Practical auditing by empleo chapter 6 investments in financial instruments
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CHAPTER 6 – INVESTMENTS IN FINANCIAL INSTRUMENTS
1.
B
6.
A
2.
A
7.
B
Multiple
Choice
–
Theories
3.
B
4.
D
8.
C
9.
B
5.
C
10.
D
Problem
1
A
Corporation
B
Corporation
Shares
Amount
Shares
Amount
Jan
3
1,000
54,000
8
1,000
60,000
Apr
5
(500)
(27,000)
8
July
15
Dec
8
Bal.
before
adj
to
FV
500
27,000
1,000
60,000
Adj
500
(6,000)
Per
audit
500
27,500
1,000
54,000
(a)
Audit
Adjusting
Entries:
Financial
Assets
at
FV
through
P&L
Dividend
Income
Financial
Assets
at
FV
through
P&L
Gain
on
Sale
of
FVPL
Treasury
Shares
Financial
Assets
at
FV
through
P&L
Financial
Assets
at
FV
through
P&L
Treasury
Shares
Paid
in
Capital
from
Treasury
Shares
Dividend
Income
Financial
Assets
at
FV
through
P&L
Financial
Assets
at
FV
through
P&L
Dividend
Income
Dividend
Receivable
Dividend
Income
C
Corporation
D
Corporation
E
Corporation
Shares
Amount
Shares
Amount
Shares
Amount
1,000
30,000
1,000
36,000
500
20,000
50
1.000
30,000
1,000
36,000
550
20,000
2,000
3,000
900
1,000
32,000
1,000
39,000
550
20,900
1,000
1,000
1,000
1,000
33,000
33,000
20,000
16,500
3,500
2,000
2,000
1,200
1,200
5,000
5,000
SOLUTIONS TO INVESTMENTS IN FINANCIAL INSTRUMENTS
Financial
Assets
at
FV
through
P&L
400
Unrealized
Gain
on
FVPL
400
(b)
(1)
Carrying
amount
of
FVPL
(see
worksheet
above)
P173,400
(2)
Gain
on
sale
of
FVPL
=
28,000
–
27,000
=
P
1,000
(3)
Dividend
Income
=
1,000
+
1,200
+
5,000
=
P
7,200
(4)
Unrealized
gain
or
loss
on
FVPL
P
400
Problem
2
1.
Selling
price
on
May
20
P21,000
Carrying
value
of
shares
sold
40,000
x
250/750
shares
13,333
Gain
on
Shares
sold
P7,667
2.
Proceeds
from
sale
P8,500
Dividends
included
(sold
dividends
on)
=
100
x
10
(1,000)
Selling
price
without
dividends
P7,500
Carrying
value
26,667
x
100/500
5,333
Gain
on
December
10
sale
P
2,167
3.
Dividend
Income
for
the
year
2012:
November
dividends
500
shares
x
P
5
P2,500
Dividends
on
100
shares
sold
(100
x
P50
x
20%)
1,000
Dividends
accrued
on
December
31
(400
x
P50
x
20%)
4,000
Total
dividend
income
P7,500
4.
Adjusted
balance
of
the
investment
account
shares
Peso
balance
Market
value,
January
1
500
P40,000
April
30
stock
dividend
250
May
20
sale
(250)
(13,333)
Dec
10
sale
(100)
(5,333)
Balances
before
adjustment
to
market
400
21,334
Adjustment
to
market
12,466
Balance,
December
31,
at
market
400
34,000
Adjusting
Entries
Dividend
Income
20,500
Trading
Securities
20,500
Trading
Securities
7,667
Gain
on
Sale
of
Trading
Securities
7,667
Trading
Securities
(8,500
–
5,333)
3,167
Gain
on
Sale
of
Trading
Securities
2,167
Dividend
Income
1,000
Dividends
Receivable
4,000
Dividend
Income
4,000
2
SOLUTIONS TO INVESTMENTS IN FINANCIAL INSTRUMENTS
Trading
Securities
Unrealized
Gain
on
Trading
Securities
Problem
3
Investment
in
Creamy
Company
Unrealized
Gain
/Loss
on
Equity
Investments–
Other
Comprehensive
Income
12,000
x
65
=
780,000
780,000
–
645,000
=
135,000
Dividend
Income
Retained
Earnings
Dividends
accrued
last
year.
