FINANCIAL ASSET AT FAIR VALUE

At the beginning of current year 2018, Gala Company purchased equity securities for P5,200,000. The entity also paid commission, taxes and other transaction costs amounting to P200,000. The securities are quoted at P5,500,000 at year-end. No securities were sold during the year. The transaction costs that would have been incurred on the disposal of the investment are estimated at P100,000.

In 2019, no securities were sold. The quoted price of the securities end of 2019 is P4,500,000.

In 2020, half of the securities was sold at a selling price of 2,500,000. The entity incurred disposal costs worth P30,000. The remaining securities are quoted at P2,750,000 at year end.

Required:

A.Provide journal entries to record the above transactions:

1.Assuming the entity has elected irrevocably to present changes in fair value in other comprehensive income.

2.Assuming the equity securities are held for trading.

B.Compute the carrying value of the financial assets as of:

1.January 1, 2018.

2.December 31, 2018.

3.

December 31, 2019.

4.December 31, 2020.

C.Assuming the securities are carried at fair value through OCI, what is the balance of the cumulative gains or losses presented as a component of stockholders' equity as of:

1.December 31, 2018.

2.December 31, 2019.

3.December 31, 2020.

D.Assuming the securities are held as trading securities, determine the amount presented as a component of profit or loss as a result of change in fair value in periods:

1. 2018.

2. 2019.

3. 2020.