04sol-Investments WB 1st

IV AUDIT OF INVESTMENTS
SUMMARY OF PROBLEMS
PROBLEM NO. 1 Analysis of investments in debts instruments HFT, AFS, HTM (preparation of journal entries under
PROBLEM NO. 2 Audit of investments in equity instruments - FVTPL (including preparation of adjusting journal entrie
PROBLEM NO. 3 Audit of investments in equity instruments FVTOCI (including preparation of adjusting journal entr
PROBLEM NO. 4 Analysis of investments in equity instruments (Trading and AFS)
PROBLEM NO. 5 Audit of investments in equity instruments (carried at cost) (including preparation of adjusting journa
PROBLEM NO. 6 Analysis of investments in equity and debt instruments
PROBLEM NO. 7 Analysis of investments in equity instruments (FVTPL and Associate)
PROBLEM NO. 8 Analysis of investments in equity instruments (AFS and Associate)
PROBLEM NO. 9 Analysis of investments in debt instruments (HTM)
PROBLEM NO. 10 Impairment of investments in debt instruments (HTM)
PROBLEM NO. 11 Analysis of investments in associates of an SME
PROBLEM NO. 12 - Theory
PROBLEM NO. 1 - Isabela Corporation

Requirement A
FA@FVTPL
Available for Sale (AFS)
Held to Maturity (HTM)
A.1) Purchase of investment:

FA@FVTPL
P874,164
Commission exp.
50,000
Cash
P924,164
AFS securities
Cash
P924,164
HTM securities
Cash
P924,164
P924,164
P924,164
A.2) Accrual of interest:

Interest receivable P80,000
Interest income
P80,000

Interest income
P80,000

Interest income
P80,000
AFS securities
P12,416
Interest income
P12,416
HTM securities
P12,416
Interest income
P12,416
FA@FVTPL
P105,836*
FV adj. gain (P/L)
P105,836
AFS securities
P43,420**
FV adj. G/L (OCI)
P43,420
No entry
* (P980,000 - P874,164)
** (P980,000 - P936,580)
A.3) Amortization of discount (see schedule

below):
No entry
A.4) FV adjustment:
Amortization schedule:
Date
1/1/2012
12/31/2012
12/31/2013
12/31/2014
12/31/2015
12/31/2016
EI (10%)
P92,416
93,658
95,024
96,526
98,212
NI (8%) Disc. Amort.

P80,000
80,000
80,000
80,000
80,000
P12,416
13,658
15,024
16,526
18,212
Amortized cost
P 924,164
936,580
950,238
965,262
981,788
1,000,000
Requirement B
Carrying amount, 12/31/12
FA@FVTPL
980,000 Fair value

980,000 Fair value
936,580 Amortized cost
Requirement C
FA@FVTPL
To update amortization
No entry
AFS securities
P13,658
Interest income
P13,658
HTM securities
P13,658
Interest income
P13,658
FV adjustment before sale
No entry
FV adj. G/L (OCI) P3,658*

AFS securities
P3,658
No entry
* (P990,000 - P993,658)
Disposal entry
Disposal entry
Disposal entry
Cash
P1,070,000
FA@FVTPL
P980,000
Interest income
80,000
Gain on sale of TS
10,000
Cash
P1,070,000
FV adj. G/L (OCI)
39,762
AFS securities
P990,000
Interest income
80,000
Gain on sale of AFS (P/L) 39,762
Cash
P1,070,000
HTM securities
P950,238
Interest income
80,000
Gain on sale of HTMS
39,762
PROBLEM NO. 2 - IMBC Corporation

Requirement No. 1. a
Sales proceeds
CA of investment sold (P1,800,000 x 2,400/7,200)
Loss on sale of 2,400 BACK shares on 3/1/12
540,000
600,000
(60,000)
Requirement No. 1. b
Total proceeds
Less dividends sold (4,800 shares x P30)
Net proceeds
CA of investment sold (P1,320,000* x 4,800/6,600**)
Gain on sale of 4,800 4WARD shares on 8/15/12
1,176,000
144,000
1,032,000
960,000
72,000
Total cash paid

Less purchased dividend (6,000 x P20)
Adjusted cost
1,440,000
120,000
1,320,000 *
** after 10% share dividend

