2/10 30,000 sh. 2,100,000

Investment in Blanca Company

8/10/10 P10,000

Dividend income