Danielle Louise F.

Gaza
3A1//Financial Accounting

QUESTIONS
1. On January 1, 2017, DeokSeon Company began its operations. The following
information pertains to the December 31, 2017 portfolio of equity securities:

TRADING NON-TRADING
Aggregate cost 5,000,000 2,800,000
Aggregate market value 8,900,000 6,000,000
Aggregate lower of cost 4,500,000 5,300,000
or market value applied
to each security
The market declines are judged to be other than temporary. The non-
trading securities are designated at fair value through profit or loss. What
amount should be reported as total gain or loss on these securities in the
income statement for 2017?

2. On June 30, 2017, Taek Company acquired 300,000 ordinary shares of

JungHwan Company for P13,500,000. At the time of acquisition, JungHwan
Company had outstanding 800,000 shares with a carrying value of
P36,000,000. The following events took place during the year:
JungHwan Company reported net income of P5,000,000 for the year
2017.
Taek Company received from JungHwan Company a dividend of P0.50
per ordinary share.
SunWoo Company acquired 10,000 preference shares (par P150) from
JungHwan Company at acquisition price of P200.
The market value of JungHwan Company share had temporarily
declined to P30.
Taek Company has elected irrevocably to measure the investment at
fair value through other comprehensive income.
What is the carrying amount of the investment on December 31, 2017?
3. Jessica Company held the following financial assets as trading investments
on December 31, 2016:
COST MARKET VALUE
100,000 shares of 8,500,000 7,500,000
TaeYeon Company
nonredeemable
preference share
 capital, par value P80
7,000 shares of Sunny 1,500,000 2,000,000
Company preference
share capital, par value
P150, subject to
mandatory redemption
by theissuer at par on
December 31, 2017
10,000,000 9,500,000
On December 31, 2016 how much is the total carrying value of the
investments?
4. On March 30, 2017, BokJoo Company acquired 300,000 ordinary shares of
JooHyuk Company for P9,000,000. At the time of acquisition, JooHyuk
Company had outstanding 800,000 shares with a carrying value of
P36,000,000. The following events took place during the year:
JooHyuk Company reported net income of P5,000,000 for the year
2017.
BokJoo Company received from JooHyuk Company a dividend of P0.50
per ordinary share.
JaeRim Company acquired 10,000 6% cumulative preference shares
(par P150) from JooHyuk Company at acquisition price of P200.
The market value of JooHyuk Company share had temporarily declined
to P30.
What is the carrying amount of the investment on December 31, 2017?
5. Jun Company provided the following portfolio of equity investments
measured at fair value through other comprehensive income:
Aggregate cost- December 31, Net realized gain during 2015
2014 1,700,000
Unrealized gain- December 31, 40,000
2014 260,000
Unrealized loss- December 31, 300,000
2014
On January 1, 2016, the entity reported an unrealized loss of P15,000 as a
component of other comprehensive income. In the statement of changes in
equity, what cumulative amount should be reported as unrealized loss on the
securities?
6. During 2017, SeungKwan Company bought the ordinary shares of Vernon
Company as follows:
June 1 20,000 shares @ 30,000 shares @
December 1 P100 P120
 2,000,000 3,600,000
The following transactions happened in 2018:
January 1, Vernon Company has 250,000 outstanding ordinary shares
and 50,000 preference shares.
January 10, SeungKwan Company received cash dividend of P10 per
ordinary share
February 15, SeungKwan received 20% stock dividend
March 1, Vernon Company issued additional 150,000 ordinary shares
and SeungKwan Company did not exercise his right and sold these
rights for P5 each.
April 13, SeungKwan Company sold half of his ordinary shares at P150
per share.
October 9, Vernon Company declared 4 for 1 share split for its ordinary
shares.
December 31, the fair market value of ordinary shares and preference
shares are P90 and P100 per share respectively.
How much is the balance of the equity investment through other
comprehensive income at year-end?
7. On July 1, 2017, Infinite Company paid P1,000,000 plus a transaction cost of
P50,000 for 100,000 outstanding shares which represent 40% of Seventeen
Company. At that date, the net assets of Seventeen totalled P2,000,000. All
assets are equal to their fair value, except for an equipment with P400,000
excess of fair value over carrying value. The equipment has a remaining
useful life of 4 years.