Dividend
Income
Investment
in
Creamy
Dividends
included
in
the
purchase
price
of
March
5
acquisition,
acquired
dividends-‐on.
Investment
in
Creamy
Unrealized
Gain
/Loss
on
Equity
Investments
-‐
OCI
Selling
price
P360,000
Previous
carrying
value
=
fair
value
on
January
1
5,000
x
65
325,000
Unrealized
gain
–
OCI
P
35,000
*Unrealized
Gain/Loss
on
Equity
Investments
–
OCI
Retained
Earnings
3,000
(72
–
35)
+
2,000
(72-‐60)
=135,000
Investment
in
Coffee
Dividend
Income
Property
dividends
should
be
recorded
at
market.
(1,000
x
4)
–
1,000
=
3,000
Investment
in
Creamy
Unrealized
Gain/Loss
on
Equity
Investments
-‐
OCI
Selling
price
=
FV
1,000
x
90
=
90,000
Previous
CV
=
FV,
Jan.
1
=
65,000
Unrealized
Gain
25,000
Miscellaneous
Receivables
Investment
in
Creamy
(1,000
x
90)
3
12466
12,466
135,000
24,000
6,000
135,000
24,000
6,000
35,000
35,000
135,000
3,000
135,000
3,000
25,000
25,000
90,000
90,000
SOLUTIONS TO INVESTMENTS IN FINANCIAL INSTRUMENTS
*Unrealized
Gain/Loss
on
Equity
Investments
-‐
OCI
Retained
Earnings
1,000
(
90
–
60)
=
30,000
30,000
30,000
Investments
in
Creamy
Unrealized
Gain/Loss
on
Equity
Investments
-‐
OCI
FV,
12/31/12
=
9,000
x
90
=
810,000
Previous
CV
:
Old
=
FV,
Jan.
1
=
6,000
x
65
=
390,000
New=
3,000
x
70
=
210,000
600,000
Unrealized
Gain
–
OCI
210,000
Unrealized
Gain/Loss
on
Equity
Investments
-‐
OCI
Investment
in
Coffee
1,000
(3.50
–
4)
=
500
210,000
210,000
500
500
Note
to
the
Teacher:
At
the
date
of
sale,
the
investments
at
fair
value
through
other
comprehensive
income
are
adjusted
to
fair
value
(presumed
to
be
equal
to
the
selling
price
on
the
date
of
sale).
Thus,
no
gain
or
loss
on
sale
is
recognized
in
profit
or
loss.
The
entry
transferring
the
cumulative
unrealized
gain
or
loss
(equity
account)
to
the
retained
earnings
account
is
optional.
Problem
4
Financial
Assets
at
FV
through
Profit
or
Loss
Red
Corp
Preference
Red
Corp.
Ordinary
Blue
Ordinary
Yellow
Ordinary
Shares
Peso
amt
Shares
Peso
amt
Shares
Peso
amt
Shares
Peso
amt
1/1/10
1,000
45,000
6,000
65,000
2,000
55,000
1/17
(2,500)
(27,083)
2/14
200
6/01
(500)
(12,500)
10/01
(500)
(22,500)
1,500
30,000
Before
adj.
