INVESTMENT – PFRS 9

1. Ella Company began operations at the beginning of current year and provided the following portfolio of
equity investments at year-end:

Trading Nontrading

Aggregate cost 3,600,000 5,500,000

Aggregate fair value 3,200,000 4,500,000
Aggregate lower of cost or market
applied to each security 3,040,000 4,200,000

The nontrading equity investment is measured at FVOCI. What amount should be reported as
unrealized loss in the income statement for the current year?
a. 1,400,000 c. 1,300,000
b. 560,000 d. 400,000

2. During 2018, Latvia Company purchased trading securities with the following cost and market value on
December 31, 2018:

Security Cost Market Value

A- 1, 000 shares 200,000 300,000
B- 10,000 shares 1, 700,000 1,600,000
C- 20,000 shares 3,100,000 2,900,000
5,000,000 4,800,000

The entity sold 10,000 shares of Security B on January 15, 2019, for P150 per share.
2.1 What amount of unrealized gain or loss should be reported in the income statement for 2018?
a. 200,000 loss c. 300,000 loss
b. 200,000 gain d. 300,000 gain

2.2 What amount should be reported as loss on sale of trading investment in 2019?
a. 200,000 gain c. 100,000 gain
b. 200,000 loss d. 100,000 loss

3. On December 31, 2018, Fay Company appropriately reported a P 100,000 unrealized loss. There was no
change during 2019 in the composition of the portfolio on nontrading equity securities held at fair value
through other comprehensive income.

Security Cost Market Value (December 31, 2019)

A 1, 200,000 1,300,000
B 900,000 500,000
C 1,600,000 1,500,000
3,700,000 3,300,000

3. 1 What is the market value of the investment on December 31, 2018?

a. 3,600,000 c. 3,500,000
b. 3,700,000 d. 3,800,000

3.2 What amount of loss on these securities should be included in the statement of comprehensive income
for the year ended December 31, 2019 as component of other comprehensive income?
a. 400,000 c. 100,000
b. 300,000 d. 0

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 3.3 What cumulative amount of loss on these securities should be reported in the statement of changes in
equity for the year ended December 31, 2019 as component of other comprehensive income?
a. 100,000 c. 400,000
b. 200,000 d. 0

4. On January 1, 2018, Sheena Company purchased nontrading equity investments which are irrevocably
designated at FVOCI:
Purchase Price Transaction Cost Market-12/31/2018
Security A 1,000,000 100,000 1,500,000
Security B 2,000,000 200,000 2,400,000
Security C 4,000,000 400,000 4,700,000

On July 1, 2019, the entity sold Security C for P 5,200,000. What amount should be credited to retained
earnings as a result of the sale of the investment in 2019?
a. 800,000 b. 500,000
b. 300,000 d. 0

5. On January 1, 2018, Jessica Company acquired a nontrading equity investment for P5, 000,000 irrevocably
designated at FVOCI. On December 31, 2018, the market value of the investment was P 4,000,000. On
December 31, 2019, the issuer of the equity instrument was in severe financial difficulty and the fair value of
the equity investment had fallen to P 1,500,000.00. The decline is judged to be nontemporary. What amount of
cumulative loss should be reported in the statement of changes in equity for 2019 as component of OCI?
a. 1,000,000 c. 2,500,000
b. 2,500,000 d. 3,500,000

6. Jonna Company received dividends from ordinary shares investments during the current year:
 A stock dividend of 10,000 shares from A Company when the market price of the share was P10.
 A cash dividend of P 1,500,000 from B Company in which the entity owned a 15% interest.
 5,000 shares of C Company in lieu of cash dividend of P20 per share. The market price of the share
was P150. The entity had 50,000 shares of C Company and owned 5% interest in C Company

What amount of dividend revenue should be reported for the current year?
a. 2,500,000 c. 1,500,000
b. 2,250,000 d. 2,350,000

7. Ronalyn Company provided the following data pertaining to dividends on ordinary share investments for the
current year:
 On October 1, the entity received P600, 000 liquidating dividend from A Company. The entity owned
a 10% interest in A Company.
 The entity owned a 20% interest in B Company which declared and paid a P4, 000,000 cash dividend
to shareholders on December 31.
 On December 1, the entity received from C Company a dividend in kind of one share of D Company
for every 4 C Company shares held. The entity had 100,000 C Company shares which have a market
price of P50 per share on December 1. The market price of D Company share was P10.

