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PRESENT SOLUTION IN GOOD ACCOUNTING FORM.

On a ½ sheet of paper PREPARE A SUMMARY OF your ANSWERS (NO ERASURES


OR ALTERATIONS).
PROBLEM 1. On January 2, 2018, Parker Company, a medium-sized entity acquired 25% of the equity of each of entities, A, B, and C
for P100, 000, P150, 000, and P280, 000 respectively. Parker Company has significant influence over entities A, B and C. Transaction
costs of 1% of the purchase price of the shares were incurred by Parker Company. On December 31, 2018, A Company declared and
paid dividends of P10, 000. On December 31, 2018 B Company declared a dividend of P80, 000 for the year ended 2018 which will be
paid in 2019. For the year ended December 31, 2018 A Company and B Company recognized profits of P50, 000 and P180, 000
respectively. However, C Company recognized a loss of P200, 000 for the year 2018.
Published price quotations do not exist for the shares of entities A, B and C. Using appropriate valuation techniques Parker Company
determined the fair value of its investments in entities A. B and C at December 31, 2018 as P130, 000. P290, 000 and P150, 000
respectively. Costs to sell are estimated at 5% of the fair value of the investments. Parker Company has no subsidiaries and therefore
does not produce consolidated financial statements.
Assume that Parker Company uses the equity method in measuring its investment in associates, at what amount should the
investment in A, B and C, respectively, be reported in its December 31, 2018 statement of financial position?
PROBLEM 2. On January 2, 2018, Marco Company purchased 20,000 shares (20%) of Polo Company's ordinary share for P4, 500.000.
The fair value of the net asset acquired is P4, 200,000. During 2018, Polo reported the following in its statement of comprehensive
income a P4, 000,000 net income and a P500, 000 revaluation surplus recognize at the end of the year. Polo Company paid cash
dividends of P3, 000,000 on December 31, 2018. What is the carrying value of the investment as of December 31, 2018?
PROBLEM 3. On January 1, 20'18 Shell Company acquired a 30% interest in Petron Company's 1, 000,000 outstanding shares for P15,
and 000,000. During the year Shell Company received P300, 000 cash dividend and 300,000 share dividends. At December 31 2018,
Petron Company reported a profit of P5, 500,000. On January 2, 2019 Petron Company issued 1,000,000 new shares for P20 per share.
Shell Company did not acquire of those shares. What is the carrying value of the investment in associate immediately after the
recognition of loss from dilution?
PROBLEM 4. Man Company purchased 10% of Kind Corporation's 200,000 outstanding shares of ordinary shares on January 2, 2017
for P2, 500,000. On January 2, 2018, Man Company purchased another 40,000 shares of Kind for P6, 000,000. There was no goodwill
as a result of either acquisition. Kind reported earnings of P6, 000,000 and P7, 000,000 for the year ended December 31, 2017 and
December 31, 2018 respectively. No dividends were declared in years 2017 and 2018, respectively by Kind Company. What amount of
income from investment should Man Company report in its statement of comprehensive income related to its investment for the year
ended December 31, 2018?
PROBLEM 5. Bloom Corporation acquired 30% of Gloom Company's 100,000 voting stock on January 2, 2018 for
P2, 000,000 when the net assets of Gloom Company was P6, 000,000. Gloom earned P1, 000,000 and P1, 500,000 in 2018 and 2019,
respectively. Gloom Company paid dividends of P300, 000 in 2018 and P500, 000 in 2019. Market value of Gloom's ordinary shares is
P80 on December 31, 2018 and P90 on December 31, 2019. On January 2, 2019, Bloom Company sold 40% of its investment at the
prevailing market value of Gloom's shares. If after the sale Bloom Company reclassified its remaining investment to other
comprehensive income, what amount of unrealized gain or loss should be reported in its December 31, 2019 other comprehensive
income?
PROBLEM 6. On January 1, 2017 MC Company acquired 25% of the ordinary shares that carry voting rights at a general meeting of
shareholders of DC Company for P400, 000. The purchase price is equal to the fair value of the 25% of the fair value DC's identifiable
assets less 25% of its identifiable liabilities. For the year ended 2017, DC Company recognized a loss of P2, 400,000. MC Company has
no constructive or legal obligation in respect of its associate and has made no payment on its behalf. For the year ended 2018, DC
Company recognized a profit of P3, 200,000. What is the carrying value of MC investment in DC as of December 31, 2018?
PROBLEM 7. Table owns 50% and 20% of Chair Corporation's ordinary and preference shares, respectively. Chair's shares outstanding
at December 31, 2018 follow: Ordinary share P4, 000,000; 10% cumulative preference share P900, 000
Chair reported net income of Pó00, 000 for the year ended December 31, 2018 and declared the current year dividend on the
preference shares
What total amount of revenue should Table Company disclose in the statement of comprehensive income related to its investment in
Chair Company for the year ended December 3 1, 2018?