500
22,500
1,500
30,000
3,500
37,917
1,700
42,500
Adj
to
market
5,500
583
(5,100)
MV
12/31
500
28,000
1,500
30,000
3,500
38,500
1,700
37,400
Non-‐Current
Investments
Investment
in
Associate
–
Green
Company
Acquisition
cost
P1,600,000
Dividends
received
100,000
x
P0.50
x
4
(200,000)
Income
from
associate
25%
x
P1,200,000
300,000
Investment
in
Associate
,
12/31/2012
P1,700,000
Gains
and
losses
On
sale
of
Blue
on
January
17
Selling
price
P32,500
Carrying
value
(P65,000
x
2,500/6,000
27,083
Gain
on
sale
P
5,417
4
SOLUTIONS TO INVESTMENTS IN FINANCIAL INSTRUMENTS
On
sale
of
Yellow
Selling
price
500
x
P21
P10,500
Carrying
value
(P55,000
x
500/2200)
12,500
Loss
on
sale
P
2,000
On
conversion
of
Red
Preference
to
Red
Ordinary
Market
value
500
x
P60
P30,000
Carrying
value
P45,000
x
500/1000
22,500
Gain
on
exchange
P
7,500
Dividend
Income
On
Red
preference
April
6
1,000
x
1.20
P1,200
Oct,
6
1,000
x
1.20
1,200
On
Blue
ordinary
June
30
3,500
x
P1
3,500
P5,900
Unrealized
gains
on
FVPL
(see
above
working
papaer)
P5,500
+
583
–
5,100
=
P
983
Income
from
Associate
(Green
Company)
25%
x
P1,200,000
P
300,000
Problem
5
PV
at
March
1,
2011
=
(P400,000
x
.74726)
+
(18,000
x
4.21236)
=
298,904
+
75,822
=
374,726
May
1,
2011
purchase
price:
Fair
value
at
March
1,
2011
=
P374,726
Discount
amortization
March
1
to
May
1
6%
x
374,726
=
P22,484
4.5%
x
400,000
=
18,000
Amortization
for
6
months
P
4,484
No.
of
months-‐
Mar.
1
to
May
1
2/6
1,495
Purchase
price
P376,221
Accrued
interest
400,000
x
9%
x
2/12
6,000
Total
cash
paid
P382,221
May
1
FVPL
-‐
XYZ
Bonds
376,221
Interest
Income
6,000
Cash
382,221
Sept
1
Cash
18,000
Interest
Income
18,000
Dec
31
Interest
Receivable
12,000
Interest
Income
12,000
5
SOLUTIONS TO INVESTMENTS IN FINANCIAL INSTRUMENTS
Dec.
31
2012
Mar.
May
1
1
July
1
Sept.
Dec.
2013
Mar.
Sept.
1
31
31
1
1
1
FVPL
–
XYZ
Bonds
Unrealized
Gains
on
FVPL
Market
value
P428,000
Ledger
balance
376,221
Unrealized
gain
P
51,779
Cash
Interest
Receivable
Interest
Income
Cash
Loss
on
Sale
of
FVPL
(
4%
x
120,000)
FVPL
–
XYZ
Bonds
(107%
x
120,000)
Interest
Income
Selling
price
120,000
x
103%
Accrued
interest
120,000
x
9%
x
2/12
Total
cash
received
Cash
FVPL
–
XYZ
Ordinary
Shares
(2,200
x
80)
FVPL
–
XYZ
Bonds
(150,000
x
107%)
Gain
on
Exchange
of
FVPL
Interest
Income
(150,000
x
9%
x
4/12)
Cash
(150,000
x
9%
x
6/12)
Interest
Income
Interest
Receivable
(150,000
x
9%
x
4/12)
Interest
Income
Unrealized
Loss
on
FVPL
FVPL
–
XYZ
Bonds
(
2%
x
150,000)
Cash
Interest
Receivable
Interest
Income
Cash
Interest
Income
Cash
Loss
on
Sale
of
FVPL
FVPL
–
XYZ
Bonds
(105%
x
150,000)
6
51,779
51,779
18,000
125,400
4,800
P123,600
1,800
P125,400
4,500
176,000
12,000
6,000
128,400
1,800
6,750
4,500
3,000
6,750
4,500
3,000
4,500
2,250
6,750
157,500
6,750
6,750
150,000
7,500
160,500
15,500
4,500
SOLUTIONS TO INVESTMENTS IN FINANCIAL INSTRUMENTS
Problem
6
Date
6/1/11
12/1/11
6/1/12
12/1/12
6/1/13
12/1/13
06/1/14
Nominal
Interest(4%)
16,000
16,000
16,000
16,000
16,000
16,000
Amortization
Table
Effective
Interest
(5%)
18,458
18,580
18,709
18,845
18,987
19,136
1.
Interest
Income,
2011
18,458
+
(18,580
x
1/6)
2.