What amount should be reported as dividend income for the current year?
a. 1,650,000 c. 850,000
b. 1,050,000 d. 250,000

8. Amor Company owned 50,000 shares of another entity. These 50,000 shares were originally purchased for
P100 per share. On October 1, 2018, the investee distributed 50,000 rights to the entity. The entity was entitled
to buy one new share for P140 and five of these rights. On October 1, 2018, each share had a market value of
P150 and each right had market value of P10. On December 31, 2018, the entity exercised all rights. The stock
rights are accounted for separately and measured initially at fair value. What total cost should be recorded for
the new shares that are acquired be exercising the rights?
a. 1,400,000 c. 1,650,000
b. 1,900,000 d. 1,000,000

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9. Aira Company issued rights to subscribe to its stock, the ownership of 4 shares entitling the shareholders to
subscribe for 1 share at P100. An investor owned 50,000 shares with total cost of P5, 000,000. The share is
quoted right-on at 125. The stock rights are accounted for separately and measured initially at fair value. What
is the cost of the new investment assuming all of the stock rights are exercised by the investor?
a. 1,500,000 c. 1,562,500
b. 1,250,000 d. 1,450,000

10. Grant Company acquired 30% of South Company’s voting share capital for P2, 000.000 on January 1, 2018.
Grant’s 30% interest in South gave Grant the ability to exercise significant influence over South’s operating
and financial policies. During 2018, South earned P800, 000 and paid dividend of P500, 000. South reported
earnings of P1, 000,000 for the 6 months ended June 30, 2019, and P 2,000,000 for the year ended December
31, 2019. On July 1, 2019, Grant sold half of the investment in South for P 1,500,000 cash. South paid
dividend of P600, 000 on October 1, 2019.

The fair value of the retained investment is P 1,600,000 on July 1, 2019 and P 1,800,000 on December 31,
2019. The retained investment is to be held as financial asset at fair value through profit or loss.

10.1 Before income tax, what amount should be included in the 2018 income statement as a result of the
investment?
a. 150,000 c. 240,000
b. 240,000 d. 800,000

10.2 On December 31, 2018, what is the carrying amount of the investment in associate?
a. 2,000,000 c. 2, 240,000
b. 2,090,000 d. 2,300,000

10.3 In the income statement for 2019, what amount should be reported as gain from sale of investment?
` a. 245,000 c. 350,000
b.305, 000 d. 455,000
10.4 In the income statement for 2019, what amount should be reported as gain from remeasurement of the
retained investment?
a. 605,000 ` c. 710,000
b. 405,000 d. 910,000

11. Glorious Company acquired 40% interest in an associate, Alta Company, for P 5,000,000 on January 1, 2018.
At the acquisition date, there were no differences between the fair value and carrying amount of identifiable
assets and liabilities.

Alta Company reported the following net income and dividend for 2018 and 2019:
2018 2019
Net Income 2,000,000 3,000,000
Dividend Paid 800,000 1,000,000

The following transactions occurred between Glorious Company and Alta Company:
 On January 1, 2018, Alta Company sold an equipment costing P500,000 to Glorious Company for
P800,000. Glorious Company applied a 10% straight line method.
 On July 1, 2019, Alta Company sold equipment for P900, 000 to Glorious 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 Glorious Company used the straight line method.
 On December 31, 2019, Alta Company sold an inventory to Glorious Company for P 2,800,000.
The inventory had a cost of P 2,000,000 and was still on hand on December 31, 2019.

