CH 7 Answers Vol 1 Finacc

CHAPTER 7
INVESTMENTS IN EQUITY SECURITIES AND DEBT SECURITIES

PROBLEMS
7-1
(Dusit, Inc.)
Classified as available for sale securities
a.
Purchase price
(10,000 shares x P33.50)
P335,000
Brokers commission
Total cost
b.
Purchase price
(7,000 shares x P26.50)
P185,500.00
Brokers commission
Transfer taxes ( x 1% x 185,500)
Total cost
c.
P58,000
1,980
P336,980
4,910.00
463.75
P190,873.75
Purchase price
Transfer fees and other costs
1,500
45,000
Total cost to be allocated
P59,500
Market values:
Ordinary shares 150 x 100
Preference shares
300 x 150
P15,000
Total
Allocation to:
Ordinary shares
P14,875
P60,000
59,500 x 15/60
Preference shares 59,500 x 45/60
P44,625
d.
Market value of ordinary shares

2,000 shares x P200
P400,000
Classified as Trading Securities
a.
Purchase price
(10,000 shares x P33.50)
P335,000
b.
Purchase price (7,000 shares x P26.50)
P185,500
c.
14,500
43,500
Allocation to Ordinary Shares

58,000 x 15/60
Allocation to Preference Shares

58,000 x 45/60
Chapter 7 Investments in Equity Securities and Debt Securities
d.
Market value of ordinary shares

2,000 shares x P200
P400,000
7-2
(A Company)
a.
Cash
Dividend Revenue
2,400 shares x 7.50
Cost per share:
B Corp. Ordinary (no change)
b.
c.
18,000
18,000
P100
Memo entry.
Received additional 600 shares of B Corp. ordinary
shares as stock dividends.
Revised cost per share:
B Corp. Ordinary (3,000 shares)
Available for Sale Securities-B Corp. Preference 80,000
Available for Sale Securities-B Corp. Ordinary
80,000
Market values:
Allocation:
80,000
Ordinary
(2,400 x 125) 300,000
Preference (600 x 250) 150,000
Ordinary
240,000 x 300/450
160,000
Preference
240,000 x 150/450
Costs per share:

B Corp. Ordinary (2,400 shares)
B Corp. Preference (600 shares)
d.
P 80
P 67
P133
Memo entry. Received additional shares of B Corp. ordinary shares on

a 4-for-1 stock split.
Revised cost per share:
B Corp. Ordinary = P240,000/9,600 shares
P 25
e.
Available for Sale Securities-C Ordinary

Dividend Revenue
2,400/6 = 400 shares x 50
20,000
20,000
Costs per share:

B Corp. Common (2,400 shares)
C Corp. Common (400 shares)
7-3
10,000
(Victoria Court)
Classified as FVPL
Cash
Gain on Sale of Trading Securities
P100
P 50
170,000
Trading Securities
160,000
To record sale of Y Co. Common
Unrealized Loss on Trading Securities
Trading Securities
To record valuation at end of year.
48
72,000
72,000
X Co.
Z Co.
Total
MV12/31/08
P330,000
350,000
P680,000
Classified as available for sale securities

Cash
Loss on Sale of Available for Sale Securities
Market Adjustment-AFS Securities
Available for Sale Securities
Net Unrealized Gain/Loss on AFS Securities
40,000
Unrealized Holding
Gains(Losses)
P(42,000)
(30,000)
P(72,000)
Market12/31/09
P288,000
320,000
P608,000
170,000
40,000
30,000
200,000
To record sale of Y Co. Common

72,000
72,000
To record valuation at end of year.

Cost
Market
X Co.
P330,000
P288,000
Z Co.
300,000
320,000
Total
P630,000
P608,000
Required balance in Market Adjustment Account
cr
Balance before adjustment (10,000 + 40,000) dr
Required adjustment
Unrealized Holding
Gains(Losses)
P(42,000)
20,000
P(22,000)
50,000
P 72,000
7-4
(Inn Corporation)
(1)
Sales price (15,000 x 60
)
P900,000
Cost of shares sold:
12,000 shares
P650,000
3,000 shares (1,300,000 x 3,000/24,000)
162,500
812,500
Gain on sale
P 87,500
(2)
Sales price
Cost of shares sold (1,800,000 x 15,000/36,000)
Gain on sale
(3)
Sales price
P900,000
Cost of shares sold:
12,000 shares
P500,000
3,000 shares (1,300,000 x 3,000/24,000)
162,500
662,500
Gain on sale
7-5
P900,000
750,000
P150,000
P237,500
(Melody Corporation)
a.
2007 Lot (4 x 750)
2008 Lot (4 x 1,250)
Total cost of stock rights received
49
P 3,000
5,000
P 8,000

b.
6,000
2,250
Cost of stock rights exercised:

2005 Lot
2006 Lot (750 x 4)
P 3,000
3,000
Cash paid (300 shares x P80)

Total cost of new shares acquired thru stock rights
Cost per share (8,400 / 300 shares)
P
c.
24,000
P30,000
100
Sales price of stock rights (500 x 4.50)
Cost of stock rights sold

2008 Lot (500 x 4)
Gain on sale
d.
225,400
2,000
250
Available for sale securities balance at December 31, 2009:

2007 Lot (60,000 3,000)
P 57,000
2008 Lot (110,000 5,000)
105,000
2009 Lot
30,000
P192,900
Market value at December 31, 2009 (98 x 2,300 shares)
Balance in unrealized gain/loss account at December 31, 2009
32,500
7-6
(Anti Corporation)
a.
Stock Rights Pro Corp. Ordinary
Trading Securities Pro Corp. Ordinary
10,000 x 5
b.
Cash
50,000
50,000
50,000
50,000
c.
50,000

Cash
10,000/5 = 2,000 shares
2,000 x 50 = 100,000
140,000
140,000
7-7
100,000

Unrealized Gain on Trading Securities
Market value, 12/31/06
900,000
150,000
140,000
(12,000 shares x 75)
Carrying value, 12/31/07 (10,000 shares x 66) 660,000

Cost of stock rights received
( 50,000)
Cost of new shares from exercise
150,000 760,000
Unrealized gain
(EDSA Company)
(a)
50

1.
2.
3.
(b)
1.
2.
7-8
150 135
2+1
2,000 x 5
5,500 (1,000 x 5)
145 135
2
2,000 x 5
=
=
=
P5.00
P10,000
P500 Gain
P5.00
P10,000
(Tolits Corporation)
2009
a.
Available for Sale Securities Diana

Ordinary
Cash
b.
Memorandum entry. Received 500

additional shares of Diana ordinary shares
as a result of 2-for-1 split.
c.
Available for Sale Securities Smith

Preference
Cash
(1,000 x 120) + 1,200
d.
e.
f.
f.
g.
54,000
54,000
121,200
121,200
Cash
Gain on Sale of AFS Securities
Ordinary
(54,000 / 1,000) x 250 shares =
13,500
15,000
Stock Rights Diana Ordinary

Ordinary
750 shares x 3
2,250

Ordinary
Cash
(60% x 750) x 3; 225 x 55
Cash
(40% x 750) x 3
1,500
13,500
2,250
13,725
1,350
12,375
900
Cash (100 x 56)

Loss on sale of AFS Securities
Ordinary
13,725/ 225 = 61; 61 x 100 = 6,100
5,600
500
h.
Cash (1,000 x 100 x 8%)

Dividend Revenue
8,000
i.
Market Adjustment AFS Securities

Unrealized Gains/Losses on AFS
Securities
2,175
51
900
6,100
8,000
2,175
CV
Diana 1 (750 sh)
46,500 38,250
Diana 2 (125 sh)
7,625
Smith (1,000 x 115)

121,200
Total
167,075
b.
P9,000
7-9
Market
7,750
115,000
Unreal
8,250
125
(6,200)
2,175
169,250
Gain on sale of AFS Securities

Loss on sale of AFS Securities
( 500)
Dividend revenue
Total income recognized in profit or loss in 2006
P1,500
8,000
(X Corporation)
2008
Jan.
Dec. 31
Available for Sale Securities Y Co. Ordinary

Cash
300,000
Net Unrealized Gains/Losses on AFS

Securities
5,000 x (60 55)
25,000

Impairment Loss AFS Securities
Securities
Available for Sale Securities Y Co.
Ordinary
5,000 x (60-52)
25,000
40,000
300,000
25,000
2009
Dec. 31
7-10
25,000
40,000
(Carlo Company)
2009
Apr. 1
May 15
Cash (5,000 x 25)