Interest
Income,
2012
(18,580
x
5/6)
+
18,709
+
(18,845
x
1/6)
3.
Interest
Income,
2013
(18,845
x
5/6)
+
18,987
+
(19,136
x
1/6)
4.
Carrying
Value,
12/31/12
CV,
12/1/12
Amortization
12/1
to
12/31
(2845
x
1/6)
CV,
12/31/12
Problem
7
Entries
that
should
have
been
made:
Jan.
21
Investment
in
Pearl
Interest
Income
Cash
Mar.
1
Cash
Investment
in
Pearl
(204,000
x
100/200)
Interest
Income
(100,000
x
9%
x
3/12)
Gain
(Loss)
on
Sale
of
Trading
Securities
June
1
Cash
Interest
Income
Nov.
1
Cash
Gain
(Loss)
on
Sale
of
Trading
Securities
Investment
in
Pearl
(204,000
x
40/200)
Interest
Income
(40,000
x
9%
x
5/12)
7
Amortization
Carrying
Value,
end
2,458
2,580
2,709
2,845
2,987
3,136
P369,150
371,608
374,188
376,897
379,742
382,729
385,865
P21,555
P37,333
P37,880
P376,897
474
P377,371
204,000
2,550
106,000
4,500
41,900
400
206,550
102,000
2,250
1,750
4,500
40,800
1,500
SOLUTIONS TO INVESTMENTS IN FINANCIAL INSTRUMENTS
Dec.
1
Cash
Interest
Income
60,000
x
9%
x
6/12
31
Interest
Receivable
Interest
Income
60,000
x
9%
x
1/12
31
Investment
in
Pearl
Unrealized
Gains
on
Trading
Securities
(60,000
x
1.03)
–
(204,000
x
60/200)
Audit
Adjustments
Interest
Income
Investment
in
Pearl
Investment
in
Pearl
Interest
Income
Gain
on
Sale
of
TS
Investment
in
Pearl
Interest
Income
Investment
in
Pearl
Loss
on
Sale
of
TS
Interest
Income
Investment
in
Pearl
Interest
Income
Dividend
Receivable
Interest
Income
Investment
in
Pearl
Unrealized
Gains
on
TS
SUPPLY
THE
REQUIRED
INFORMATION
1.
P12
per
share
2.
2,500
3.
3,500
gain
4.
6,500
5.
350
6.
15,800
7.
55,200
8.
1,600
9.
376,400
2,700
450
600
2,550
4,000
4,500
1,100
400
2,700
450
600
8
2,700
450
600
2,550
2,250
1,750
4,500
1,500
2,700
450
600
SOLUTIONS TO INVESTMENTS IN FINANCIAL INSTRUMENTS
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
26.
27.
28.
29.
30.
31.
32.
33.
34.
35.
36.
37.
38.
39.
40.
41.
42.
43.
44.
45.
46.
1.
2.
3.
3,776,400
0
48,279
2,167,000
365,218
360,000
160,000
35,000
loss
1,970,000
50,000
gain
0
30,000
0
0
15,000
116,000
0
1,816,000
3,333
1,000
gain
18,300
gain
200
gain
10,600
77,100
55,000
4,125
111,000
2,293,500
316,500
31,500
4,125
136,300
0
52,900
7,500
758,600
3,133
Final
Answers
P36,000
or
P12
per
share
P2,500
gain
Computations
Net
selling
price:
(1,000
x
8)
-‐
500
=
P7,500
Cost
of
shares
sold
P
30,000
x
1,000/6,000
5,000
Gain
on
sale
P
2,500
P3,500
gain
Selling
price
1,000
x
8.50
Cost
of
shares
sold
9
P8,500
SOLUTIONS TO INVESTMENTS IN FINANCIAL INSTRUMENTS
4.
5.
6.