Sales proceeds
CA of investment sold (P1,320,000* x 1,200/6,600**)
Gain on sale of 800 4WARD shares on 9/1/12
276,000
240,000
36,000
Total gain on sale of 4WARD shares
108,000
Requirement No. 1. c
Declared January 2
Declared May 2
Declared August 1 (6,600 shares x P30)
Total dividend income for 2012
198,000
198,000
Requirement No. 1. d
4WARD Co. [(6,000 x 1.1) - 4,800 - 1,200] = 600 x P210
BACK Co. (7,200 - 2,400) = 4,800 x P240
CA of trading securities (FV), 12/31/12
126,000
1,152,000
1,278,000
Requirement No. 2
Jan. 10 (See requirement 1.b)
Dividend income
Trading securities - 4WARD
120,000
120,000
Feb. 20
No AJE
Mar. 1 (See requirement 1.a)
Loss on sale of TS - BACK
Trading securities - BACK
May 31
Retained earnings
60,000
60,000
132,000
132,000
Aug. 15 (See requirement 1.b)

Entry made
Cash
Correct entry
Cash
Dividend income
Gain on sale of TS - 4WARD
Adjusting entry
Dividend income
1,176,000
1,176,000
1,176,000
960,000
144,000
72,000
216,000
144,000
72,000
Sep. 1 (See requirement 1.b)

36,000
Dec. 31 (Fair value adjustment)

FV adjustment loss (P/L)
Trading securities
42,000
36,000
Computation of FV adjustment:
January 10
February 20
March 1
August 15
September 1
Should be balance, 12/31/12 before fair value adjustment
Fair value , 12/31/12 (see requirment 1.d)
Unrealized loss (FV adjustment)
Alternative computation:
Adjusted cost of 4WARD shares (see requirment 1.b)
Cost of BACK shares
Total cost
Less costs of shares sold
March 1
600,000
August15
960,000
September 1
240,000
Adjusted cost, 12/31/12
4WARD Co. [(6,000 x 1.1) - 4,800 - 1,200] = 600 x P210
BACK Co. (7,200 - 2,400) = 4,800 x P240
Fair value of trading securities, 12/31/12
Unrealized loss (P1,278,000 - P1,320,000)
42,000
1,320,000
1,800,000
(600,000)
(960,000)
(240,000)
1,320,000
1,278,000
42,000
1,320,000
1,800,000
3,120,000
1,800,000
1,320,000
126,000
1,152,000
1,278,000
42,000
PROBLEM NO. 3 - Pin Shop Company

Investment ledger
Particulars
Balance, 1/1/2012
Share dividend, 4/30/12
Balance
Sale of 5,000 shares, 5/20/2012
Balance
Sale of 2,000 shares, 12/10/2012
Balance, 12/31/2012
Shares
10,000
5,000
15,000
(5,000)
10,000
(2,000)
8,000
Loss on sale 5/20 (see computation below)
Gain on sale 12/10 (see computation below)
Dividend income (see computation below)
Net amount to be recognized in P/L
Cost/share
39.00
26.00
26.00
26.00
26.00
Total
390,000
390,000
(130,000)
260,000
(52,000)
208,000
(5,000)
48,000
150,000
193,000
Loss on sale 5/20:

Sales proceeds (5,000 shares x P25)
Cost of investment sold (see investment ledger)
Loss on sale of investment
125,000
(130,000)
(5,000)
Gain on sale 12/10:

Dividends sold (2,000 shares x P50 x 20%)
Net sales proceeds
Cost of investment sold (see investment ledger)
Gain on sale of investment
120,000
(20,000)
100,000
(52,000)
48,000
Dividend income:
Cash dividends declared, 11/1/2012 (10,000 shares x P5)
Cash dividends declared, 12/1/2012 (10,000 shares x P50 x 20%)
Total dividend income
50,000
100,000
150,000
FV adjustment:
Fair value
Cost
Unrealized loss (FV adjustment) - OCI
110,000
208,000
(98,000)
Carrying amount, 12/31/12 (8,000 shares x P13.75)
110,000
Amount to be recognized in P/L - Dividend income
150,000
At initial recognition, an entity may make an irrevocable election to present in other comprehensive
income subsequent changes in the fair value of an investment in an equity instrument within the scope of
PFRS 9 that is not held for trading.
If an entity makes the election, it shall recognise in profit or loss dividends from that investment when
the entitys right to receive payment of the dividend is established in accordance with PAS 18.
Carrying amount, 12/31/12 (8,000 shares x P13.75)
110,000
PROBLEM NO. 4 - La Cost Company