PROBLEM 8. On May 1, 2017, Golden Company purchased a short-term P4 000.000 face value 9% debt instruments
for P3720.000 including the accrued interest and designated as an investment to profit or loss which is based on the Business model
of the entity to buy and sell portfolio of securities and to make profit for
Short term movements in the market rate of interest. Golden Company incurred and paid P20, 000 transaction cost related to the
acquisition of the instrument. The debt instruments mature on January 1, 2020, and pay interest semi-annually on January 1 and July
1. On December 3 1, the fair market is P3, 880,000 and estimated cost to sell of P40, 000. What amount of gain or loss should Golden
Company disclose in the profit or loss in the statement of comprehensive income for the year ended December 31, 2017?

PROBLEM 9. On October 1, 2017, Graham Company, with a business model of trading debt securities, purchased a
P2 000 000 face value 9% debt instruments for with a remaining term of 2years and three months for
P 2, 174 867, the prevailing market rate of interest at the time of acquisition was 8%. Interest is being
Received every December 31. On December 31, the fair market value of the instruments is P2, 072,321 based on prevailing market
rate of 7% .Company report in its December 31, 2017 profit or loss? What amount of unrealized gain or loss should Graham Company
report in its December 31, 2017 profit or loss?

PROBLEM 10. On January 1, 2017, Sum Company purchased the debt instruments of Silk Company with a face value of P5 000.000
bearing interest rate of 8% for P4,621,006 to yield I0% interest per year. The bonds
Mature on January 1, 2022 and pay interest annually on December 30. On December 31, 2017 the fair
Value of the investment is P4, 838,014 which is based on the prevailing market rate of 9%
A. If the investment is designated as FVPL, what amount of unrealized gain or loss should the company disclose in their
December 3 1, 2017 profit or loss?
B. If the investment is designated as FVOCI, what amount of unrealized gain or loss should
The company disclose in their December 3 1, 2017 other comprehensive income?
C. If the investment is designated as Amortized Cost, at what amount should the investment
Be reported in the company's statement of financial position for the year ended December 31. 2017?

PROBLEM 11. On January 2, 2017, Saint Company invested in a 4-year 10% bond with a face value of P6, 000.000 in which interest is
to be paid every December 31. The bonds has an effective interest rate of 9% and was acquired for P6, 194,383. On December 31,
2017, the security has a fair value of P6, 229,862 which is based on the prevailing market rate of 8.5%.
A. Assume that the debt security was classified initially as Investment at Fair value to Profit and loss. Assume further that during
the year 2017 there was a change in the business model and cash flow characteristics but they decided to make a
reclassification on January 2, 2018 to Investment at Fair value to Other Comprehensive income. On December 31, 2018, the
debt investment has a fair value of P6, 213,992 which is based on the prevailing rate of 8%. What amount should the debt
investment be reported in the December 31, 2018 statement of financial position
B. Assume that the debt Security was classified initially as Investment at Fair Value to profit or loss. Assume further that during
the year 2017 there was a change in business model and cash flow characteristics but they decided to make a reclassification
on January 2, 2018 to investment at Amortized Cost. On December 31, 2018, the debt investment has fair value of P6, 213,992
which is based on the prevailing interest rate of 8%. What amount should the debt investment be reported in December 31,
2019 statement of financial position?
C. Assume that on the date of acquisition the debt security was designated as Investment at Amortized cost but the investment
cost valuation was reclassified on January 1, 2018 as investment at Fair value to profit or loss, at what amount of gain or loss
should the company recognize on the date of reclassification?
D. Assume that on the date of acquisition the debt security was designated as Investment at Amortized cost but the investment
cost valuation was reclassified on January 1, 2018 as investment at Fair value to Other Comprehensive income, at what
amount of gain or loss should the company recognize on the date of reclassification?
E. Assume that on the date of acquisition the debt security was designated as Investment at FVOCI but the investment cost
valuation was reclassified on January 1, 2018 as investment at FVPL, at what amount of gain or loss should the company
recognize on the date of reclassification?