Loss on Sale of Trading Securities
Trading Securities Avi Ordinary
Available for Sale Securities Ghio
Preference
Cash
July 10
Memorandum entry. Received 4,000

additional Darrel ordinary shares
representing a 20% bonus issue. Shares
now held are 24,000.
Nov. 30
Cash (1 x 24,000)
Dividend Revenue
Unrealized Loss on Trading Securities
Trading Securities Avi Ordinary
(5,000 x 26) 139,000
Dec. 31
52
125,000
14,000
139,000
30,550
30,550
24,000
9,000
24,000
9,000

31

Securities
116,650 6,000 balance
FV
Unrealized
Darrel 480,000
116,000
Ghio
31,200
650
Total
511,200
116,650
7-11
364,000
30,550
394,550
Investment in Associates
Income from Associates
20% x 1,500,000
2,000,000
2,000,000
300,000
300,000
3.
Memo. Received 2,000 additional

shares of Atlanta ordinary as 10% bonus
issue. Shares now held are 22,000.
4.
20% x 3,000,000
600,000
Cash
20% x 1,000,000
200,000
5.
(b)
110,650
Cost
(Hostel Company)
(a)
1.
Cash
2.
110,650
600,000
Investment cost
P2,000,00
0
300,000
600,000
(200,000)
P2,700,00
Share in income 2009

Share in income 2010
Share in dividends
Carrying amount, December 31, 2010
7-12
200,000
(Byron, Inc.)
2009
Jan.
Dec. 31
31
Investment in Associates Pirates

Ordinary
Cash
5,160,000

Ordinary
Income from Associates (30% x
3,600,000)
1,080,000
Cash (30% x 400,000)

Ordinary
53
5,160,000
1,080,000
120,000
120,000

7-13
(Barbie, Inc.)
(a).
2009
Mar. 1
Dec. 31
31
31
Investment in Associates Kitchie

Cash
Cash (30% x 800,000)
(3.2M x 10/12) x 30%
Income from Associates Kitchie
1,365,000
240,000
1,365,000
240,000
800,000
800,000
37,500
(30% x 750,000) / 5 yrs. = 45,000

45,000 x 10/12 = 37,500
37,500
(b)
Acquisition cost, March 1, 2009
P1,365,000
Cash dividends received
( 240,000)
Income from associates
800,000
Adjustment in reported income
( 37,500)
Investment carrying value, December 31, 2009
P1,887,500
Income reported by Barbie from its investment in associates:
(800,000 37,500)
762,500
7-14
(Richmonde Corporation)
(a)
2008
Jan.
Dec. 31
31
Available for Sale Securities Pen, Inc.

Cash
900,000
Cash
Dividend Revenue
10% x 2,000,000
200,000

Securities
480,000
900,000
200,000
480,000
2009
Jan.
Investment in Associates Pen, Inc.

Securities
Retained Earnings
Available for Sale Securities Pen, Inc.
Acquisition cost
900,000
Share in income (10% x 6M)
54
1,300,00
0
480,000
480,000
400,000
900,000

600,000
Share in dividends (10% x 2M)
(200,000)
Carrying amount, 12/31/05
1,300,000
1
2,600,00
0
Cash
Dec. 31
1,950,00
0
Income from Associates (30% x

6,500,000)
31
(b)
Cash
Investment in Associates (30% x
3,000,000)
900,000
Cost transferred from Available for Sale Securities
1,950,00
0
900,000
1,300,00
0
2,400,000
1,950,000
(900,000)
4,750,000
Additional investment
Share in income
Share in dividends
Carrying amount, December 31, 2009
7-15
2,600,00
0
(E Corporation)
(a)
2008
Jan.
Investment in Associates F Company
8,250,00
0
Cash (50,000 x 165)
8,250,00
0
Aug. 1
Cash
210,000
Dec. 31

170,000
Cash
210,000

Income from Associates F Company
250,000
25% x 680,000
210,000
170,000
2009
Dec. 31
31
25% x 1,000,000
210,000
250,000
2010
Jan. 2
Cash (20,000 x 170)
3,400,00
0

Gain on Sale of Investment in Associates
Acquisition cost
Share in income (2006)
Share in dividends (2006)
55
8,250,000
170,000
(210,000)
3,300,00
0
100,000

Share in dividends (2007)
Share income (2007)
Investment carrying amount
Portion sold
Cost of investment sold
(210,000)
250,000
8,250,000
40%
3,300,000
Available for Sale Securities F Company