Requirement No. 1
Selling price (4,000 shares x P69)
CA of shares sold (P528,250 x 4/8)
Gain on sale of Totoy Bibo shares
276,000
(264,125)
11,875
Requirement No. 2
Selling price (4,000 shares x P62)
Cost of shares sold (P590,000 x 4/10)
Gain on sale of Bulaklak shares
248,000
(236,000)
12,000
Requirement No. 3
Yeye Bonel [(10,000+ 3,000) x P76.60]
Totoy Bibo [(8,000 - 4,000) x P68.50]
Pasaway (15,000 x P55.25)
Mayniladlad
Total fair value - Trading securities
Bulaklak Inc. [(10,000 - 4,000) x P61]
Jumbo Hotdog (20,000 x P27)
Total fair value - AFS
995,800
274,000
828,750
205,550
2,304,100
366,000
540,000
906,000
PROBLEM NO. 5 - Lee Buys Company
1/2
3/2
Entry made
Cash
Dividend income
Investment in Silver Tab

Cash
120,000
2,100,000
7/15 Cash
2,000,000
(50,000 shares x P40)
Should be entry
Note: the entry made can be considered
120,000 correct if the company accrued the dividend
in 2011 and reversed in 2012. Since there was
no debit entry in the "Dividend Income" account,
we will assume that no accrual was made in 2011.
Adjusting journal entry

Dividend income
Retained earnings
120,000
120,000

2,070,000
Dividend income
30,000
2,100,000 Dividend income
30,000 *
Cash
2,100,000
*(30,000 x P1) - purchased dividend
Cash
2,000,000
2,000,000 Loss on sale
250,000
Loss on sale
250,000
2,250,000 **
30,000
250,000
Note: in the absence of specific identification,

use FIFO to determine cost of investment sold
From 2010 lot (30,000 x P35)
From 2011 lot (20,000 x P60)
8/10 Investment in Red Tab

Dividend income
(100,000/10 x P1)
10,000
12/20 Cash
Dividend income
100,000
10,000
100,000
12/29 None
1,050,000
1,200,000
2,250,000 **
Investment in Red Tab

30,000
Investment in Red Tab
Dividend income
30,000
Dividend income
(100,000/10 x P3)
Note: Property dividend received is recorded at FV
100,000
AR - non trade
900,000 *
Gain on sale
* (10,000 x P90)
590,000
310,000
Shares
90,000
(20,000)
70,000
70,000
590,000
310,000
AR - non trade
900,000
Gain on sale
Cost
5,400,000
(1,200,000)
4,200,000
(70,000)
4,130,000
(10,000/70,000 x P4,130,000)
Adjusted Investment in Red Tab

Unadjusted balance
6,550,000
(30,000)
(250,000)
(100,000)
(590,000)
5,580,000
10,000
20,000
Cash
100,000
Dividend income
100,000
100,000
Note: the dividend received is a liquidating dividend.
From 2011 lot:

Original cost
Sold on 7/15
Balance
Liquidating dividend
(70,000 x P1)
Balance
Adjusted Investment in Silver Tab

Unadjusted balance
AJE for 3/2
AJE for 7/15
AJE for 12/20
AJE for 12/29
Adjusted balance
20,000
Adjusted Dividend Income

Unadjusted balance
AJE for 1/2
AJE for 3/2
AJE for 8/10
AJE for 12/20
Adjusted balance
380,000
(120,000)
(30,000)
20,000
(100,000)
150,000
PROBLEM NO. 5 - Lee Buys Company

Entry made
AJE for 8/10
Adjusted balance
Should be entry
20,000
30,000
Adjusting journal entry
PROBLEM NO. 6 - Norte Corporation

Requirement No. 1
Sales proceeds
CA of shares sold (P288,000 x 8/16)
Gain on sale of 8,000 Laoag, Inc. shares
152,000
(144,000)
8,000
Requirement No. 2
Cost of shares sold (P960,000 x 3.2/80)
Gain on sale of 3,200 Batac, Inc. shares
48,000
(38,400)
9,600
Requirement No. 3
Santiago bonds (P200,000 x 10%)
Ilocos bonds (P1,926,000 x 14%*)
Total interest income for 2012
20,000
269,640
289,640
*Computation of effective interest rate:

