INVESTMENTS W Matrix PFRS 9 PDF
INVESTMENTS W Matrix PFRS 9 PDF
P1 MAST
F.Dauz Jr., CPA
Investments (PFRS 9)
Subsequent
Type of Initial measurement
Type of Asset Classification measurement Reclassification
investment (Acquisition)
(reporting date)
Fair Value: Acquisition
Equity Securities Fair value;
Trading (TS)/ FVPL Current Cost; Transaction cost
(shares) FV change - P/L
– expensed
Equity Securities Not Trading / Fair Value: Acquisition Fair value; Irrevocable election; FVOCI
Noncurrent
(shares) FVOCI Cost + Transaction cost FV change - OCI -> Equity
Equity Securities
Investment in Cost method -> Equity
(voting/ ordinary Noncurrent Cost (Acquisition cost) Equity method
Associate method: FV new CA
shares)
(FV approach)
FVOCI->Equity method: FV
new CA ; UG/UL - OCI
transferred to P/L
Equity Securities
Investment in
(voting/ ordinary Noncurrent Cost (Acquisition cost) Consolidation
Subsidiary
shares)
Debt Securities
(Bonds) Amortized cost -> FV : FV
Investment at @ Amortized Cost; (date of reclassification) new
Fair Value: Acquisition
Amortized Cost Noncurrent Interest income= CA; Difference in Amort.cost
Cost + Transaction cost
(Previously HTM) Effective interest & FV: Reclassification gain/
loss -P/L
1. On January , 2013, Pen Company purchased marketable equity securities to be held as “trading” for P5,000,000. The
entity also paid commission, taxes and other transactions costs amounting to P500,000. The securities had a market
value of P5,200,000 on December 31, 2013. The securities were sold for net proceeds of P5,300,000 on February 2,
2014 when the market value is P5,600,000.
What amount of unrealized gain or loss on these securities should be reported in the 2013 income statement?
a. 300,000 unrealized gain
b. 200,000 unrealized gain
c. 200,000 unrealized loss
d. 300,000 unrealized loss
3. During 2014, Apple Company purchased marketable equity securities for P1,850,000 to be held as trading investments.
In 2014, the entity appropriately reported an unrealized gain of P200,000 in the income statement. There was no
change during 2014 in the composition of the portfolio of trading securities. Pertinent data on December 31, 2015 are
as follows:
Security Cost Market value
A 600,000 700,000
B 450,000 400,000
C 800,000 900,000
What mount of unrealized gain on these securities should be included in the 2015 income statement?
a. 150,000
b. 350,000
c. 50,000
d. 0
4. Pineapple Company acquired an equity instrument for P4,000,000 on March 31, 2014 to be measured at fair value
through other comprehensive income. The direct acquisition costs incurred amounted to P700,000.
On December 31, 2014, the fair value of the instrument was P5,500,000 and the transaction costs that would be
incurred on the sale of the investment were estimated at P600,000.
What amount of unrealized gain should be recognized in other comprehensive income for the year ended December
31, 2014?
a. 200,000
b. 900,000
c. 800,000
d. 0
5. Inday Company had trading and nontrading investments held throughout 2013 and 2014. The nontrading investments
are measured at fair value through other comprehensive income. The investments had a cost of P3,000,000 for trading
and P3,000 for nontrading. The investments had the following fair value at year-end:
December 31, 2013 December 31, 2014
Trading 4,000,000 3,800,000
Nontrading 3,200,000 3,700,000
What amount of unrealized gain or loss should be reported in the income statement for 2014?
a. 200,000 gain
b. 200,000 loss
c. 300,000 gain
d. 300,000 loss
6. What amount of cumulative unrealized gain or loss should be reported as component of other comprehensive income
in the statement of changes in equity on December 31, 2014?
a. 500,000 gain
b. 500,000 loss
c. 700,000 gain
d. 700,000 loss
8. What is the balance of the cumulative unrealized gain or loss on Security B on December 31, 2014?
a. 300,000 unrealized loss
b. 300,000 unrealized gain
c. 400,000 unrealized gain
d. 500,000 unrealized gain
9. Malas Company acquired 40,000 ordinary shares on October 1, 2013 for P6,600,000 to be held for trading. On
November 30,2013, the investee distributed a 10% ordinary stock dividend when the market price of the share was
P330. On December 31, 2013, the entity sold 4,000 shares for P1,000,000.
For the year ended December 31, 2013, what amount should be reported as gain or loss on sale of investment?
a. 280,000
b. 400,000
c. (320,000)
d. 600,000
10. On January 1, 2013, Harang Company purchased 4,000 shares of another entity at P100 per share. Transactions costs
amounted to P20,000. The investment is measured at fair value through other comprehensive income.