4,950,00
0
4,950,00
0
8,250,000 3,300,000
Dec. 31
31
Cash
Dividend Revenue
120,000

Securities
750,000
120,000
750,000
(30,000 x 190) - 4,950,000 = 750,000
(b).
Cost/Carrying Value, beg of year
2008
P8,250,000
2009
P8,210,000
2010
P8,250,000
Income from associates
Cash dividends received
Sale of shares
Market adjustment
Carrying value, end of year
170,000
(210,000)
250,000
(210,000)
(3,300,000)
750,000
P8,210,000
P8,250,000
P5,700,000
7-16
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
7-17
A and B
A
B and C
A and B
B
C
C
A
B
A, B and C
C
A
B
A
C
(Abu Company)
(a)
Date
01/01/07
12/31/07
12/31/08
12/31/09
12/31/10
12/31/11
Interest
Received
Interest Revenue
Premium
Amortization
1,200,000
1,200,000
1,200,000
1,200,000
1,200,000
1,158,450
1,152,633
1,146,002
1,138,442
1,129,827*
41,550
47,367
53,998
61,558
70,173*
56
Carrying
Value
8,274,646
8,233,096
8,185,729
8,131,731
8,070,173
8,000,000

*rounded off.
(b)
2007
Jan.
Dec. 31
Held to Maturity Securities

Cash
8,274,646
Cash
Interest Revenue
1,200,000
Cash
Interest Revenue
1,200,000
8,274,646
41,550
1,158,450
2008
Dec. 31
7-18
47,367
1,152,633
(South Company)
a. Journal entries in 2006 and 2007
(1) Securities are classified as financial assets at fair value through
profit and loss.
2008
June 1
Dec. 1
Trading Securities State Corp. Bonds

Cash
Cash
Interest Revenue (4M x 8% x )
3,691,500
3,691,500
160,000
160,000
31
Interest Receivable
Interest Revenue (4M x 8% x 1/12)
26,667
31

Unrealized Gain on Trading
Securities
188,500
26,667
188,500
4M x 0.97 = 3,880,000
3,880,000 3,691,500 = 188,500
2009
Jan. 1
Interest Receivable
Interest Revenue
26,667
June 1
Cash
Interest Revenue
160,000
Dec. 1
Cash
Interest Revenue
160,000
31
Interest Receivable
Interest Revenue
26,667

Unrealized Gain on Trading
Securities
80,000
Dec. 31
26,667
160,000
160,000
26,667
80,000
4M x 0.99 = 3,960,000
3,960,000 3.880,000 = 80,000
(3) Securities are classified as held-to-maturity securities.

To facilitate computation, a partial amortization table is presented below.
Interest
Interest
Amortization
HTM
Date
Received
Revenue
of Discount
Carrying Value
57

June
1,
2008
Dec 1, 2008
June
1,
2009
Dec.
1,
2009
June
1,
2010
Dec.
1,
2010
June
1,
2011
Dec.
1,
2011
3,691,500
160,000
160,000
184,575
185,804
24,575
25,804
3,716,075
3,741,879
160,000
187,094
27,094
3,768,973
160,000
188,449
28,449
3,797,422
160,000
189,871
29,871
3,827,293
160,000
191,365
31,365
3,858,658
160,000
192,933
32,933
3,891,591
2008
June 1
Dec. 1
31
Held to Maturity Securities State Corp.

Bonds
Cash
3,691,50
0
Cash
Bonds
Interest Revenue (see above table)
160,000
24,575
Interest Receivable
Bonds
Interest Revenue
26,667
4,301
Interest Revenue
Interest Receivable
Bonds
30,968
3,691,500
184,575
30,968
160,000 x 1/6 = 26,667; 25,804 x 1/6 =

4,301
2009
Jan. 1
June 1
Dec. 1
31
26,667
4,301
Cash
Bonds
Interest Revenue(see above table)
160,000
25,804
Cash
Bonds
160,000
27,094
Interest Receivable
Bonds
Interest Revenue
26,667
4,742
160,000 x 1/6 = 26,667; 28,449 x 1/6=
185,804
187,094
31,409
4,742
(3) Securities are classified as available for sale securities.

