1.Nation Company began business in November of 2011. During the year, Nation Company purchased portfolio of equity securities listed below. In its December 31, 201 balance sheet, National Company appropriately reported a P160,000 debit balance in its "Fair value adjustment- Equity Security" account. The composition of the securities did not change during 2012. Pertinent data are as follows:

Securities Cost Market Value, Dec. 31, 2012

A P 1,200,000 P1,260,000

B 900,000 950,000

C 1,600,000 1,620,000

Total P 3,700,000 P 3,830,000

What amount of unrealized gain or loss on these securities should be included in Nation 97 Company's profit or loss for the year ended December 31, 2012 assuming the equity securities were designated as investment to profit or loss?

2.Morgan Company began business in October of 2011. During the year, Morgan purchased a portfolio of securities listed below. In its December 31, 2011 balance sheet, Morgan appropriately reported a P300,000 credit balance in its "Fair Value Adjustment- Equity Securities" account. The composition of the securities did not change during the year 2012. Pertinent data are as follows:

Securities Cost Market Value, Dec. 31, 2012

P P2,400,000 P2,450,000

Q 2,500,000 2,550,000

R 1,900,000 2,000,000

Total P6,800,000 P7,000,000

Question 1. What amount of unrealized gain or loss on these securities should be included in Morgan's profit or loss for the year ended December 31, 2012 assuming the securities were designated as investment to profit or loss?

Question 2. What amount of unrealized gain or loss on these securities should be included in Morgan's other comprehensive income for the year ended December 31, 2012 assuming the securities were designated as investment in available for sale?

Question 3. What amount of unrealized gain or loss on these securities should be included in Morgan's shareholders' equity for the year ended December 31, 2012 assuming the securities were designated as investment in available for sale?

3.On November 1, 2011, Ribbon Company invested in P600,000 in equity securities representing 20,000 ordinary shares of Carbon Company. Ribbon Company incurred transaction cost of P5,000 related to the acquisition of the security. On December 31, 2011, this investment has a market value of P580,000. On April 15, 2012, Ribbon Company sold the investment for P630,000.

Question 1. What amount of realized gain should Ribbon Company recognized on the 98 disposal of the security assuming the security was classified as investment in profit or loss?

Question 2. What amount of realized gain should Ribbon Company recognized on the disposal of the security assuming the security was classified as investment at fair value to other comprehensive income under PAS 39?

Question 3. What amount of realized gain should Ribbon Company recognized on the disposal of the security assuming the security was classified as investment at fair value to other comprehensive income under PFRS 9?

4.On October 1, 2010, Graham Company purchased a P2,000,000 face value 9% debtinstruments for P1,860,000 and designated as investment to profit or loss. The debtinstruments mature on January 1, 2011, and pay interest semi-annually on January 1and July 1. On December 31, the fair market value of the instruments is P1, 960,000. On February 2, 2011, Graham Company sold the debt security for P1,970,000. What amountof unrealized gain or loss should Graham Company report in its December 31, 2010 profitor loss?

5.On May 1, 2014, Golden Company purchased a short-term P4,000,000 face value 9% debt instruments for P3,720,000 excluding the accrued interest and classified it as an investment to profit or loss which is based on the business model of the entity to buy and sell portfolio of securities and to make profit for short-term movements in the market rate of interest. Golden Company incurred and paid P20,000 transaction cost related to the acquisition of the instrument. The debt instruments mature on January 1, 2017, and pay interest semi-annually on January 1 and July 1. On December 31, the fair market value of the instruments is P3,880,000. On February 2. 2015, Graham Company sold the debt security for P3,960,000. At what amount should the investment be initially recorded?

6.On January 1, 2014, Sun Company purchased the debt instruments of Silk Company with a face value of P5,000,000 bearing interest rate of 8% for P4,621,006 to yield 10% interest per year. The bonds mature on January 1, 2019 and pay interest annually on December 30. On December 31, 2014 the fair value of the investment is P4,838,014 99 which is based on the prevailing market rate of 9%.

Question 1. If the company's business model has the objective of trading and making a profit from changes in the fair value of the securities, what amount of unrealized gain or loss should the company disclose in their December 31, 2014 profit or loss?

Question 2. If the company's business model has the objective of collecting all the contractual cash flows including interest and principal, at what amount should the investment be reported in the company's statement of financial position for the year ended December 31, 2014?

7.On January 2, 2013 Saint Company invested in a 4-year 10% bond with a face value of P6,000,000 in which interest is to be paid every December 31. The bonds has an effective interest rate of 9% and was acquired for P6,194,383. Saint Company has a portfolio of commercial loans that it holds to sell in the short term. On December 31, 2013, the security has a fair value of P6,229,862 which is based on the prevailing market rate of 8.5%.

On December 31, 2013, Saint Company acquires Joseph Company that manages commercial loans and has a business model that holds the loan in order to collect the contractual cash flows. Saint Company original portfolio of commercial loans is no longer for sale, and the portfolio is now managed together with the acquired commercial loans and all are held to collect the contractual cash flows. On December 31, 2014, the debt investment has a fair value of P6,550,000. What amount should the debt investment be reported in the December 31, 2014 statement of financial position?

8.On January 2, 2013 Saint Company invested in a 4-year 10% bond with a face value of P6,000,000 in which interest is to be paid every December 31. The bonds has an effective interest rate of 9% and was acquired for P6,194,383. On December 31, 2014, the management of Saint Company decided to dispose P4,000,000 face value debt instruments which will be used to settle an obligation and to finance some of its operating costs. The company has a business model of collecting the contractual cash flows for all their debt security investments, however due to frequent sale and disposal 100 of investments the management has decided that the business model is no longer appropriate. On December 31, 2014, the four million face value debt instrument was disposed of when the market rate of similar instrument was 11%.

PV factor of 11% after 2 years 0.8116

PV factor of annuity of 11% after 2 years 1.7125

Question 1. What is the amortized cost of the debt instrument on December 31, 2014?

Question 2. If the remaining debt securities were redesignated on January 1, 2015 when the market rate of interest has yet to change, what is the amount of gain or loss should the company recognize in its 2015 profit or loss as a result of the redesignation?