A P10 dividend per share had been declared on December 15, 2012, to be paid on March 31, 2013 to shareholders of record
on January 31, 2013. No other transactions occurred in 2013 affecting the investment.
What is the initial measurement of the investment on January 1, 2013?
a. 420,000
b. 400,000
c. 380,000
d. 360,000
11. On January 2, 2013, Isu Company purchased 100,000 ordinary shares at P80 per share to be classified as nontrading
through other comprehensive income. On September 30, 2013, the entity received 100,000 stock rights to purchase an
additional 100,000 shares at P90 per share. The stock rights had an expiration date of February 1, 2014. On September
30, 2013, each share had a market value of P114 and the stock right had a market value of P6. What amount should be
reported on September 30, 2013 as investment in stock rights?
a. 500,000
b. 400,000
c. 100,000
d. 600,000
12. Tatang Company owned 50,000 ordinary shares held for trading. These 50,000 shares were purchased for P120 per
share. On August 30, 2013, the investee distributed 50,000 stock rights to the investor. The investor was entitled to buy
one new share for P90 cash and two of these rights. On August 30, 2013, each share had a market value of P130 and
each right had a market value of P20. What total cost should be recorded for the new shares that are acquired by
exercising the rights?
a. 2,250,000
b. 3,250,000
c. 3,050,000
d. 5,500,000
14. Wen Company received dividends from its share investments during the current year as follows:
A cash dividend of P80,000 from Saan Company in which Wen Company owns 2% interest.
A cash dividend of P450,000 from Gayam Company in which Wen owns a 30% interest.
A stock dividend of 5,000 shares from Joke Company was received at year-end when the market value was P10 per
share.
What amount of dividend revenue should be reported for the current year?
a. 580,000
b. 530,000
c. 130,000
d. 80,000
Investment in Associate
15. On January 1, 2013, Papa Company purchased a 25% of the outstanding ordinary shares of an investee. During the
current year the investee reported net income of P4,200,000 and distributed dividends to Papa of P1,000,000. The
carrying amount of the investment on December 31, 2013 was P3,200,000 after applying the equity method. What was
the purchase price paid for the investment?
a. 3,150,000
b. 2,400,000
c. 3,800,000
d. 4,700,000
16. On July 1, 2013 Babu Company purchased a 25% of the outstanding ordinary shares of an investee for P5,000,000 when
the fair value of net assets was P20,000,000. Babu Company has the ability to exercise significant influence over the
operating and financial policies of the investee. The following data concerning the investee are available:
12 mos. Ended 12/31/13 6 mos. Ended 12/31/13
Net income 3,000,000 1,800,000
Dividend declared and paid 1,900,000 1,000,000
In the income statement for the year ended December 31, 2013, what amount of income should be reported from the
investment?
a. 250,000
b. 450,000
c. 380,000
d. 750,000
17. On January 1, 2013 Mama Company purchased 40% of the outstanding ordinary shares of an investee paying
P2,560,000 when the carrying amount of the net assets of the investee equaled P5,000,000. The difference was
attributed to equipment which had a carrying amount of P1,200,000, and a fair market value of P2,000,000 and to
building with a carrying amount of P1,000,000 and a fair market value of P1,600,000. The remaining useful life of the
equipment and building was 4 years and 12 years, respectively. During the current year, the investee reported net
income of P1,600,000 and paid dividends of P1,000,000.
What is the carrying amount of the investment in associate on December 31, 2013?
a. 2,550,000
b. 2,700,000
c. 2,800,000
d. 3,050,000
18. On January 1, 2012, Ketong Company purchased 30% interest in Pulgas Company for P2,500,000. On this date, Pulgas’
shareholders’ equity was P5,000,000. The carrying amount of Pulgas’ identifiable assets approximated their fair values,
except for land whose fair value exceeded its carrying amount by P2,000,000. Pulgas reported net income of P1,000,000
for 2012 and paid P300,000 in dividends to Ketong. In its December 31, 2012 statement of financial position, what
amount should Ketong report as investment in associate?
a. 2,100,000
b. 2,800,000
c. 2,500,000
d. 2,710,000
20. Mulong Company owns 20% of Duldog Company’s ordinary share capital and 40% of its preference share capital.
DUldog’s share capital outstanding at December 31, 2012 is as follows:
10% cumulative preference share capital 7,000,000
Oridanry share capital 10,000,000
Duldog reported net income of P2,700,000 for the year ended December 31, 2012. What amount should Mulong record as
equity in earnings of Duldog for the year ended December 31, 2012?
a. 540,000
b. 820,000
c. 400,000
d. 680,000
21. Godo Company acquired 30% of Baldo Company’s voting share capital for P2,000,000 on January 1, 2013. Godo’s 30%
interest in Baldo gave Godo the bility to exercise significant influence over Baldo’s operating and financial policies.