58
Date
June
1,
2008
Dec 1, 2008
June
1,
2009
Dec.
1,
2009
June
1,
2010
Dec.
1,
2010
June
1,
2011
Dec.
1,
2011
Interest
Received
Interest
Revenue
Amortization
of Discount
HTM
Carrying Value
3,691,500
160,000
160,000
184,575
185,804
24,575
25,804
3,716,075
3,741,879
160,000
187,094
27,094
3,768,973
160,000
188,449
28,449
3,797,422
160,000
189,871
29,871
3,827,293
160,000
191,365
31,365
3,858,658
160,000
192,933
32,933
3,891,591
2008
June 1
Dec. 1
31
31
Available for Sale Securities State Corp.

Bonds
Cash
Cash
Available for Sale State Corp. Bonds
Interest Receivable
Bonds
Interest Revenue
160,000 x 1/6 = 26,667
25,804 x 1/6 = 4,301
Net Unrealized Gain/Loss on AFS
Securities
3,691,500
3,691,500
160,000
24,575
184,575
26,667
4,301
30,968
159,624
159,624
4M x 0.97 =
3,880,000
Amortized cost
3,691,500+ 24,575 + 4,301 =
3,720,376
Market Adjustment
P 159,624
2009
Jan. 1
Interest Revenue
Interest Receivable
Bonds
June 1
Cash
Bonds
Interest Revenue(see above table)
160,000
25,804
Cash
Bonds
160,000
27,094
Dec. 1
59
30,968
26,667
4,301
185,804
187,094

31
Interest Receivable
Bonds
Interest Revenue
26,667
4,742
Market Adjustment Available for Sale

Securities
Unrealized Gain or Loss on AFS
26,661
31,409
160,000 x 1/6 = 26,667

28,449 x 1/6 = 4,742
Dec 31
26,661
Market value (4M x 99%)

P3,960,000
Amortized Cost (3,768,973 + 4,742)
3,773,715
Cumulative UG/L
P
186,285
Before adjustment
159,624
Increase in UG/L
P
26,661
2011.
2. Journal entry/entries to record sale of investment on November 1,

(a) Securities are classified as financial assets at fair value through
profit and loss.
2011
Nov. 1
Cash
Loss on Sale of Trading Securities
Interest Revenue
3,925,00
0
128,333
Acc. Int. = 4M x 8% x 5/12 = 133,333

Sales price (3,925,000133,333)
3,791,667
Carrying value (4 M x 0.98)
3,920,000
Loss on sale
128,333
133,333
3,920,000
(b) Securities are classified as held-to-maturity securities.

2011
Nov. 1

Bonds
Interest Revenue
32,933 x 5/6 = 27,444
Cash
Loss on Sale of Held to Maturity Securities
Interest Revenue
Held to Maturity SecuritiesState Corp.
Bonds
CV of HTM Securities sold:
As of June 1, 2011
3,858,658
Amortization June 1 to
Nov. 1, 2011
27,444
As of Nov. 1, 2011
3,886,102
60
27,444
27,444
3,925,00
0
94,435
133,333
3,886,10
2

Sales price
3,791,667
Loss on sale
94,435
(c) Securities are classified as available for sale securities.
2011
Nov. 1
Available for Sale Securities State

Corp.Bonds
Interest Revenue
27,444
27,444
Cash
Loss on Sale of Available for Sale Securities
Interest Revenue
Available for Sale SecuritiesState
CorpBonds
Sales price (3,925,000133,333)
3,791,667
Amortized Cost
3,886,102
Loss
94,435
Amortized Cost 12/1/08
P3,827,293
Discount Amort.
12/1/08 12/31/08
31,365 x 1/6
5,228
Amortized Cost 12/31/08
P3,832,521
MV 12/31/08 4M x 98%
3,920,000
Unrealized Gain on 12/31/08
87,479
7.19
3,925,00
0
94,435
87,479
133,333
3,886,10
2
87,479
Raffy Company)
Date
June 1, 2007
Dec.
31,
2007
Dec.
31,
2008
Dec.
31,
2009
Dec.
31,
2010
2007
June 1
Interest
Received
Interest
Revenue
Amortization
of Discount
350,000
312,267
37,733
HTM
Carrying Value
5,353,150
5,315,417
600,000
531,542
68,458
5,246,959
600,000
524,696
75,304
5,171,655
600,000
517,166
82,834
5,088,821
Held to Maturity Securities Blessie Corp.