Less carrying amount, 1/2/11 (Cost)
Discount amortization for 2011
Add nominal interest (P2,000,000 x 12%)
Effective interest
Divide by carrying amount, 1/2/11
Effective interest rate
Requirement No. 4
Trading securities
Vigan, Inc. (9,600 x P22)
Laoag, Inc. [(16,000 - 8,000) x P15]
10% , P200,000 face value , Santiago bonds
Total fair value
Available-for-sale securities
Candon Products (32,000 x P42)
Pagudpud, Inc. (240,000 x P28)
Batac, Inc. [(80,000 - 3,200) x P18]
Ilocos bonds (P2,000,000 x 1.01)
Total fair value
FV adjustment gain on transfer of securities (OCI)
Add discount amortization in 2012:
Effective interest (P1,926,000 x 14%)
Nominal interest (P2,000,000 x 12%)
Fair value of Ilocos bonds on 12/31/12 (P2M x 1.01)
FV adjustment gain on transfer of securities (OCI)
1,926,000
1,900,000
26,000
240,000
266,000
1,900,000
14.00%
211,200
120,000
151,200
482,400
1,344,000
6,720,000
1,382,400
2,020,000
11,466,400
1,926,000
269,640
240,000
29,640
1,955,640
2,020,000
64,360
PROBLEM NO. 7 - Gateway Company

Amount to be recognized in profit or loss - Investment in Templar
350,000
2,160,000
Dividend income (50,000 shares x P5)
250,000
FV adjustment gain
240,000
Net amount to be recognized in P/L
3,000,000
Gain on sale 10/05:
Less Cost of investment sold (see below)
Gain on sale
1,300,000
950,000
350,000
Cash paid
Less Purchased dividend
Correct acquisition cost
1,000,000
50,000
950,000
Gain on sale 11/30:

Cash received
Less dividends sold (20,000 shares x P5)
Net sales proceeds
Less Cost of investment sold
Gain on sale
3,300,000
100,000
3,200,000
1,040,000
2,160,000
FV adjustment gain:
Fair value, 12/31/12 (30,000 x P60)
Balance before FV adjustment (see investment ledger)
FV adjustment gain
1,800,000
1,560,000
240,000
Investment in Templar ledger

Sept. 5 acquisition
Purchase, Sept. 5
Sale, Oct. 5 (use FIFO)
Balance, Dec. 31, 2012
Shares
20,000
(20,000)
-
Cost/share
47.50
47.50
Total
950,000
(950,000)
-
Oct. 1 acquisition
Purchase, Oct. 1
Sale, Nov. 30
Balance, Dec. 31, 2012
Shares
50,000
(20,000)
30,000
Cost/share
52.00
52.00
52.00
Total
2,600,000
(1,040,000)
1,560,000
Amount to be recognized in SFP - Investment in Templar

Fair value, 12/31/12 (30,000 x P60)
Amount to be recognized in profit or loss - Investment in Dark

Share of profit (P800,000 x .195)
Amount to be recognized in SFP - Investment in Dark
Acquisition cost
Share of profit (P800,000 x .195)
Dividends received (P200,000 x .195)
Investment in stock balance, 12.31.11
1,800,000
156,000
1,170,000
156,000
(39,000)
1,287,000
* Use equity method since there is a significant influence, i.e. Gateway's President
is represented in the board of directors.
PROBLEM NO. 8 - JR Company

Requirement No. 1
Profit or loss - Dividend income
OCI - FV adjustment (P570,000 - P500,000)
Net amount in comprehensive income - 2010
15,000
70,000
85,000
Requirement No. 2
Profit or loss - Dividend income
OCI - FV adjustment (P525,000 - P570,000)
Net amount in comprehensive income - 2011
20,000
(45,000)
(25,000)
Requirement No. 3
None
Requirement No. 4
Fair value of original investment
Purchase price of 30% interest
Total cost of 40% interest
Share of profit - 2012
Based on reported amount (P550,000 x .4)
Excess of cost over underlying equity amortization
{[P2.1M - (P4.15M x .4)]/8}
Dividends received
525,000
1,575,000
2,100,000
220,000
(55,000)
165,000
(70,000)
2,195,000
PROBLEM NO. 9 - Panday Corporation

