Answer the following problems.
Problem 1(Adopted): You were able to gather the following in connection with your audit of Borbor Company. On December 31, 2018, Borbor reported the following fair value through other comprehensive income investments: Cost Market Unrealized loss Siano Corp, 10,000 shares of P 250,000 P 220,000 P 30,000 ordinary share (1% interest) AC Corp, 20,000 shares of ordinary 320,000 300,000 20,000 shares (2% interest) Panway Corp, 50,000 shares of 1,400,000 1,350,000 50,000 ordinary shares (10% interest) Additional information: 1. On April 1, 2019, Siano issued 15% stock dividend when the market price of its stock was P24 per share. 2. On August 30,2019, AC issued share rights to existing shareholders. Borbor received 20,000 share rights entitling him to purchase 5,000 new shares at P27. The ordinary share was trading ex-rights at P27 a share and the rights had a market value of P3 per right. On October 1, 2019, Borbor exercised all the share rights. On July 1, 2019, Borbor acquired 100,000 additional shares of Panway ordinary share which represented a 20% investment in Panway and paid P30 per share, its fair value on that date. The fair value of all Panway identifiable assets net liabilities was equal to their carrying amount of P12,500,000. As a result of this transaction, Borbor owns 30% of Panway and can exercise significant influence over Panway's operating and financial policies. 4 . Borbor initial 10% interest of 50,000 shares of Panway's ordinary share was acquired on January 2, 2018 for P1,600,000. At that date, the net assets of Panway totalled P12,000,000 and the fair values of Panway's identifiable assets net liabilities were equal to their carrying amount. 5. On December 31, Borbor reclassifies Siano shares into fair value through profit or loss securities. 6. Market prices per share of the securities which are all listed in the Philippine Stock Exchange are as follows: Dec 31, 2019 Dec 31, 2018 Siano Corporation P 23 P 22 AC Corporation 14 15 Panway Corporation 31 277. Panway reported net income and paid dividends of: Net Income Dividend per share Year ended Dec 31,2018 P 1,000,000 P 1 Six months ended June 30, 2019 500,000 Six months ended Dec 31, 2019 900,000 2 (dividend was paid on Oct 1, 2019) 8. There were no other intercompany transactions between Borbor and Panway. Required: Based on the above result of your audit, determine the following: (One point for every correct answer, total of 5 points) 1. Net unrealized gain (loss) on financial asset at FVOCI to be presented in the statement of financial position as of December 31, 2019. 2. Gain or loss on reclassification of Siano shares 3. Gain or loss on reclassification on July 1, 2019 as a result of the purchase of additional shares of Panway. 4. Net investment income from Panway for year ended December 31, 2019. 5. Carrying amount of Investment in Panway Corp as of December 31, 2019. Problem 2 (Adopted): 11 The following pertains to the supporting records of Mae Corporation's trading securities portfolio: Security Cost Fair Value 200 ordinary shares of Cone Co. 127,250 121,500 P400,000 Tip Co. 7% bonds 398,250 387,000 P600,000 Turk Co. 7 1/2 % bonds 603,750 609,450 Interest dates on the bonds are January 1 and July 1. Mae uses the incoe approach to record purchase of bonds with accrued interest. During 2018 and 2019, Mae completed the following transactions related to trading securities: 2018: Jan 1 Received semi-annual interest on bonds. Assume that the appropriate adjusting entry was made on December 31, 2017 Apr 1 Sold P300,000 of 7 1/2 % Turk bonds for P305,000 May 21 Received dividend of P1.25 per share on the Cone ordinary share capital. The dividend had not been recorded on the declaration date. July 1 Received semi-annual interest on bonds and then sold the 7% Tip bonds P388,750 Aug 15 Purchased 100 shares of Newt Inc. ordinary share capital at P580 per share plus brokerage fees of P250 Nov 1 Purchased P250,000 of 8% Tolly Co. bonds at 101 plus accrued interest. Brokerage fees were P625. Interest dates are January 1 and July 1. Dec 31 Market prices of securities were: Cone Ordinary shares P550 7 1/2 % Turk bonds 101 3/4 8% Tolly bonds 101 Newt ordinary shares P583.752019: Jan 2 Recorded the receipt of semi-annual interest on bonds. Feb 1 Sold the remaining 7 1/2 % Turk bonds for P301,500, plus accrued interest Required: Based on the above, compute for the following: (One point for every correct answer, total of 5 points) 1. Total interest and dividend income for 2018 2. Gain on sale of trading securities in 2018 3. The unrealized gain or loss in the income statement for the year ended December 31, 2018 4. The carrying amount of the trading securities as of December 31, 2018. 5. The loss on the sale of the remaining Turk bonds on February 1, 2019