P6,500
Property
dividends
5,000/5
x
P2.50
P2,500
Cash
dividends
5,000
x
0.80
4,000
Total
dividend
income
P6,500
P350
500
(3.20
–
2.50)
P
350
P55,200
P
1,600
P15,800
Unrealized
Gain
or
Loss
on
AFS
01-‐01
Balance
P6,000
03-‐17
1,000/6,000
x
P6,000
(1,000)
11-‐30
1,000/6,000
x
6,000
(1,000)
12-‐31
Market
value
6,000
x
P
9.20
=
P55,200
Cost
35,400
Cumulative
Unrealized
Gain
19,800
Balance
before
adjustment
to
FV
6,000
–
1,000
–
1,000
4,000
Unrealized
gain
this
year
in
OCI
15,800
Cumulative
balance
in
equity,
Dec.
31
P19,800
7.
P55,200
6,000
x
9.20
8.
P1,600
500
X
3.20
DEXTER
COMPANY
AFS
–
Y
Company
Ordinary
Date
Shares
Total
Cost
Gain(loss)
01-‐01-‐12
3,000
P30,000
01-‐12-‐12
3,000
03-‐17-‐12
(1,000)
(5,000)
P2,500
06-‐30-‐12
10-‐01-‐12
2,000
15,400*
10-‐20-‐12
11-‐30-‐12
(1,000)
(5,000)
3,500
12-31-12
Balances
6,000
P35,400
P6,000
• 2,000
(8.50
-‐
.80
dividends
on)
=
15,400
FVPL
–
B
Co.
Ordinary
Date
Shares
Total
CV
06-‐30-‐12
1,000
P2,500
9-‐10-‐12
(500)
(1,250)
12-‐31-‐12
UGL
500
x
(3.20
–
2.50)
350
12-‐31-‐12
balances
500
shares
P1,600
Unrealized
Gain
or
Loss
on
AFS
10
Dividend
Income
1,000
x
P2.50
=
P2,500
5,000
x
0.80=
4,000
P6,500
Gain(loss)
150
Dividend
Income
SOLUTIONS TO INVESTMENTS IN FINANCIAL INSTRUMENTS
01-‐01-‐12
Balance
P6,000
03-‐17
1,000/6,000
x
P6,000
(1,000)
11-‐30
1,000/6,000
x
6,000
(1,000)
12-‐31
Market
value
6,000
x
P
9.20
=
P55,200
Cost
35,400
Cumulative
Unrealized
Gain
19,800
Balance
before
adjustment
to
FV
6,000
–
1,000
–
1,000
4,000
Unrealized
gain
this
year
in
OCI
15,800
Cumulative
balance
in
equity,
Dec.
31
P19,800
Items
9
through
14:
Kristine
Company
10%Effective
Discount
Amortized
Cost,
Interest
Date
9%Interest
Paid
Interest
Amortization
End
Jan.
1,
2012
P3,760,000
June
30,
2012
P180,000
188,000
P8,000
3,768,000
Dec.
31,
2012
P180,000
188,400
8,400
3,776,400
June
30,
2013
P180,000
188,820
8,820
3,785,220
Dec.
31,
2013
P180,000
189,261
9,261
3,794,481
June
30,
2014
P180,000
189,724
9,724
3,804,205
Dec.
31,
2014
P180,000
190,210
10,210
3,814,415
Final
Answers
Computations
9.
P376,400
P188,000
+
188,400
=
P376,400
10.
P3,776,400
11.
P0
12.
P48,279
Selling
price
on
November
30
(1.8M
x
98%)
P1,764,000
Carrying
amount
June
30,
2014
3,804,205
x
1.8/4
=
P1,711,892
Amortization
June
30
–
Nov
30
10,210
x
1.8/4
x
5/6
=
3,829
1,715,721
Gain
on
sale
on
November
30
P
48,279
13.
P2,167,000
P2,200,000
x
98.5%
=
P2,167,000
14.
P365,218
Interest
income
for
2014
January
1
to
June
30
P190,210
July
1
to
November
30
190,210
x
5/6
=
158,508
December
1
to
31
P2,200,000
x
9%
x
1/12
16,500
Total
interest
income
P
365,218
Items
15
through
19
15.
P360,000
P4,000,000
x
9%
=
P360,000
11
SOLUTIONS TO INVESTMENTS IN FINANCIAL INSTRUMENTS
16.
17.