Seventeen reported net income of P800,000 for 2017, of which
P500,000 was for the 2nd half of the year. Seventeen also paid cash dividends
of P300,000 on September 30,2017.
On January 1, 2018, Infinite Company acquired an additional 5% shares
for P15 per share. The excess of fair value over the carrying value of this
date is attributable to inventories amounting to P190000 which is already
sold. At year-end, Seventeen Company reported net income of P2,000,000
and no dividends was declared at that year. How much is the carrying value
of the investment at December 31, 2018?
8. On March 31, 2016, Dana Company purchased 20% of the outstanding
ordinary shares of Louise Company for P5,000,000 of which 25% was paid in
cash and the rest is payable with 10% annual interest due on March 31,
2017. Louise Companys net assets as of that date was P19,000,000.
Dana also paid P1,000,000 to a business broker who helped to find a
suitable business and negotiated the purchase.
At the time of acquisition, the fair values of Louise Companys
identifiable assets and liabilities were equal to their carrying amount except
 for inventories which had a fair value in excess of carrying amount of
P5,000,000. Half of these inventories are sold on the first half of the year
while the 50% of the remaining inventories are sold on the second half of the
year. During 2016, the associate reported net income of P6,000,000 and paid
dividend of P1,000,000.
a. How much should be the share in income of Dana Company at year
2016?
b. How much is the carrying amount of the investment at year-end?
c. How much goodwill arises from the investment?
9. On January 1, 2015, Solar Company purchased 40% of the ordinary shares of
Wheein Company for P3,500,000 when the net assets of Wheein Company
amounted to P7,000,000.
At acquisition date, the carrying amounts of the identifiable assets and
liabilities of Wheein Company were equal to their fair values, except for a
machinery for which the fair value was P1,500,000 greater than carrying
amount and inventory whose fair value was P500,000 greater that cost. The
equipment has a remaining life of 5 years and the inventory was all sold
during 2015.
Wheein Company reported net income of P4,000,000 for 2015 and paid
no dividends during 2015. How much is the maximum amount of the equity
in earnings of the investee?
10. On September 30, 2016, Noah Company purchased 200,000 of the
outstanding ordinary shares of Rozen Company for P5,000,000 of which 25%
was paid in cash and the rest is payable with 10% annual interest due on
March 31, 2017. Rozen Companys net assets as of that date was
P19,000,000. Rozen Company also had 1,000,000 outstanding ordinary
shares (P15 par value) as of that year.
Noah also paid P1,000,000 to a business broker who helped to find a
suitable business and negotiated the purchase.
At the time of acquisition, the fair values of Louise Companys
identifiable assets and liabilities were equal to their carrying amount except
for inventories which had a fair value in excess of carrying amount of
P5,000,000. Half of these inventories are sold on the first half of the year
while the 50% of the remaining inventories are sold on the second half of the
year. During 2016, the associate reported net income of P6,000,000 and paid
dividend of P1,000,000. Next year, the following chronological events
happened:
Jan 1: Rozen Company issued additional 250,000 ordinary shares.
Jan 1: Noah received one right for every ordinary share held. The
rights entitle their holders to buy one ordinary share at P10 for
every 2 rights submitted.
 Feb 1: Noah didnt exercise his right and sold all his rights for P5
each.
Feb 1: At this date, Noah loses his significant influence from the
company and made an irrevocable choice of designating his
investment at fair value through profit or loss
Dec 31: Fair value of each share is P25
a. How much is the gain/loss from dilution?
b. How much is the equity investment at year-end
c. How much is the unrealized gain or loss P/L?
11. On March 31, 2014, WonWoo Company purchased 20% of MinGyu
Companys outstanding ordinary shares and no goodwill resulted from the
purchase.
WonWoo Company appropriately carried this investment at equity and
the balance in Wonwoos account was P3,900,000 on December 31, 2014.
MinGyu Company reported net income of P5,000,000 for the year ended
December 31, 2014 and paid cash dividend totalling P700,000 on December
31, 2015. How much did WonWoo pay for the 25% interest in MinGyu?