Bonds
Interest Revenue (5M x 12% x 5/12)
61
5,353,15
0
250,000

Cash
Dec. 31
5,603,15
0
Cash
Interest Revenue
Held to Maturity Securities Blessie
600,000
Cash
Interest Revenue
600,000
Cash
Interest Revenue
600,000
Interest Receivable (3M x 12% x 8/12)

Interest Revenue (517,166 x 3/5 x 8/12)
240,000
562,267
37,733
2008
Dec. 31
2009
Dec. 31
531,542
68,458
524,696
75,304
2010
Sept. 1
Cash (3,090,000 + 240,000)

Gain on sale of HTM Securities
Interest Receivable
3,330,00
0
33,134
206,866
20,141
240,000
3,069,85
9
CV of HTM securities sold:

As of 12/31/07 (5,171,655 x 3/5)
3,102,993
Amort from 1/1/08-9/1/08
33,134
CV as of 9/1/08
3,069,859
Sales price
3,090,000
Gain on sale
20,141
Available for Sale Securities Blessie

2,068,66
2
2,068,66
2
5,171,655 3,102,993 = 2,068,662

Dec. 31
Cash
Interest Revenue
Available for Sale Securities Blessie
240,000
2M x 12% = 240,000
5,171,655 3,102,993 = 2,068,662
2,068,662 x 10% = 206,866
240,000 206,866 = 33,134
Dec 31
Market Adjustment AFS

Unrealized Gain or Loss on AFS
Amortized cost
2,068,662 33,134 =
P2,035,528*
Market value 2M x 103.5%
2,070,000
Market Adjustment
P 34,472
*or 5,088,821 x 2/5 = P2,035,528
Note:
206,866
33,134
34,472
34,472
Instead of recognizing the unrealized gain or loss at the date of
62

reclassification on September 1, 2010 (the company demonstrating no ability
to hold the securities until maturity, hence the securities were reclassified as
AFS), and adjusting the account again at yearend, a single adjustment at
yearend is made in the above entries. Both methods would achieve the same
effect of reflecting the AFS to market at balance sheet date through the
equity account Unrealized Gain or Loss on AFS.
7-21
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
B
A
B
A
B
A
A
A
B
B
C
B
A
A
B
and C
and C
and C
and C
and C
MULTIPLE CHOICE QUESTIONS

Theory
MC1
MC2
MC3
MC4
B
B
A
C
MC5
MC6
MC7
MC8
D
D
A
D
MC9
MC10
MC11
D
B
C
Problems
MC12
MC13
B
D
MC14
MC15
MC16
A
C
MC17
MC18
MC19
MC20
MC21
MC22
MC23
MC24
D
B
A
D
B
B
MC25
MC26
535,000 525,000 = 10,000

307,500 + 269,500 = 577,000; (600 x 440) + (2,000 x 138) = 540,000
577,000 540,000 = 37,000; 12,900 + 13,500=26,400; 37,00026,400=10,600
10,000 x 150 = 1,500,000; 20% x 3M = 600,000
10,000 x 50 = 500,000; 1,500,000 + 600,000 500,000 = 1,600,000
1,000 x 50 = 150,000 + 2,250 = 152,250; 152,250 (1,000 x 10) = 142,250
3,000 x 120 = 360,000; 560,000 x 3,000/6,000 = 280,000
360,000 280,000 = 80,000
360,000 x 600/3600 = 60,000; 200,000 + 60,000 = 260,000
360,000 260,000 = 100,000
500 x 25 = 12,500 500 = 12,000
500 x 20 = 10,000; 12,000 10,000 = 2,000 gain
960-500 = 460 + 600 = 1,060; 1,060/10 = 106 shares
88 1.10 = 80
352,000 (4,400 x 4) = 334,400; 334,400 / 4,400 sh = 76
See No. 21
1,200,000 (3 x 40,000) + (25% x 640,000) = 1,240,000
40% x 450,000 = 180,000
150,000 12 = 12,500; 180,000 12,500 = 167,500
25,000 x 180 = 4,500,000; 25% x (2,400,000 480,000) = 480,000
4,500,000 + 480,000 60,000 60,000 = 4,860,000
4,860,000 x 15/25 = 2,916,000
63