P160,000
(98%
x
P4,000,000)
–
3,760,000
=
P160,000
P35,000
loss
Total
proceeds
P1,960,000
Accrued
interest
2,000,000
x
9%
x
5/12
=
(
75,000)
Selling
price
P1,885,000
CV
96%
x
2,000,000
1,920,000
Loss
on
sale
of
FVPL
P
35,000
18.
P1,970,000
2M
x
.985
=
P1,970,000
19.
P50,000
Fair
value,
12/31/12
P1,970,000
Fair
value,
12/31/11
2,000,000
x
.96
1,920,000
Unrealized
gain
for
2012
P
50,000
Items
20
through
24
20.
P0
There
was
no
objective
evidence
of
impairment.
The
decline
is
taken
to
OCI.
21.
P30,000
Cumulative
decline
from
date
of
acquisition
=
P10,000
+
P20,000
=
P30,000
(Impairment
loss
is
taken
to
profit
or
loss)
22.
P0
The
recovery
in
fair
value
of
AFS-‐
Equity
is
taken
to
other
comprehensive
income,
not
to
profit
or
loss.
23.
P0
At
the
date
impairment
loss
is
recognized,
the
unrealized
gain
or
loss
in
equity
is
transferred
to
profit
or
loss.
Hence,
the
equity
account
UGL
is
brought
to
zero.
24.
P15,000
The
recovery
in
fair
value
is
taken
to
other
comprehensive
income
through
the
account
Unrealized
Gain
or
Loss
on
AFS.
Items
25
through
27
Power
Cast
Company
Cost
of
investment
P1,800,000
Underlying
equity
20%
x
P6,000,000
1,200,000
Excess
of
cost
P
600,000
Undervaluation
in
land
20%
x
750,000
(150,000)
Undervaluation
in
equipment
20%
x
200,000
(40,000)
Undervaluation
in
inventory
20%
x
30,000
(
6,000)
Goodwill
P
404,000_
25.
P116,000
Income
from
Associate
Initial
share
(800,000
–
160,000)
x
20%
P128,000
Amortization
Depreciation
on
Equipment
40,000/5
x
9/12
(
6,000)
Inventory
(
6,000)
Income
from
Associate
P116,000
12
SOLUTIONS TO INVESTMENTS IN FINANCIAL INSTRUMENTS
26.
27.
P0
Dividends
received
from
associate
should
be
credited
to
the
Investment
account.
P1,816,000
Cost
of
investment
P1,800,000
Dividends
received
(
100,000)
Income
from
Associate
116,000
Carrying
value
of
investment
P1,816,000
Items
28
through
33
Boracay
Co.
ordinary
Bohol
Company
ordinary
8%
treasury
bonds
#
of
shares
Amount
#
of
shares
Amount
Face
Amount
1/1/12
bal.
1,000
P
25,000
3,000
P18,000
P50,000
P50,000
1/31
(200)
(
5,000)
6/30
600
7/8
(300)
(1,500)
8/1
(20,000)
(20,000)
12/31
bal.
before
Fair
Value
adj.
800
P20,000
3,300
P16,500
30,000
P30,000
Adj
to
FV
4,000
6,600
12/31
per
audit
800
shares
P24,000
3,300
P23,100
P30,000
P30,000
28.
P3,333
Interest
Income
January
1
to
July
31
P50,000
x
8%
x
7/12
=
P2,333
August
1
to
Dec.
31
P30,000
x
8%
x
5?12
=
1,000
Total
interest
income
for
2012
P3,333
29.
P1,000
gain
Net
selling
price
P6,000
Carrying
value
P25,000
x
200/1,000
(5,000)
Gain
on
sale
P
1,000
30.
P18,300
gain
Selling
price
P19,800
Carrying
value
P18,000
x
300/3,600
(
1,500)
Gain
on
sale
P18,300
31.
P200
gain
Cash
received
P21,000
Interest
for
6
months
(20,000
x
8%
x
6/12)
(
800)
Selling
price
P20,200
Carrying
value
20,000
Gain
on
sale
P
200
32.
P10,600
See
above
worksheet:
P4,000
+
P6,600
P10,600
33.