Requirement No. 1
PV of principal (P6,000,000 x 0.5568)
PV of interest [(P6,000,000 x 4%) x 8.8633]
Purchase price
3,340,800
2,127,192
5,467,992
Requirement No. 2
Date
6/1/11
12/1/11
6/1/12
12/1/12
EI (5%)
273,400
275,070
276,823
NI (4%)
Disc. Amort.
240,000
240,000
240,000
33,400
35,070
36,823
Carrying amount, 12/1/11 (see amortization schedule)

Add discount amortization, 12/1/11 to 12/31/11 (P35,070/6)
Requirement No. 3
Jan. 1 to May 31 (P275,070 x 5/6)
June 1 to Nov. 1 (P276,823 x 5/6)
Total interest income for 2012
Requirement No. 4
Total proceeds
Accrued interest (P240,000 x 5/6)
Net proceeds
Less carrying amount, 11/1/12:
Add discount amortization, 6/1/12 to 11/1/12 (P36,823 x 5/6)
Gain on sale on investment in bonds
Amort. Cost
5,467,992
5,501,392
5,536,462
5,573,285
5,501,392
5,845
5,507,237
229,225
230,686
459,911
5,887,500
(200,000)
5,687,500
5,536,462
30,686
5,567,148
120,352
PROBLEM NO. 10 - Klootz Corporation

Requirement No. 1
Cash flow
Principal
10,000,000
Interest
1,000,000
Purchase price, 1/1/09
PVF@8%
0.6806
3.9927
PV, 1/1/09
6,806,000
3,992,700
10,798,700
Amortization schedule:
EI (8%)
NI (10%)
Amort
1/1/09
12/31/09
863,896
1,000,000
(136,104)
12/31/10
853,008
1,000,000
(146,992)
12/31/11
841,248
1,000,000
(158,752)
12/31/12
828,548
1,000,000
(171,452)
12/31/13
814,832
1,000,000
(185,400)
PV, 1/1/09
Premium amortization, 1/1 to 4/1 (P113,456 x 3/12)
PV, 4/1/09
Accrued interest (P10,000,000 x 10% x 3/12)
Total purchase price
CA
10,798,700
10,662,596
10,515,604
10,356,852
10,185,400
10,000,000
10,798,700
(34,026)
10,764,674
250,000
11,014,674
Requirement No. 2
Refer to the amortization schedule
10,662,596
Cash flow
Principal
10,000,000
Interest
1,000,000
PVF@8%
0.7350
3.3121
PV, 12/31/09
7,350,000
3,312,100
10,662,100
Requirement No. 3
PV of expected cash flows (P8,000,000 x 0.7972)
Impairment loss
10,356,852
6,858,400
3,498,452
Cash flow
PVF@8%
Principal
10,000,000
0.8573
Interest
1,000,000
1.7833
PV of expected cash flows (P8,000,000 x 0.8573)
Impairment loss
Requirement No. 4
EI (8%)
12/31/11
12/31/12
548,672
12/31/13
592,928
(362)
NI (10%)
Amort
-
548,672
592,928
PV, 12/31/11
8,573,000
1,783,300
10,356,300
6,858,400
3,497,900
CA
6,858,400
7,407,072
8,000,000
Requirement No. 5
Carrying amount, 12/31/12 (without impairment)
Carrying amount, 12/31/12 (with impairment)
Reversal of impairment loss
10,185,400
7,407,072
2,778,328
The limit on the amount of reversal is what the amortized cost of the asset would have been at
the date of reversal had the impairment loss not been recorded.
Principal
Interest
Cash flow
10,000,000
1,000,000
PVF@8%
0.9259
0.9259
PV, 12/31/12
9,259,000
925,900
Carrying amount, 12/31/12 - without impairment

Carrying amount, 12/31/12 - with impairment
Impairment loss
10,184,900
7,407,072
2,777,828
PROBLEM NO. 11 - Spurs Corporation (SME)

Requirement No. 1 - SFP amount (Cost Model)
Purchase price
Transaction costs
Total cost
Impairment loss*
CA, 12/31/12
*Impairment loss computation:
Total cost
FV less cost to sell (RA)
B
10,000,000
100,000
10,100,000
10,100,000
C
15,000,000
150,000
15,150,000
15,150,000
D
28,000,000
280,000
28,280,000
(14,030,000)
14,250,000
10,100,000
12,350,000
-
15,150,000
27,550,000
-
28,280,000
14,250,000
14,030,000
Total
53,000,000
530,000
53,530,000
(14,030,000)
39,500,000
Requirement No. 1 - P/L amount (Cost Model)

