GENERAL DIRECTIONS: Use black permanent ink pen in writing your final answers in your answer sheet. Erasure and/or superimposition of any kind is strictly not allowed. Doing such shall automatically render your answers INCORRECT. Choices are CASE- SENSITIVE. DO NOT CHEAT. GOD IS WATCHING YOU.

PART I

1. Guess Company purchased 50,000 shares (5% ownership) of Casio Company on January 15, 2014. Guess received a share dividend of 15% on March 31, 2014 when the market price of the share is P 40. On December 15, 2014, Guess received a cash dividend of P 8 per share. In the statement of comprehensive income for the year ended December 31, 2014, what amount should Guess report as dividend income?

A. 60,000 B. 150,000 C. 400,000 D. 460,000

2. On January 2, 2014, Tender Company acquired 16,000 shares of A Company ordinary shares at P 50 per share. On July 1, 2014, the A Company shares were split 5 to 1. On October 1, 2014, Tender Company received from A Company a preference share dividend of one share for every 10 ordinary shares held. On this date, the market price of A Companys ordinary shares is P 15 per share and the preference shares is P 10 per share. On December 31, 2014, A Company transferred to Tender Company its investment in B Company representing 5,000 ordinary shares as dividend. The market price of B Company shares is P 15 per share and its par value is P 10 per share. What is the amount of dividend income that should appear in the December 31, 2014 financial statement of Tender Co.?

A. None B. 50,000 C. 75,000 D. 90,000

3. Table owns 50% and 20% of Chair Corporations ordinary and preference shares, respectively. Chairs shares outstanding at December 31, 2014 follow: Ordinary Shares P 4,000,000 10% cumulative preference share 900,000 Chair reported net income of P 600,000 for the year ended December 31, 2014 and declared the current year dividend on the preference shares. What total amount of revenue should Table Company disclose in the statement of comprehensive income related to its investment in Chair Company for the year ended December 31, 2014?

A. None B. P 255,000 C. 273,000 D. 300,000

4. On October 1, 2013, Graham Company with a business model of trading debt securities, purchased a P 2,000,000 face value 9% debt instruments for with a remaining term of 2 years and three months for P 2,174,867. The prevailing market rate of interest at the time of acquisition was 8%. Interest is being received every December 31. On December 31, the fair market value of the instruments is P 2,072,321 based on prevailing market rate of 7%. What amount of unrealized gain or loss should Graham Company report in its December 31, 2013 profit or loss?

A. None B. 32,454 C. 102,456 D. 135,000

5. On January 1, 2014, Sun Company purchased the debt instruments of Silk Company with a face value of P 5,000,000 bearing interest rate of 8% for P 4,621,006 to yield 10% interest per year. The bonds mature on January 1, 2019 and pay interest annually on December 30. On December 31, 2014, the fair value of the investment is P 4,838,014 which is based on the prevailing market rate of 9%. If the companys business model has the objective of collecting all the contractual cash flows, including interest and principal, at what amount should the investment be reported in the companys statement of financial position for the year ended December 31, 2014?

A. 4,621,006 B. 4,683,107 C. 4,751,418 D. 4,838,014

6. On January 2, 2013, Saint Company invested in a 4-year 10% bond with a face value of P 6,000,000 in which interest is to be paid every December 31. The bonds has an effective interest rate of 9% and was acquired for P 6,194,383. On December 31, 2014, the management of Saint Company decided to dispose P 4,000,000 face value debt instrument which will be used to settle an obligation and to finance some of its operating costs. The company has a business model of collecting the contractual cash flows for all their debt security investments. What is the amortized cost of the debt instrument on December 31, 2014?

A. 6,055,046 B. 6,105,547 C. 6,151,877 D. 6,194,383

7. On January 1, 2014, Trunk Company has an investment property acquired at cost of P 4,000,000. Depreciation of P 200,000 is recognized annually and periodic continuing maintenance of P 20,000 per year as well as property tax of P 40,000 are incurred by the company on an annual basis. As of December 31, 2014, the property has no determinable fair value. What should be the carrying value of the investment property on December 31, 2014?

A. None B. 3,800,000 C. 3,840,000 D. 3,860,000 JFA

8. The following information relates to non- current investments that Dragon Company placed in trust as required by underwriter of its bonds: Bond sinking fund balance, 1/1/14, P 2,000,000; Additional investment during 2014, P 500,000; Interest revenue, P 20,000; Administrative costs, P 15,000; Carrying value of bonds payable, P 3,000,000. What amount should Dragon Company report in its December 31, 2014 balance sheet related to its non- current investment for bond sinking fund requirements?

