Exercise 1

Below is a list of the marketable equity securities included in the current portfolio of the Sudan Corporation.In addition, the acquisition cost and the market value are provided.Sudan began operations in January 2019.

PurchaseMarket Value

DateSecurityCost12-31-19

3-01-19Morocco Corp-commonP520,000P 590,000

4-01-19Algeria Inc.- common640,000494,000

6-01-19Libya Corp.-common420,000390,000

PurchaseMarket value

DateSecurityCost12-31-20

3-01-19Morocco Corp.-commonP520,000P 416,000

4-01-19Algeria Inc -common450,000474,000

6-01-19Libya Corp. -common420,000484,000

2-01-20Egypt Co. - common530,000560,000

All of the above securities are actively traded on national security exchange and classified as Trading Securities.

During January 2020, Sudan sold a portion of its investment in Algeria Inc. for P230,000.Also in February 2020, Sudan purchased Egypt Co. common stock for P530,000 cash.

Instruction:

1. Prepare the adjusting entry, if any, required as of December 31, 2019 to properly value the current portfolio of equity securities.
2. Prepare journal entry required to record the sale of Algeria, Inc. common stock in January 2020.
3. Prepare the journal entry as of February 2020, to record the acquisition of Egypt Co. common stock.
4. Prepare the adjusting entry, if any, required as of December 31, 2020 to properly value the current portfolio of equity securities

Exercise 4

On January 1, 2020, the Maxell Company purchased P400,00 of 6% term bonds.The bonds are dated January 1, 2020, and the interest is payable semiannually on June 30 and December 31.At the time the bonds were purchased the market interest rate was 8%.The bonds mature on December 31, 2030.Maxell Company uses the effective interest method of amortization.

Instruction:Determine the following:

1. issue price of the bonds on January 1, 2020
2. total amount of interest revenue for 2020
3. book value of the investment in bonds on December 31, 2020

Exercise 5

On January 1, 2019, Hart Corporation purchased 1,000 of ABC 8%, P1,000 callable bonds for P877,068, which represented a 10% effective interest rate.The bonds are dated January 1, 2019, and mature on January 1, 2029.Interest is payable annually on January 1.On January 1, 2020, Hart soldhalf of the bonds at 101.Assume that Hart uses the effective interest method of amortization and that its fiscal year ends December 31

Instruction:Determine the following:

1. Interest income for the year ended December 31, 2019
2. Carrying value of the bonds as of December 31, 2019
3. Interest income for the year ended December 31, 2020
4. Carrying value of the bonds as of December 31, 2020
5. Gain or loss on sale of the bonds.
6. Give the entry to adjust the allowance for doubtful accounts at December 31, 2020.