1.A debt investment is measured at FVOCI:Single choice.

(1 Point)

a. When the debt investment is held for trading

b. By irrevocable designation upon initial recognition

c. When the debt investment is not held for trading

d. When the business model is to collect contractual cash flows that are solely payments of principal and interest and also to sell the financial asset

2.These investments are recorded at purchase price plus directly attributable transaction costs:Single choice.

(1 Point)

a. Equity investments at FVPL

b. Investments in associates

c. Equity investments at FVPL and Investments in associate

d. Equity investments at FVOCI and Investments in associate

3. On January 1, 2020, Piano Company invested in 20% of Violin Co.'s outstanding ordinary shares for P6,000,000. Acquisition cost is equal to the carrying amount of the net assets acquired. During 2020, the investee reported net income of P7,000,000. It also declared cash dividends of P4,000,000. What is the balance of the Investment in Associate as of December 31, 2020?Single choice.

(1.5 Points)

a. 5,200,000

b. 7,400,000

c. 6,600,000

d. 6,000,000

4. The following statements are provided to you: Statement 1: Reclassification is allowed for equity investments from FVOCI to FVPL and vice-versa. Statement 2: Reclassification is allowed for debt investments between FVPL, FVOCI, and Amortized cost unless irrevocable designation to FVPL has been made on initial recognition.Single choice.

(1 Point)

a. Statement 1 is true ; Statement 2 is false.

b. Statement 1 is false ; Statement 2 is true.

c. Both statements are true.

d. Both statements are false.

5. On January 1, 2020, Hearts Company invested in debt securities with face amount of P5,000,000 for P4,760,000 (inclusive of 160,000 transaction costs). The company's business model is to collect contractual cash flows and to sell the debt investment. These debt securities mature on December 31, 2022. It pays 10% interest annually every December 31 with a 12% effective yield (after adjustment in transaction costs). On December 31, 2020, the bonds are quoted at 102. What amount of unrealized gain should be reported in other comprehensive income for 2020?Single choice.

(1.5 Points)

a. 100,000

b. Zero because it should be a loss

c. 340,000

d. 268,800

6. All of the following statements are true except one. Which of the following is the exception?Single choice.

(1 Point)

a. If an investor holds, directly or indirectly, less than 20% of the voting power of the investee, it is presumed that the investor does not have significant influence, unless such influence can be clearly demonstrated.

b. If an investor holds, directly or indirectly, 20% or more of the voting power of the investee, it is presumed that the investor has significant influence, regardless whether such influence can be clearly demonstrated or not.

c. A substantial or majority ownership by another investor does not necessarily preclude an investor from having significant influence.

d. All of the above are true. No exception.

7.In relation to Investment in Associates, the following are provided to you: Statement 1: The existence and effect of potential voting rights that are currently exercisable or convertible, including potential voting rights held by other entities, are considered when assessing whether an entity has significant influence. Statement 2: The loss of significant influence can occur only if there is a change in absolute or relative ownership levels.Single choice.

(1 Point)

a. Statement 1 is true ; Statement 2 is false.

b. Statement 1 is false ; Statement 2 is true.

c. Both statements are true.

d. Both statements are false.

8. Which statement is INCORRECT concerning the equity method?Single choice.

(1 Point)

a. Investor's share of the profit or loss of the investee is not recognized in the investor's profit or loss

b. Distributions received from the investee reduce the carrying amount of the investment

c. Investment in associate is initially recognized at cost plus directly attributable transaction costs

d. Investment in associate account is tested for impairment whenever there is any objective evidence of impairment

9.Through the approval of management, an entity changed its business model on August 1, 2018. How should the entity effect its reclassification in its financial statements?Single choice.

(1 Point)

a. Retrospective adjustment from first year of operations until January 1, 2019

b. Currently and prospectively from August 1, 2018

c. Retrospective adjustment from first year of operations until August 1, 2018

d. Currently and prospectively from January 1, 2019

10. The existence of significant influence by an investor is usually evidenced in one or more the following ways, except:Single choice.

(1 Point)

a. Representation in the shareholders' meeting

b. Participation in the policy-making decisions

c. Provision of essential technical information

d. Interchange of management personnel