P77,100
See
above
worksheet:
P24,000
PP23,100
+
P30,000
=
P77,100
13
SOLUTIONS TO INVESTMENTS IN FINANCIAL INSTRUMENTS
Items
34
through
40
34.
P55,000
P1,040,000
–
P985,000
=
P55,000
35.
P4,125
From
Alaska:
5,500
x
P0.75
=
P4,125
36.
P111,000
P370,000
x
30%
=
P111,000
37.
P2,293,500
Fair
value
of
old
25,000
shares:
P1,520,000
x
25,000/50.000
=
P760,000
Purchase
price
of
new
50,000
shares
1,520,000
Initial
cost
of
75,000
shares
P2,280,000
Income
from
associate
111,000
Dividends
received
(75,000
x
1.30)
(
97,500)
Carrying
value,
December
31,
2013
P2.293,500
38.
P316,500
Alaska
5,500
x
23
P126,500
Bahamas
10,000
x
19
190,000
Total
fair
value
P316,500
39.
P31,500
Fair
value
P316,500
Cost
:
125,000
+
160,000
285,000
Cumulative
balance
of
UGL
P
31,500
40.
P115,125
P111,000
+
P4,125
=
P115,125
Items
41
through
46
Financial
Assets
at
Fair
Value
through
Profit
or
Loss
Seattle
Ordinary
Grunge
Preference
Cobain
Ordinary
Shares
Amount
Shares
Amount
Shares
Amount
1/1/12
2,000
P28,400
1,200
P78,000
20%
bonus
400
Sale
(400)
(4,733)
Purchase
1,500
P31,500
12/31
bal.
before
adj
to
FV
2,000
P23,667
1,200
P78,000
1,500
P31,500
Unrealized
Gains
(Losses)
4,333
(1,200)
Per
audit
2,000
P28,000
1,200
P76,800
1,500
P31,500
41.
P136,300
28,000
+
76,800
+
31,500
=
136,300
42.
P0
Cash
dividend
from
Grunge
should
have
been
recorded
as
income
in
2011.
14
SOLUTIONS TO INVESTMENTS IN FINANCIAL INSTRUMENTS
43.
44.
45.
46.
P52,900
Cost
(800
x
P50)
+
P5,400
=
Share
in
profit
50,000
x
20%
x
9/12
Investment
in
Associate,
Dec.
31
P45,400
7,500
P52,900
P7,500
50,000
x
20%
x
9/12
=
P
7,500
758,600
764,000
–
5,400
=
P758,600
3,133
See
above
worksheet
:
4,333
–
1,200
P
3,133
A-MAGS
CORPORATION
Selling
and
Administrative
Expenses
Advances
to
Officers
and
Employees
Cash
–
Petty
cash
fund
Other
Assets
Cash
in
Bank
Cash
in
Bank
–
PCI
Bank
–
Current
Accounts
Payable
Cash
in
Bank
Other
Current
Liabilities
(Bank
Overdraft)
Accounts
Receivable
–
Past
Due
Cash
in
Bank
–
PCI
Bank
Accounts
Receivable
Customer
Credit
Balances
Allowance
for
Doubtful
Accounts
Accounts
Receivable
–
Past
due
Advances
to
Officers
and
Employees
Accounts
Receivable
Sales
Discount
on
Notes
Receivable
Notes
Receivable
–
Non-Current
Interest
Income
Notes
Receivable
Discount
on
Notes
Receivable
–
Non-
current
2,000
1,500
3,500
130,000
130,000
5,000
5,000
45,000
45,000
20,000
20,000
15,000
15,000
10,250
10,250
3,500
3,500
30,000
30,000
120,000
24,337
120,000
24,337
15
SOLUTIONS TO INVESTMENTS IN FINANCIAL INSTRUMENTS
Discount
on
Notes
Receivable
(30,000
x
5/12)
12,500
Discount
on
Notes
Receivable
–
Non-current
(95,663
x
12%
x
10/12)
9,566
Interest
Income
22,066
Interest
Receivable
4,057
Interest
Income
4,057
40,000
x
16%
x
36/360
=
640
75,000
x
20%
x
82/360
=
3,417
Total
4,057
Inventories
22,500
Accounts
Payable
22,500
Sales
80,000
Advances
from
Customers
24,000
Accounts