MC27
MC28
MC29
MC30
A
C
B
MC31
MC32
C
B
MC33
MC34
MC35
MC36
A
A
C
C
MC37
MC38
C
B
MC39
MC40
MC41
MC42
D
B
D
10,000 x 200 = 2,000,000; 4,860,000 x 10/25 = 1,944,000

2,000,000 1,944,000 = 56,000
500,000 + 1,500,000 + (10% x 3M) = 2,300,000
40% x 1,200,000 = 480,000; (40% x 900,000) 18 = 20,000
40% x 100,000 = 40,000; 480,000 20,000 40,000 = 420,000
4,000,000 + 420,000 (40% x 200,000) = 4,340,000
(1,000 x 140) + (900 x 170) + (800 x 200) = 453,000
(1,000 x 150) + (900 x 180) + (800 x 220) = 488,000
488,000 453,000 = 35,000; 35,000 20,000 = 15,000
See No. 33
8,750,000 x 5% = 437,500
3,692,000 x 5% = 184,600; 4M x 4% = 160,000
184,600 160,000 = 24,600; 3,692,000 + 24,600 = 3,716,600
See No. 36
912,400 x 10% = 91,240; 1,000,000 x8% = 80,000
91,240-80,000 = 11,240; 912,400 + 11,240 = 923,640
7,850,000 (8M x .08 x 6/12) = 7,530,000; 7,383,000 x 5% = 369,150
8M x 4% = 320,000; 369,150 320,000 = 49,150
7,383,000 + 49,150 = 7,432,150; 7,432,150 x 5% = 371,608
371,608 320,000 = 51,608; 7,342,150 + 51,608 = 7,483,758
7,530,000 7,483,758 = 46,242
500,000 x 4% = 20,000
460,000 472,500 = 12,500
64

CH 7 Answers Vol 1 Finacc

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

CH 7 Answers Vol 1 Finacc

Uploaded by

Copyright:

Available Formats

CHAPTER 7

INVESTMENTS IN EQUITY SECURITIES AND DEBT SECURITIES

Total cost to be allocated

Preference shares 59,500 x 45/60

Market value of ordinary shares

Allocation to Ordinary Shares

Allocation to Preference Shares

Chapter 7 Investments in Equity Securities and Debt Securities

Market value of ordinary shares

Costs per share:

Memo entry. Received additional shares of B Corp. ordinary shares on

Available for Sale Securities-C Ordinary

Costs per share:

Chapter 7 Investments in Equity Securities and Debt Securities

Classified as available for sale securities

To record sale of Y Co. Common

To record valuation at end of year.

Chapter 7 Investments in Equity Securities and Debt Securities

Cost of stock rights exercised:

Cash paid (300 shares x P80)

Sales price of stock rights (500 x 4.50)

Cost of stock rights sold

Available for sale securities balance at December 31, 2009:

Trading Securities Pro Corp. Ordinary

Trading Securities Pro Corp. Ordinary

(12,000 shares x 75)

Carrying value, 12/31/07 (10,000 shares x 66) 660,000

Chapter 7 Investments in Equity Securities and Debt Securities

Available for Sale Securities Diana

Memorandum entry. Received 500

Available for Sale Securities Smith

Stock Rights Diana Ordinary

Available for Sale Securities Diana

Cash (100 x 56)

Cash (1,000 x 100 x 8%)

Market Adjustment AFS Securities

Chapter 7 Investments in Equity Securities and Debt Securities

Smith (1,000 x 115)

Gain on sale of AFS Securities

Available for Sale Securities Y Co. Ordinary

Net Unrealized Gains/Losses on AFS

Market Adjustment AFS Securities

Cash (5,000 x 25)

Memorandum entry. Received 4,000

Chapter 7 Investments in Equity Securities and Debt Securities

Market Adjustment AFS Securities

Memo. Received 2,000 additional

Share in income 2009

Investment in Associates Pirates

Investment in Associates Pirates

Cash (30% x 400,000)

Chapter 7 Investments in Equity Securities and Debt Securities

Investment in Associates Kitchie

(30% x 750,000) / 5 yrs. = 45,000

Available for Sale Securities Pen, Inc.

Market Adjustment AFS Securities

Investment in Associates Pen, Inc.

Chapter 7 Investments in Equity Securities and Debt Securities

Investment in Associates Pen, Inc.

Investment in Associates Pen, Inc.

Income from Associates (30% x

Cost transferred from Available for Sale Securities

Investment in Associates F Company