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Problem 1

On January 1, 2020 Iffy Corp. acquired 30,000 shares of ABC Corp's 100,000 shares outstanding for P5,000,000. The book value of ABC's identifiable net aseets on this date was at P14M. All its assets carrying value approximated

their fair values except for a depreciable assets with a remaining life of 5 years, which was undervalued on this date by P1.6M.

ABC reported total comprehensive income in 2020 at P4,000,000 which was net of a foreign exhange loss reported in as other comprehensive loss at P800,000. ABC also paid dividends at P1.5M at the end of the year, P500,000 of which is from pre-acquisition Retained Earnings. The fair market value of shares on this date was at P210 per share.

Requirements:

1. What is the carrying value of Iffy's investment in ABC shares as of December 31, 2020 using theappropriate accounting standards?

a. 5,990,000 c. 5,654,000

b. 5.750,000 d. 5,894,000

2. Assuming that Iffy Corp. is a medium-sized entity and that the company uses the fair value method inaccounting for its investment in ABC, how much in total should be recognized in Iffy Corp.'s profit or loss

for 2020?

a. 300,000 c. 1,300,000

b. 450,000 d. 1,750,000

3. Assuming that Iffy Corp. sold 18,000 shares of its ABC shares investment on December 31, 2020 at itsprevailing fair value, how much in total should be recognized in the profit or loss as aresult of the

transaction?

a. 646,000 c. 387,600

b. 406,000 d. 243,600

4. Using the information in the previous item, how much shall be the carrying value of any remaininginvestment as of December 31, 2020

a. 2,261,600 c. 2,300,000

b. 2,357,600 d. 2,520,000

5. Assuming that ABC issued 25,000 shares to other stockholders on December 31, 2020 at prevailing fairvalue without Iffy Corp's participation, how much should be recognized in the profit or loss as a resultof the transaction/event?

a. None c. 129,200

b. 196,200 d. 81200

Problem 2

Answer the folllowing under (a) TRADING SECURITIES UNDER PAS 39; (b) HELD TO MATURITY SECURITIES under PAS 39 and Available-For-Sale Securities under PAS 39:

1. How much is the unrealized holding gain or (loss) to be reported in the company's income statements for 2015 and 2016?

a. (67,848); 126,312 c. (26,168); (28,217)

b. (94,016); 165,943 d. 0 ;0

2. How much is the corresponding interest income to be reported in the company's income statement for 2015 and 2016?

a. 680,000; 680,000 c. 585,984; 845,943

b. 653,832; 651,783 d. 0: 0

3. What is the carrying value of the debt securities as of Dec. 31, 2015 and 2016?

a. 6,000,000; 6,000,000 c. 6,157,514; 6,157,514

b. 6,131,346; 6,103,129 d. 6,063,498; 6,229,441

4. If DEF Inc. bonds were soldat P2,000,000 on Jan. 2, 2017, how much realized gain or (loss) on the sale should be recognized?

a. 35,714 c. (67,602)

b. 96,074 d. (18, 384)

My San Inc.'s portfolio of debt securities at Dec. 3, 2015 and Dce. 31, 2016 are shown below. All the bonds were acquired by the company at the beginning of 2015. 31-Dec-15 31-Dec-16 FACE VALUE ACQUISITION COSTS AMORTIZED COSTS FAIR VALUES AMORTIZED COSTS FAIR VALUES 12%, ABC Corp. 1,000,000.00 1,063,397.00 1,049,737.00 1,024,437.00 1,034,711.00 1,052,773.00 10%, DEF Inc. 2,000,000.00 1,903,926.00 1,932,398.00 1,965,750.00 1,964,286.00 2,018,348.00 12%, GHI Co. 3,000,000.00 3,190,191.00 3,149,211.00 3,073,311.00 3,104,132.00 3,158,320.00 TOTALS 6,000,000.00 6,157,514.00 6,131,346.00 6,063,498.00 6,103,129.00 6,229,441.00 ABC Corp. and GHI Co. bonds were acquired at prevailing market rate of interest at 10%, while DEF Inc. bonds were acquired at an effective rate of 12%. The bonds had prevailing market rate of interest at the end of 2015 and 2016 applicable to the bonds were 11% and 9% respectively