A. 2,000,000 B. 2,500,000 C. 2,505,000 D. 3,000,000

9. On January 1, 2011, Crane Company purchased a P 4,000,000 ordinary life insurance policy on its president. Additional data for the year 2014 are as follows: Cash Surrender value, January 1, P 200,000; Cash Surrender value, December 31, P 220,000; Annual insurance premium paid on January 1, 2014, P 80,000; Dividend received on August 1, P 10,000; Crane Company is the beneficiary under the life insurance policy. Crane should report life insurance expense for 2014 of A. 50,000 B. 60,000 C. 70,000 D. 80,000 Use the following information for the next two questions: On April 1, 2015, Purefoods Company purchased as a short- term investment a P 1,000,000 face value 8% bond for P 910,000 including accrued interest and commission. The commission to acquire the bonds was P 5,000. The bonds are classified as held for trading. The bonds are dated January 1, 2015 and mature on January 1, 2020, and pay interest semi- annually on January 1 and July 1. On December 31, 2015, the bonds had a fair value of P 920,000. On April 1, 2016, Purefoods sold the bonds for a total consideration of P 950,000. 10. What amount should Purefoods report as unrealized gain in its 2015 profit or loss? A. 35,000 B. 15,000 C. 30,000 D. 0 11. How much is the gain from the sale of investment in debt securities on April 1, 2016? A. 30,000 B. 45,000 C. 10,000 D. 65,000 12. On January 1, 2015, Alaska Corporation purchased P 1,000,000 10% bonds for P 1,051,510 (including brokers commission of P 20,000). Interest is payable annually every December 31. The bonds mature on December 31, 2017. The prevailing market rate for the bonds is 9% at December 31, 2015. (Round off present value factors to four decimal places). If the bonds are classified as held for trading, the amount to be recognized as fair value adjustment loss in its 2015 profit or loss? A. 33,900 B. 26,180 C. 13,900 D. 6,180 13. On April 1, 2015, Saxe, Inc. purchased P 2,000,000 face value, 9%, Treasury Notes for P 1,985,000, including accrued interest of P 45,000. The notes mature on July 1, 2016, and pay interest semi-annually on January 1 and July 1. Saxe uses the straight- line method of amortization. If the notes are classified as heldto- maturity, the carrying amount of this investment in the companys October 31, 2015 statement of financial position should be A. 1,985,000 B. 1,968,000 C. 1,976,000 D. 1,964,000 14. On January 1, 2011, JAN Inc. invested P 926,405 in the bonds of FEB Ltd. The face value of the bonds is P 1,000,000. The bonds pay interest of 5% per annum and mature on December 31, 2020. The bonds are held to maturity. The market value of the bonds was P 940,340 on December 31, 2015. The carrying amount of the investment in bonds at December 31, 2015 is A. 940,340 B. 950,834 C. 957,920 D. 965,357 15. On July 1, 2015, Morales Corp acquired P 4,000,000 face value of X Corporation bonds with a nominal interest rate of 4%. The bonds mature on July 1, 2020 and pay interest semi- annually each July 1 and January 1, with the first interest payment due on January 1, 2016. The bonds are held to maturity. At the date of issuance, the bonds had a market interest rate of 6%. On December 31, 2015, the market value of the bonds was P 3,700,000. The amount to be recognized in 2015 profit or loss related to the bond investment is A. 109,764 B. 109,896 C. 219,529 D. 219,791 16. On April 1, 2015, Etcha Co. purchased 25,000 ordinary shares of Pwera Co. at P 180 per share which reflected book value as of that date. At the time of the purchase, Pwera had 100,000 ordinary shares outstanding. The shares are intended as a long- term investment. The first quarter statement ending March 31, 2015 of Pwera recorded profit of P 480,000. For the year ended December 31, 2015, Pwera reported profit of P 2,400,000. Pwera paid Etcha dividends of P 60,000 on June 1, 2015 and again P 60,000 on December 31, 2015. The shares of Pwera are selling at P 190 per share on December 31, 2015. Etcha is entitled to appoint two directors to the board, which consists of eight members. The remaining of the voting rights are held by two other companies, each of which is entitled to appoint three directors. The board makes decisions on the basis of simple majority. Because board meetings are often held at very short notice, Etcha does not always have representation on the board. Often the suggestions of the representative of Etcha are ignored, and the decisions of the Board seem to take little notice of any representations made by the director from Etcha Corp. Based on the above information, the carrying amount of the investment in Pwera Co. as of December 31, 2015 should be A. 4,750,000 B. 4,500,000 C. 4,860,000 D. 4,950,000 JFA/Page 3 of 3 17. On July 1, 2011, Cleopatra Corporation acquired 25% of the shares of Marcus, Inc for P 1,000,000. At that date, the equity of Marcus was P 4,000,000, with all the identifiable assets and liabilities being measured at amounts equal to fair value. The table below shows the profits and losses made by Marcus during 2011 to 2015: Year Profit (Loss) 2011 200,000 2012 (2,000,000) 2013 (2,500,000) 2014 160,000 2015 300,000 How much share of profit of associate should Cleopatra report in its 2015 profit or loss? A. Nil B. 15,000 C. 60,000 D. 75,000 18. Nueva Vizcaya Company has the following accounts included in its December 31 trial balance: Trading Securities P 1,000,000 Available- for sale securities 2,000,000 Held- to- maturity securities 3,000,000 Investment in Associate 4,000,000 Interest rate swap receivable 100,000 Forward contract receivable 200,000 Futures contract receivable 250,000 Call Option 150,000 Petty Cash Fund 50,000 Payroll cash fund 500,000 Dividend cash fund 200,000 Interest fund 150,000 Sinking fund 2,000,000 Plant Expansion Fund 1,800,000 Stock redemption fund 1,000,000 Contingency fund 1,100,000 Insurance Fund 1,000,000 Investment Property 4,000,000 Prepaid rent 200,000 Cash surrender value of life insurance 100,000 How much is the total amount normally considered as non-current investments? A. 20,000,000 B. 18,000,000 C. 17,900,000 D. 14,000,000 19. The following information is available concerning the Mauro Corporations sinking fund transactions in 2015. There is no trustee. January 1 Established a sinking fund to retire an outstanding bond issue by contributing P 425,000 January 15 Purchased securities for P 400,000 July 30 Sold securities originally costing P 48,000 for P 45,000 December 31 Collected dividends and interest on the remaining securities in the amount of P 49,000; the securities had a market value of P 360,000 at this time. The sinking fund balance on December 31, 2015 is A. 479,000 B. 474,000 C. 471,000 D. 442,000 20. If P 900,00 is put in a savings account today for 8% interest compounded annually, what amount will be available six years from now? A. 900,000 x 0.6302 B. 900,000 x 1.08 x 1.4693 C. 900,000 x 0.6806 x 0.9259 D. 900,000 x (1.08+ 1.4693)