ASAP

1. On January 2, 2020, Hero Company acquired equity instrument over the counter at its fair market value of

P2,500,000. Hero Company also paid P100,000 transaction costs in relation to the acquisition of the equity

instruments. At December 31, 2020 the equity instruments has a fair market value of P2,750,000 and the

transaction costs that would be incurred on sale are estimated at P50,000. No equity securities were sold

during the year 2020.

Q1: If the equity instruments were designated at initial recognition as Investment at Fair Value to Profit or

Loss, what amount of unrealized gain or loss should Hero Company recognized and disclose in its profit or

loss of 2020?

Q2: If the equity instruments were designated at initial recognition as Investment at Fair Value to Other

Comprehensive Income, what amount of unrealized gain or loss should Hero Company recognized and

disclose in its other comprehensive income of 2020?

2. Calling Company began business in January of 2021. During the year, Calling purchased a portfolio of

securities listed below. In its December 31, 2021 balance sheet, Calling appropriately reported a

P300,000 debit balance in its "Unrealized gain/loss" account. The composition of the securities did

not change during the year 2022. Pertinent data are as follows:

Security Cost Market Value, December 31, 2022

BE (FVPL) P2,000,000 P2,750,000

BI (FVOCI) 3,600,000 3,250,000

KO (FVOCI) 3,900,000 4,000,000

P9,500,000 P10,000,000

Q1: How much is the carrying value of Investment at FVOCI on December 31, 2021?

a. 9,800,000 c. 9,500,000

b. 9,200,000 d. 10,000,000

Q2: How much is the unrealized gain or loss that should presented in the Equity section of the

Balance Sheet on December 31, 2022?

a. 500,000 UG c. 800,000 UG

b. 500,000 UL d. 800,000 UL

3. Swans Corporation acquired 10,000 Maids Company shares on February 5, 2021 at P50 which include P10 per

share broker's fees and commissions. A P50,000 cash dividends were received from Maids Company on March

20, 2021. These dividends were declared on January 5 payable to shareholders as of February 10. Maids shares

were split 2 for 1 on November 1. The shares were selling at P32 per share on December 31, 2021. The

investments were designated as FVPL.

Q1: How much is initial carrying value of investment on the date of acquisition?

a. 500,000 c. 450,000

b. 400,000 d. 350,000

Q2: How much should be recognized as dividend income?

a. 50,000 c. 290,000

b.100,000 d. 0

4. Geese Corp. received dividends from ordinary share (15%) and preference share (25%) investments during

the current year:

A cash dividend of P 100,000 from ordinary share investment

A cash dividend of P 50,000 from preference share investment

A property dividend costing P 500,000 which had a market value of P600,000

How much is the total dividend income that should reported for the current year?

a. 750,000 c. 150,000

b. 700,000 d. 650,000

5. Comfort Company purchased 10,000 shares of Velvet ordinary shares at P90 share on January 3, 2019. On

December 31, 2019 Comfort received 2,000 shares of Velvet ordinary shares in lieu of cash dividend of P10

per share. On this date, the Velvet ordinary share has a quoted market price of P60 per share.

In its 2019 statement of comprehensive income, Comfort should report dividend income at

a. P120,000 c. P10,000

b. P100,000 d. none

6. On January 2020, Golden Company invested in P900,000 in equity securities representing 15% interest in

Rings Company. Golden Company incurred transaction cost of P100,000 related to the acquisition of

the security. On December 31, 2020, this investment has a market value of P950,000. On July 1, 2021,

Golden Company sold all the investments for P1,200,000.

Q1: What amount of gain on sale should Golden Company recognized in profit or loss

assuming the security was classified as Investment at FVPL?

Q2: How much is the amount transferred to Retained earnings upon sale assuming the

security was classified as Investment at FVOCI?