Case 1 - Audit of Investments The following investments were held by Honest Corporation as of December 31, 2022: Equity investments at fair value (Note 1) Debt investment at other comprehensive income (Note 2) Debt investments at amortized cost (Note 3) Note 1 - Equity investments at fair value P? 2,800,000 6,031,379 HILIPPINES On December 31, 2020, Honest Corporation purchased the following equity investments and the summary of related transactions to these shares: FV Company Shares Transaction cost 12/31/20 (acquisition) Integrity Company shares 80,000 P45.00 P1.50 Pagkakatiwalaan Corporation shares 60,000 50.00 2.00 Objective Company shares 45,000 55.00 2.25 Your further procedure summarized other related transactions for year 2021 and 2022: % of Company ownership hare Dividend Dividend received/s received/s hare FV 12/31/21 FV 12/31/22 (2021) (2022) Integrity Company shares 10% P4.00 P3.50 P42.00 P49.00 Pagkakatiwalaan Corporation shares 15% 5.00 3.75 54.00 52.00 Objective Company shares 15% 6.00 4.00 57.00 60.00 Additional information: . . Integrity company and Objectivity Company shares were designated at fair value through other comprehensive income while Pagkakatiwalaan Corporation shares was held for trading purposes. On December 1, of each year annual dividends were declared and paid on December 31 of same year. 20,000 shares of Integrity Company shares were sold on July 1, 2022 at P48.00 per share, while another 15,000 shares of Objective Company shares were purchased on August 31, 2022 at P56.50 per share incurring P1.25 per share transaction cost. On September 30, 2022, additional 10,000 shares of Pagkakatiwalaan Corporation shares were purchased on October 15, 2022 at P52 per share while 25,000 of these shares were sold at P58.50 per share on November 5, 2022. . Your audit procedures revealed that all transaction cost incurred in acquisition of shares were expensed while all changes in fair value of the investments were recognized in profit or loss. Entries also revealed that dividends were recorded as dividend income when received. For the year ended December 31, 2021 and 2022, each investee company reported the following profit: Company Integrity Company shares Pagkakatiwalaan Corporation shares Objective Company shares Profit P1,200,000 1,350,000 2,670,000 Debt investment at FVTOCI On January 1, 2021, Honest Corporation purchased a 11%, 4-year, P2,800,000 face value bonds paying a total of P2,934,588 to yield a 9.5% interest, interest on this bond was collectible every December 31 of each year. The company's business model on this bond is to collect cash flows and to sell when circumstances warrants. The bond were selling at 103 on December 31, 2021 and has an effective interest of 10% on December 31, 2022. This questionnaire is exclusively designed and administered to the students of PUP College of Accountancy and Finance. Reproduction and/or publication is only through the faculty members or approved platforms of the college. Page 1