11.1 What is the inventor’s share in the profit of the associate for 2018?
a. 692,000 c. 680,000
b. 800,000 d. 920,000

11.2. What is the investor’s share in the profit of the associate for 2019?
a. 880,000 c. 720,000
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 b. 748,000 d. 732,000

11.3 What is the carrying amount of the investment in associate on December 31, 2018?
a. 5,692,000 c. 5.372,000
b. 5,000,000 d. 5,360,000

11.4 What is the carrying amount of the investment in associate on December 31, 2019?
` a. 5,692,000 c. 5,720,000
b.5, 704,000 d. 6,120,000

12. On January 1, 2018, Dumaguete Company purchased bonds with face amount of P4, 000,000 for P 4, 206,000.
The business model in managing the financial asset is to collect contractual cash flows that are solely
payments of principal and interest and also to sell the bonds in the open market.

The bonds mature on December 31, 2020 and pay 10% interest annually on December 31 each year with 8%
effective yield.
The bonds are quoted at 95 on December 31, 2018 and 90 on December 31, 2019.
12.1 What amount of unrealized loss should be reported as component of other comprehensive income in
2018?
a. 342,480 c. 469,520
b. 406,000 d. 0

12.2 What amount of unrealized loss should be reported as component of other comprehensive income in
2019?
a. 473,878 c. 200,000
b. 131,398 d. 0

12.3 What amount of cumulative unrealized loss should be reported in the statement of changes in equity for
2019?
a. 406,000 c. 473,878
b. 606,000 d. 0

12.4 What is the carrying amount of the bond investment to be reported on December 31, 2019?
a. 4,206,000 c. 3,800,000
b. 3,600,000 d. 4,673,878

13. On January 1, 2018, Gelyka Company purchased 12% bonds with face amount of P5, 000,000 for P 5,500,000
including transactions cost of P100, 000. The bonds provide an effective yield of 10%.

The bonds are dated January 1, 2018 and pay interest annually on December 31 of each year.

The bonds are quoted at 115 on December 31, 2018. The entity has irrevocably elected to use the fair value
option.

13.1 What amount of gain from change in fair value should be reported for 2018?
a. 750,000 c. 350,000
b. 250,000 d. 0

13.2 What amount of interest income should be reported for 2018?

a. 600,000 c. 660,000
b. 550,000 d. 540,000

13.3 What is the carrying amount of the bond investment on December 31, 2018?
a. 5,750,000 c. 5,500,000
b. 5,400,000 d. 5,450,000

13.4 What total amount of income from the investment should be reported in the income statement for 2018?
a. 540,000 c. 890,000
b. 950,000 d. 900,000

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14. On January 1, 2018, Tagbilaran Company purchased bonds with face amount of P2, 000,000. The bonds are
dated January 1, 2018 and mature on January 1, 2022. The interest on the bonds is 10% payable semiannually
every June 30 and December 31. The prevailing market rate of interest on the bonds is 12%.

The present value of 1 at 6% for periods is .63 and the present value of an ordinary annuity of 1 at 6% for 8
periods is 6.21. What is the present value of the bonds on January 1, 2018?
a. 1,881,000 c. 1,360,000
b. 1,888,000 d. 1,480,000

15. On January 1, 2018, Gilberto Company purchased 9% bonds with a face amount of P4, 000,000 for P
3,756,000 to yield 10%. The bonds are dated January 1, 2018, mature on December 31, 2027 and pay interest
annually on December 31. The interest method of amortizing bond discount is used.

15.1 What amount should be reported as interest revenue for 2018?

a. 338,040 c. 375,600
b. 360,000 d. 400,000

15.2 What amount should be reported as interest revenue for 2019?

a. 400,000 c. 360,000
b. 375,600 d. 377,160

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