12. Dino Company owned 10% of Hoshi Companys preference share
capital and 15% of the ordinary share capital on December 31, 2013. The
investee reported net income P500,000 for the year end.
6% cumulative preference share 2,000,000
Ordinary share 8,000,000
13. How much is the equity in earnings of the investee for 2013?
14. SungGyu Company acquired 40% interest in an associate, MyungSoo
Company, for P5,000,000 on January 1, 2012. At the acquisition date, there
were no differences between fair value and carrying amount of identifiable
assets and liabilities. MyungSoo Company reported the following net income
and dividend for 2012 and 2013 respectively:
15. Net 16. Dividend 19. 3,000,000
income 17. 2,000,000 20. 1,000,000
18. 800,000
 21. The following transactions happened between the two entities:
April 1, 2012, MyungSoo Company sold a machinery costing P500,000
to SungGyu Company for P800,000. SungGyu Company applied 10%
straight line depreciation.
On July 1, 2013 MyungSoo Company sold an equipment for P900,000
to SungGyu Company. The carrying amount of the equipment is
P500,000 with a remaining life of 5 years from the time of sale.
On December 31, 2013, MyungSoo Company sold an inventory to
SungGyu Company for P2,800,000. The inventory had a cost of
P2,000,000 and still on hand at that date.
a. How much is the investors share in profit of the associate for 2012?
b. How much is the investors share in profit of the associate for 2013?
c. How much is the carrying amount of the investment in associate on
December 31, 2012?
d. How much is the carrying amount of the investment in associate on
December 31, 2013?
22. The following chronological transactions were completed by Popi
Company:
Bought 1,000 ordinary shares of Tolits Company for P50,000 to be
measured at fair value through other comprehensive income.
Bought 500 shares 5% P150 par preference of the same company at
P200 per share plus brokers fee of P5,000. The shares are classified
as at fair value through other comprehensive income.
350 ordinary shares were sold for P20,000 and an expense was
incurred amounting to P750
Received one right from Tolits Company for every ordinary share
held. The rights entitle their holders to buy one ordinary share at
P40 for every five shares held.
Popi exercised 70% of the rights received form Tolits when each
ordinary share of Tolits sells at P70. The remaining shares were sold
at P5 each.
Popi received 4 for 1 share split.
Market value of the securities at year-end are: ordinary share P55,
preference share P120
a. How much is the cost of ordinary and preference shares per unit after
the share split?
b. How much is the unrealized gain or loss on the investment?
23. Krystal Companys portfolio of trading securities includes the following
on December 31, 2016:
24. 25. COST 26. FAIR VALUE
27. 25,000 ordinary 28. 500,000 29. 425,000
 shares of Amber Co.
30. 50,000 ordinary 31. 550,000 32. 675,000
shares of Luna Co.
33. 34. 1,050,000 35. 1,100,000
36. All of the above securities have been purchased in 2016.
KrystalCo. Completed the following transactions:
37. March 1- Sold 15,000 shares of Amber Co. ordinary shares
at P40, less brokerage commission of P3,500.
38. June 30- Bought 2,800 ordinary shares of Victoria, Inc. at
P55 plus commission, taxes and other transactions of P3,500.
39. September 30- Received one for four share spilt from
Victoria, Inc.
40. Krystal Company portfolio of trading securities appeared as
follows on December 31, 2016:
41.
42. 43. 44. FAIR VALUE
COST
45. ? 46. 47. 580,000 (net of P6,000
ordinary 546,00 estimated transaction costs that
shares of 0 would be incurred on the sale of
Luna Co. securities)
48. ? 49. 50. 75,000 (net of P5,000
ordinary 82,650 estimated transaction costs that
shares of would be incurred on the sale of
Victoria, Inc. securities)
51. 52. 53. 655,000
628,65
0
a. How much is the cost per unit of the ordinary shares held at year-end?
b. How much is the unrealized gain/loss on these securities should be
reported in the 2016 income statement?
c. What is the gain/loss on the sale of Amber Co. ordinary shares?
d. How much is the total amount of trading securities at year-end?