Receivable
–
Not
yet
due
56,000
Accounts
Receivable
–
not
yet
due
(182,000
x
60%
x
125%)
136,500
Sales
136,500
Inventories
(
182,000
x
40%)
72,800
Cost
of
Sales
72,800
Selling
and
Administrative
Expenses
5,460
Accrued
Expenses
182,000
x
60%
x
5%)
5,460
Other
Current
Assets
(80%
x
28,000)
22,400
Loss
due
to
Flood
5,600
Inventories
28,000
Equipment
15,000
Cost
of
sales
15,000
Selling
and
Administrative
Expenses
1,500
Accumulated
Depreciation
(15,000/5
x
6/12)
1,500
AR
–
Total
AR
–
Not
due
Per
client
P424,000
P187,000
Adjustments
20,000
15,000
(10,250)
(3,500)
(56,000)
(56,000)
136,500
136,500
P525,750
P267,500
16
SOLUTIONS TO INVESTMENTS IN FINANCIAL INSTRUMENTS
Operating
Expenses
363
Allowance
for
Doubtful
Accounts
Total
Accounts
Receivable
P525,750
Accounts
Receivable
not
yet
due
(267,500)
Accounts
Receivable
past
due
P258,250
Provision
rate
for
past
due
accounts
5%
Required
allowance
P
12,913
Existing
allowance
(
22,800
–
10,250)
12,550
Additional
doubtful
accounts
expense
P
363
Trading
Securities
48,000
Available
for
Sale
Securities
47,800
Investments
in
Equity
Securities
Allowance
for
Decline
in
Market
Value
6,800
Trading
Securities
Market
Adjustments
–
Available
for
Sale
Securities
Unrealized
Gains/Losses
on
Available
for
Sale
Securities
2,000
Retained
Earnings,
January
1
Investments
in
Associate
–
Johnny
Walker
280,000
Investment
in
Equity
Securities
Investment
in
Associate
–
Johnny
Walker
150,000
Income
from
Associate
Dividend
Income
12,000
Investments
in
Equity
Securities
Investment
in
Equity
Securities
16,800
Trading
Securities
Trading
Securities
2,400
Gain
on
Sale
of
Trading
Securities
Treasury
Stock
45,000
Investments
in
Equity
Securities
17
363
95,800
4,800
2,000
2,000
280,000
150,000
12,000
16,800
2,400
45,000
SOLUTIONS TO INVESTMENTS IN FINANCIAL INSTRUMENTS
Trading
Securities
AFS
Securities
Balances,
January
1
adjustment
P48,000
P
47,800
Adjustments
(
4,800)
(16,800)
2,400
Balances
before
adjustment
P
28,800
P47,800
Market
value,
December
31
800
x
38
30,400
500
x
50
=
P25,000
1,200
x
31=
37,200
62,200
Unrealized
Gain
P
1,600
P14,400
Balance
before
adjustment
(Dr.)
2,000
Adjustment
P
1,600
P16,400
Dividend
Income
30,000
Investment
in
Associate
30,000
Trading
Securities
1,600
Unrealized
Gain
on
Trading
Securities
(I.S.)
1,600
Market
Adjustment
–
AFS
Unrealized
Gains/Losses
on
AFS
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
26.
27.
P491,500
P30,400
P525,750
P12,913
P6,500
P295,000
P12,500
P4,057
P5,000
P1,347,300
P5,500
P62,200
P400,000
P213,500
P257,629
P399,500
P275,000
P15,000
P24,000
P153,450
P122,960
P52,500
P490,914
P45,000
P14,400
P4,677,163
P3,682,361
18
16,400
16,400
SOLUTIONS TO INVESTMENTS IN FINANCIAL INSTRUMENTS
28.
29.
30.
31.
32.
33.
34.
35.
36.
37.
38.
39.
40.
P643,126
P9,000
P35,923
P2,400
P14,400
16,400
P5,600
P150,000
157,140
P366,659
363
9,566
5612,724
19
