Audit of Investments - Equity Securities Supplementary Problems

Problem 1
On December 31, 2009 GINEBRA Company’s statement of financial position showed the following balances related
to its securities accounts:
Profit/Loss securities P 738,750
OCI securities 590,000
Interest receivable – Jawo water bonds 6,250
Unrealized gain – OCI 50,000
GINEBRA’s securities portfolio on December 31, 2009, was made up of the following securities:
Security Classification Cost Fair Value

5,000 Japhet shares P/L P 375,000 P 381,250
4,000 LA shares P/L 275,000 264,125
10% Jawo water bonds P/L 125,000 93,375
(Interest payable 7/1 and 1/1)
5,000 Greg shares OCI 295,000 315,000
10,000 Mark shares OCI 245,000 275,000
During 2010, the following transactions took place:
January 3 Received interest on Jawo water bonds
March 1 Purchased 1,500 additional shares of Japhet for P 114,750 classified as held for trading
April 15 Sold 2,000 shares of LA for P 69 per share
May 4 Sold 2,000 shares of Greg for P 62 per share
July 1 Received interest on the Jawo water bonds
October 30 Purchased 7,500 shares of Eman stock for P 416,250, classified as held for trading
The fair values of the shares and bonds on December 31, 2010, are as follows:
Japhet P 76.60
LA 68.50
Eman 55.25
Jawo water bonds 102,775
Greg 61.00
Mark 27.00
Based on the above and the result of your audit, determine the following:
1. Gain or loss on sale of 2,000 LA shares on April 15, 2010

a. P 500 gain b. P 5,937 gain c. P 500 loss d. P 5,937 loss
2. Gain or loss on sale of 2,000 Greg shares on May 4, 2010

a. P 6,000 gain b. P 2,000 gain c. P 6,000 loss d. P 2,000 loss
3. Carrying amount of Trading Securities as of December 31, 2010

a. P 1,168,500 b. P 1,152,050 c. P 1,143,900 d. P 1,148,700
4. Carrying amount of Available for Sale Securities as of December 31, 2010

a. P 422,000 b. P 453,000 c. P 403,000 d. P 472,000
5. What amount of unrealized gain or loss should be recognized in 2010 profit or loss and as component of
equity as of December 31, 2010?
Profit or Loss Equity
a. P 14,363 gain P 31,000 gain
b. P 14,363 gain P 11,000 gain
c. P 16,450 loss P 61,000 loss
d. P 19,800 gain P 39,000 gain
Problem 2
The statement of financial position of WHOOPS KERRI WHOOPS on December 31, 2012 reports Trading Securities at
fair value of P 670,770. Supporting records of the company show the following debt and equity securities:
Security Cost Fair Value

600 Condura Co. ordinary shares P 76,350 P 72,900
P 240,000 Sinker Co. 7% bonds 238,950 232,200
P 360,000 Floater Co. 7.5% bonds 362,250 365,670
Total P 677,550 P 670,770
Interest on bonds is paid semiannually on January 1 and July 1. WHOOPS KERRI WHOOPS uses the income approach
to record the acquisition of bonds with accrued interest. The following transactions occurred during 2013:
January 1 Received semiannual interest on bonds

April 1 Sold P 180,000 of the Floater Co. bonds at 102 plus accrued interest. Brokerage fees were P 600
May 21 Received dividend of P 0.25 per share on the Condura ordinary share
July 1 Received semiannual interest on bonds. Sold the Sinker Co. bonds at 97 ½ Brokerage fees were P 750
August 15 Purchased 300 Bobber Co. ordinary shares at P 116 plus brokerage fees of P 150
November 1 Purchased P 150,000 of 8% Leader Co. bonds at 101 plus accrued interest. Brokerage fees were P
375. Interest dates are January 1 and July 1
December 31 FMV of securities: Condura, P 110; Floater bonds 101¾, Leader bonds, 101; Bobber P 116.75
1. What is the gain on the sale of P 180,000 Floater Co. bonds on April 1
a. P 1,875 b. P 165 c. P 765 d. P 2,610
2. What is the gain (loss) on the sale of Sinker Co. bonds on July 1, 2013?
a. P 1,800 b. P (5,700) c. P 1,050 d. P (4,950)
3. What is the total interest income on bonds that should be reported in WHOOPS KERRI WHOOPS’ income
statement for the year ended December 31, 2013?
a. P 25,275 b. P 27,275 c. P 34,650 d. P 34,025
4. What is the unrealized gain (loss) on trading securities that should be reported in WHOOPS KERRI WHOOPS’
income statement for the year ended December 31, 2013?
a. P (8,625) b. P 8,100 c. P (1,854) d. P (6,360)
5. What is the accrued interest receivable on bonds that should be reported in WHOOPS KERRI WHOOPS’
statement of financial position at December 31, 2013?
a. P 12,750 b. P 21,900 c. P 19,500 d. P 8,750

Audit of Investments - Equity Securities Supplementary Problems

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Problem 1

Security Classification Cost Fair Value

During 2010, the following transactions took place:

January 3 Received interest on Jawo water bonds

April 15 Sold 2,000 shares of LA for P 69 per share

May 4 Sold 2,000 shares of Greg for P 62 per share

July 1 Received interest on the Jawo water bonds

1. Gain or loss on sale of 2,000 LA shares on April 15, 2010

2. Gain or loss on sale of 2,000 Greg shares on May 4, 2010

3. Carrying amount of Trading Securities as of December 31, 2010

4. Carrying amount of Available for Sale Securities as of December 31, 2010

Security Cost Fair Value

January 1 Received semiannual interest on bonds

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