54. On January 1, 2016, Twice Company acquired 15% interest in
Mamamoo Company by paying P8,000,000 for 100,000 ordinary shares. On
this date, the net assets of Mamamoo Company totalled P40,000,000. The
fair values of Mamamoos identifiable assets and liabilities were equal to
their book values. Twice received dividends of P1.50 per share from
Mamamoo on October 1, 2016. Mamamoo reported net income of P5,00,000
for the year 2016. Twice classified the investment as at fair value through
other comprehensive income. Market price for each shares was P90 at
December 31, 2016.
 55. Twice paid P30,000,000 on January 1, 2017, for 300,000
additional ordinary shares, which represents 25% interest in Mamamoo
Company. The fair value of Mamamoos identifiable assets, net of
liabilities was equal to their books values of P92,00,000. Twice received
a dividend of P2.50 per share on September 1, 2017 and Mamamoo
reported net income of P6,000,000 for the year 2017. Market value at
year-ended 2017 is P120.
a. How much is the carrying amount of the investment at year-
ended 2017?
b. How much is the gain on re-measurement to equity should be
reported in 2017 income statement?
c. How much is the goodwill arises from the year 2017?
56. On January 1, 2016, Twice Company acquired 15% interest in
Mamamoo Company by paying P8,000,000 for 100,000 ordinary shares. On
this date, the net assets of Mamamoo Company totalled P40,000,000. The
fair values of Mamamoos identifiable assets and liabilities were equal to
their book values. On June 30, 2016, Twice sold the 25% of his ordinary
shares at P95 per share.
57. Twice received dividends of P1.50 per share from Mamamoo on
October 1, 2016. Mamamoo reported net income of P5,00,000 for the year
2016. Twice classified the investment at fair value through other
comprehensive income. Market price for each shares was P90 at December
31, 2016.
58. Twice paid P30,000,000 on January 1, 2017, for 300,000
additional ordinary shares, which represents 25% interest in Mamamoo
Company. The fair value of Mamamoos identifiable assets, net of
liabilities was equal to their books values of P92,00,000. Twice received
a dividend of P2.50 per share on September 1, 2017 and Mamamoo
reported net income of P6,000,000 for the year 2017. Market value at
year-ended 2017 is P120.
a. How much is the amount that was transferred from investment in
equity through OCI to Investment in Associate?
b. How much is the gain on sale from the year 2016?
59. Sian Company owns 5% interest in Rohee Company, which declared a
cash dividend of P3,720,000 on November 31, 2016, to shareholders of
record on December 25, 2016, payable on January 25, 2017. In addition, on
September 30, 2016, Sian Company received a liquidating dividend of
P100,000 from Sarang Company. Sian Company owns 7% of Sarang
Company. What amount of dividend income should be recorded at year-end
2016 at Sians income statement?
60. Lisa Company purchased 40% of Jennie Companys outstanding
ordinary shares on April 1, 2015, for P270million. The book value of Jennie
Companys net assets at the acquisition date totalled P450million. Book
values and fair values are same for all assets and liabilities except for
inventory and office building, for which fair values exceeded book values by
P12.5million and P112.5million, respectively. 25% of the inventories were
sold at first half of the year, while the remaining were sold at the second half
of the year. The office building has a remaining useful life of 15 years.
61. Jennie Company reported net income of P110million for the year
ended December 31, 2015 and paid cash dividends of P40million. The fair
value of Lisas investment in associate was P300million at year-end.
a. How much is attributable to goodwill?
b. How much is the balance of the investment at year-end?
c. How much is the investment income in 2016?
62. Lisa Company purchased 20% of Jennie Companys outstanding
ordinary shares on July 1, 2015, for P500,000. The book value of Jennie
Companys net assets at the acquisition date totalled P3,000,000. Book
values and fair values are same for all assets and liabilities except for
inventory. The excess of carrying value over fair value of the inventory was
P300,000. 25% of the inventories were sold at first half of the year, while the
remaining was sold at the second half of the year.
63. Jennie Company reported net income of P270,000 for the year
ended December 31, 2015 and declared and paid cash dividends of
P170,000 on August 1, 2016. The fair value of Lisas investment in associate
was P400,000 at year-end. How much is the impairment for the year 2016?