PROBLEM 12. On January 2, 2016, Holy Company invested in a 4-year 10% bond with a face value of P3, 000,000 in which interest is
to be paid every December 31. The bonds has an effective interest rate of 8% and was acquired for P3, 198,728. Holy Company has
designated the debt instrument as investment at amortized cost. On December 31, 2018, Holy Company sold the bonds at the
prevailing rate of 12%
A. What amount of gain or loss should Holy Company recognize on the sale of security?
B. What amount of interest income should Holy Company report in its 2018 statement of income?

Problem 13
On June 1, 2017, Sugar Corp. purchased 10,000 shares of Oli Company for P55/share. Sugar incurred transaction costs of P20, 000.
The fair market value of the shares by the end of 2017 is P59/share; and by the end of 2018, P52/share. Dividend declared by Oli in
2018 was P3/share. Sugar sold all shares for P60/share on Feb. 14, 2019.

Case 1
The entity carried the investment at fair value through profit or loss.
A .How much is the unrealized gain to be presented in profit or loss for 2017
B. How much net income (loss) related to the investment must be presented in the income statement in 2018?
C .How much is the gain (loss) from disposal?

Case 2
The entity carried the investment at fair value through other comprehensive income.
A. What amount of unrealized gain must be presented as a component of other comprehensive income for 2017?
B. What amount of unrealized loss must be presented in the statement of financial position as of December 31, 2018?
C. How much net income (loss) related to the investment must be presented in the income statement in 2018?
D. How much is the gain (loss) from disposal?
Problem 14
On January 2, 2017, Single Corporation purchased 5-year 10% bonds of Taken Co., with face value totaling to P5, 000,000, at 92. Single
incurred an additional P39, 500 as direct costs, resulting to a yield rate of 12%. Interest is paid by Taken every December 31.

The bonds are quoted on December 31, 2017 and 2018, at 95 and 91, respectively. The entity sold the bonds on January 3, 2019 at 92.

Case 1
The company has a business model of holding the financial asset to collect contractual cash flows consisting of principal payments and
interest payments on the outstanding principal.
A. What is the initial cost of the investment?
B. How much income related to the investment must be presented in the 2017 income statement?
C. What is the carrying value of the investment as of December 31, 2018?
D. How much is the gain or loss on disposal?
Case 2
The company has a business model of holding the financial asset to collect contractual cash flows consisting of principal payments and
interest payments on the outstanding principal, and to sell the financial asset.
A. What is the initial cost of the investment?
B. What is the carrying value of the investment as of December 31, 2017?
C. How much unrealized gain or loss must be presented as a component of other comprehensive income for 2017?
D. How much unrealized gain must be presented in the statement of financial position as of December 31, 2018?
E. How much is the gain or loss on disposal?

Case 3
The company carried the financial asset at fair value through profit or loss.
A. What is the initial cost of the investment?
B. How much income related to the investment must be presented in the 2017 income statement?
C. How much income related to the investment must be presented in the 2018 income statement?
D. What is the carrying value of the investment as of December 31, 2018?
E. How much is the gain or loss on disposal?

PROBLEM 15.Paramount purchases a landed property at a cost P100, 000,000. In the sale and purchase agreement, P20, 000,000 of
the purchase price is attributed to the land portion. The building consists of 10 floors of equal space. Paramount also incurs the
following costs in connection with the purchase of the property. Legal and agency expenses, P3, 600,000; soft launching cost to market
for tenants, P500, 000 and administrative expenses P200, 000. Assuming paramount company uses two floors or 20% of the entire
building for the administrative purposes, at what amount should the investment properly be initially recognized?

PROBLEM 16. On July 1, 2014, Strata Company purchases an investment property at a cost of P50, 000,000 including transaction costs.
On October 1, 2014 the fair value increases to P51, 000,000. At December 31, 2014, the fair value of the property is P48, 000,000. The
rental income received per quarter is P1, 500,000. The property has a useful life of 50 years. If the company uses the cost model, what
is the net effect on the profit or loss for the six months ended December 31, 2014 in relation to the investment property?

PROBLEM 17. On January 1, 2014, Double Company which uses the fair value model, purchases an investment at a cost of P50,
000,000. At December 31, 2014 the market value of the property is P60, 000,000. The fair market value of the property on December
31, 2015 is P55, 000,000. On January 1, 2016, the property was reclassified to PPE. At what amount should the property, plant, and
equipment be initially recorded?