During 2013, Baldo earned P800,000 ad paid dividends of P500,000. Baldo reported P1,000,000 earnings for the six months
ended June 30, 2014 and P2,000,000 for the year ended December 31, 2014.
On July 1, 2014, Godo sold half of its investment in Baldo for P1,500,000 cash. On shuch date, the investment is measured
at fair value through other comprehensive income. Baldo paid dividends of P600,000 on October 1, 2014. The fair value of
the retained investment is P1,600,000 on July 1, 2014 and P1,800,000 on December 31, 2014.
How much is the gain or loss for the sale of the investment?
a. 455,000
b. 240,000
c. 500,000
d. 305,000
22. In the December 31, 2014 statement of financial position, what is the carrying amount of the investment?
a. 1,600,000
b. 1,800,000
c. 1,195,000
d. 1,000,000
On January 1, 2015, Mountaineer Company acquired a 30% interest in an associate for P5,000,000. The equity of the
associate at the date of acquisition consisted of share capital; of P10,000 and retained earnings of P5,000,000. All the
identifiable assets and liabilities of the associate were recorded at fair value. The associate reported the following.
2015 2016
Profit before tax 3,000,000 4,000,000
Income tax expense 900,000 1,200,000
Dividend paid 2,500,000 2,000,000
23. What is the goodwill arising from the acquisition?
a. 2,000,000
b. 1,000,000
c. 500,000
d. 0
24. What is the carrying amount of the investment in associate on December 31, 2016?
a. 5,000,000
b. 5,120,000
c. 4,620,000
d. 6,000,000
25. On January 1, 2013, Atong Company purchased bonds with face value of P5,000,000 for P4,766,000. The stated rate on
the bonds is 10% but the bonds are acquired to yield 12%. The bonds mature at the rate of P1,000,000 annually every
December 31 and the interest is payable annually also every December 31. The entity used the effective interest
method of amortization. What is the carrying amount of the bond investment on December 31, 2013?
a. 4,766,000
b. 3,694,080
c. 4,837,920
d. 3,837,920
26. On January 1, 2013, Totoy Company purchased 10% bonds with face value of P5,000,000 plus transaction cost of
P101,500 with a yield rate of 8%. The bonds mature on December 31, 2017 and pay interest annually on December 31.
The carrying amount of the investment on December 31, 2013 using the effective interest method is P5,333,620. What
is the initial acquisition cost of the bond investment?
a. 5,401,500
b. 5,300,000
c. 5,298,500
d. 5,398,500
27. On January 1, 2013, Edong Company purchased serial bonds with face value of P5,000,000 and stated interest at 12%.
The stated interest is payable annually on December 31. The bonds are acquired to have an effective yield at 10%. The
bonds mature at annual installment of P1,250,000 every December 31.
PV of 1 at 10% for one period 0.9091
PV of 1 at 10% for two periods 0.8264
PV of 1 at 10% for three periods 0.7513
PF of 1 at 10% for four periods 0.6830
What is the market price of the serial bonds on acquisition date?
a. 5,207,430
b. 5,090,960
c. 5,545,460
d. 5,000,000
Investment Property
Julie Corporation acquired a building on January 1, 2012. The acquisition cost was P5,000,000 payable at the rate of P1M at
the beginning of each year starting January 1, 2012. The company paid option money totaling P400,000, p85,221 of which
attributed to real properties not acquired. The company also paid property taxes in arrears as of January 1, 2012 at
P147,872. The prevailing market rate of interest for transactions is 12%. The building is estimated to have useful life of 25
years.
33. What is the carrying value of the property as of December 31, 2013 assuming that the building is an owner-occupied
property?
a. 4,140,000 b. 4,048,000 c. 4,010,000 d. 4,100,000
34. What is the carrying value of the property as of December 31, 2014, assuming that the building is an investment
property?
a. 3,960,000 b. 3,975,758 c. 3,921,739 d. 4,000,0000
35. Assuming that the building is originally categorized as owner occupied upon acquisition but was transferred to
investment property at the end of 2013, how much gain or loss from transfer should be recognized in the income
statement assuming that investment properties are carried at fair value method?
a. None b. 40,000 c. 140,000 d. 200,000
36. Assuming that the building is originally categorized as investment property upon acquisition but was transferred to
owner-occupied property at the end of 2014, how much gain or loss from transfer should be recognized as other
comprehensive income assuming the investment properties are carried at fair value?
a. None b. 40,000 c. 140,000 d. 200,000
Information of Daddy Company regarding its life insurance policy are available:
Daddy Company insured the life of its president for P4,000,000, the corporation being the beneficiary of an
ordinary life policy. The monthly premium is P8,000 payable every first day of the month.
The policy is dated January 1, 2012, and carries the following cash surrender values:
End of policy year CSV
2012 0
2013 0
2014 25,200
2015 30,000
2016 39,600
2017 50,400