PROBLEM 7. Purchase: Trade Date vs Settlement Date Accounting

On December 29, 2021, bifurcation Company commits itself to purchase a financial asset to be classified as held for trading for P 600,000, its fair value on commitment (traded) date. The security has a fair value of P 601,000 and P 602,000 on December 31, 2021 (Bifurcation's financial year-end), and January 5, 2022 (settlement date), respectively

Questions:

Based on the above data, answer the following:

1.If Bifurcation applies the trade date accounting method to account for regular-way purchases of its securities, how much should be recognized as trading securities on December 31, 2021?

a.P 600,000c. P 602,000

b.P601,000d. P 0

2.If Bifurcation applies the settlement date accounting method to account for regular-way purchase of its securities, how much should be recognized as trading securities on December 31, 2021?

a.P 600,000c. P 602,000

b.P601,000d. P 0

PROBLEM 8. Exchange of One Financial Asset into Another Financial Asset

Uranus Company owns 8,000 convertible preference shares of which was acquired in 2020 at cost of P 400,000. The investment was classified as trading securities. On December 31, 2020, the fair value of the preference share was P 425,000. On March 31,2021, Uranus Company converted the 4,000 preference shares into 6,000 shares of ordinary shares, when the market price was P 50 per share for the preferences shares and P 40 per share for the ordinary shares.

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Questions:

Based on the above data, answer the following:

1.Compute for the gain on exchange to be recognized in 2021

a.Nil c. P 27,500

b.P 40,000d. P 60,000

2.The necessary journal entry on march 31, will not include a

a.Debit to Investment in Trading-Ordinary shares, P 240,000

b.Credit to Investment in Trading -Pref, shares, P27,500

c.Credit Gain on exchange, P27,500

d.Credit to Investment in Trading Pref, shares, P 212,500

PROBLEM 9. Exchange of a Financial Asset for PPE

On January 1, 2021, Pluto Company has investment in equity designated as at Fair value through Other Comprehensive Income with a fair value of P 600,000. These securities were acquired a year ago at a cost of P 625,000. On March 31 2021. Pluto Company exchanged these securities for a piece of land from Mars Company. The carrying amount of the land in books Marks Company was P480,000 and has a zonal value of P 800,000. At the time of exchange , the shares which was publicly listed, has a fair value of P 650,000

Questions:

Based on the above data, answer the following:

1.Compute for the gain on exchanges to be recognized in 2021 equity

a.Nilc. P 25,000

b.P50,000d. P 175,000

2.The necessary journal entry on March 31, will include a debit to financial at FVTOC,P 600,000

a.Debit to financial asset at FVTOCI, P 600,000

b.Debit to land P 650,000

a.Credit gain on exchange, P 25,000

b.Debit to loss on exchange, P 25,000

PROBLEM 10. FVTOCI

At December 31, 2929, BAGSPARS, company properly reported as noncurrent asset the following FCTOCI equity securities:

CostMarket Value

EDA Corporation, 1,000 shares,

Preference shareP 40,00030,000

DJOA, Inc, 6,000 shares of ordinary shareP 60,00090,000

RVFE Co, 2,000 shares or ordinary share55,00088,000

TotalsP 155,000208,000

During 2021. The following transaction occurred among other:

January 5

Acquired 8,000 shares of ARP Co, for P 880,000 incurring additional P 10,000 for brokerage and another P 10,000 for commission. These shares are to be initially recognized at fair value through other comprehensive income.

February 14

Problem 11. Acquisition of Bonds

the following transaction transpired for Bokod Company during the year.

On January 1, 2021 Bokod acquired from Buguias a 4-year bond with a face value of P 1,200,000 and stated interest of 10% per year payable annually on December 31. The bonds were acquired to yield 12%

On January 1, 2021, Bokod acquired from Baquio at 10% interest, 4-year bonds with a face value of P1,200,000 for P 1,100,000. Transaction cost paid by the company amounted P 44,752. Interest is payable annually on December 31.

On January 1, 2021, Bokod Co. acquired from kabayan a 4-year bonds with a face value of P 1,800,000 and stated interest 10% per year. The bonds mature in 4 equal annual installment every December 31. The interest is also payable every December 31. The bonds were acquired to yield 12%.

On April 1, 2021, Bokod acquired from Kayapa a 4-yearbonds with a face value of P 2,000,000 and stated interest of 10% per year payable annually on December 31. The bonds were acquired to yield 12%

All the investment are to be appropriately classified as FAAC.

Question:

Based on the above data, answered for the following: (Round off present value factors to four decimal places)

1.How much is the purchase price of bonds acquired from buguias?

a.Nilc. P 1,127,076

b.P227,076d. P 1,051,730

2.How much is the purchase price of bonds acquired from Baguio?

a.P1,884,814c. P1,834,814

b.P1,878,460d. P1,934,814

3.How much is the purchase price of bonds acquired from Kabayan?

a.Nilc. P1727,834

b.P612,167d. P1,030,521

4.What is the effective rate of the bonds acquired from Baguio?

a.10%c. 11%

b.12%d. 11.5%

5.How much is the total interest income in 2021 for the above investments?

a.P620,000c. P643,296

b.P570,000d.P586,942

PROBLEM 12- Initial and Subsequent Measurement, Derecognition and Reclassificiation of trading Debt Securities.

On January 1, 2020, VIriginia Co. acquired a 5-year bonds with a total face value of P5,000,000 for P5,479,079. The bonds are to be appropriately classified as held for trading. On December 31, 2020, the bonds are quoted at 104%.

OnJanuary 3, 2021 the of the bonds were sold at 105.

On November 1, 2021, Virginia Co, changed its business model. It was determined that the remaining at amortized cost dat. On December 13, 2021, the bonds are quoted 102.

On January 1, 2022, the bonds were quoted at 104.

Question:

Based on the above data, answer the following:

1.How much is the interest income for 2020?

a.Nilc. P600,000

b.P537,908d. P645,489

2.How much is the unrealized gain (loss) in 2020 to be recognized in the profit or loss ?

a.Nilc. P200,000

b.P(179,079)d. P(379,079)

3.How much is the realized gain (loss) on sale in 2021 to be recognized in the profit of loss?

a.Nilc. P(33,494)

b.P25,000d. P(64,540)

4.How much is the interest income for 2021?

a.P265,849c. P531,699

b.P300,000d. P600,000

5.How much is the gain (loss) on reclassification to be recognized in the profit or loss on January 1,2022?

a.Nilc. P50,000

b.P24,343 d. P100,000

6.Assume instead that the bonds are reclassifiedto FVTOCI, how much is the gain (loss) on reclassification to be recognized in the profit or loss on January 1, 2022?

a.Nil.c. P50,000

b.24,343d. 100,000