B
250,000
250,000
C
2,000,000
2,000,000
(14,030,000)
(14,030,000)
Total
2,250,000
(14,030,000)
(11,780,000)
Requirement No. 2 - SFP amount (Fair Value Model)

B
Fair value
13,000,000
C
29,000,000
D
15,000,000
Total
57,000,000
Requirement No. 2 - P/L amount (Fair Value Model)

B
Transaction costs
(100,000)
Dividend income
250,000
FV adjustment gain (loss)*
3,000,000
3,150,000
C
(150,000)
2,000,000
14,000,000
15,850,000
D
(280,000)
(13,000,000)
(13,280,000)
Total
(530,000)
2,250,000
4,000,000
5,720,000
13,000,000
10,000,000
3,000,000
29,000,000
15,000,000
14,000,000
15,000,000
28,000,000
(13,000,000)
Requirement No. 3 - SFP amount (Equity Method)

B
Purchase price
10,000,000
Transaction costs
100,000
SOPA (SOLA)
1,250,000
Dividends
(250,000)
CA, 12/31/12 - before impairment
11,100,000
Impairment loss*
CA, 12/31/12
11,100,000
C
15,000,000
150,000
4,500,000
(2,000,000)
17,650,000
17,650,000
D
28,000,000
280,000
(5,000,000)
23,280,000
(9,030,000)
14,250,000
11,100,000
12,350,000
-
17,650,000
27,550,000
-
23,280,000
14,250,000
9,030,000
Requirement No. 3 - P/L amount (Equity Method)

B
SOPA (SOLA)
1,250,000
Impairment loss
1,250,000
C
4,500,000
4,500,000
D
(5,000,000)
(9,030,000)
(14,030,000)
Dividend income
Impairment loss
*FV adjustment gain (loss)

Fair value
CA before FV adjustment
*Impairment loss computation:

CA, 12/31/12 - before impairment
FV less cost to sell (RA)
Total
53,000,000
530,000
750,000
(2,250,000)
52,030,000
(9,030,000)
43,000,000
Total
750,000
(9,030,000)
(8,280,000)
PROBLEM NO. 12 - Theory

1
2
3
4
5
6
7
8
9
10
A
D
D
D
C
A
B
B
C
D
A
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
Cash on hand and in bank

Notes receivable
Accounts receivable
Allow. for doubtful accounts
Accounts receivable-net
Accounts receivable-others
Advances to officers and employees
Marketable securities
Allow. for decline in MV of marketable sec.
Inventories
Prepayments
Total curent assets
Property, plant and equipment
Accumulated depreciation
PPE-net
Total assets
Accounts payable
Accrued expenses
Total current liabilities
Bonds payable
Bond discount
Total liabilities
Common stock
Retained earnings, end.
Net sales
Cost of sales
Gross Profit
Operating expenses
Operating income
Other income
Other charges
Net income
Gain on sale of Maretable securities-SMC
Bond discount amortization
Dividend income-SMC Co. common
38,700
4,000
36,000
1,800
40,100
2,750
3,840
13,000
1,375
15,400
100
111,904
990,000
346,000
566,000
677,904
600
2,800
2,800
397,000
37,000
400,000
311,102
125,104
944,000
669,600
280,400
270,798
23,602
5,000
6,500
16,352
1,000
1,000
1,000
B
35,002
4,500
40,000
2,000
38,000
1,000
10,750
250
20,000
500
113,302
1,910,000
344,000
1,566,000
713,950
4,000
4,000
5,200
400,000
3,000
405,200
200,000
108,750
948,000
665,000
282,400
264,798
15,000
7,250
9,000
11,000
2,250
4,000
500
C
34,402
5,000
42,000
2,100
40,000
500
2,840
8,500
1,125
24,600
113,950
910,000
350,000
606,000
679,302
5,200
5,200
4,000
363,000
43,000
363,000
108,750
111,102
950,000
661,000
285,000
270,000
17,602
5,500
6,000
17,000
1,750
3,000
2,000
D
35,502
5,500
38,000
1,900
39,900
1,000
3,740
4,250
16,000
900
112,802
940,000
356,000
584,000
678,802
2,800
1,200
1,200
360,000
40,000
368,200
308,750
94,750
952,000
664,400
287,000
264,000
18,400
7,750
3,000
14,000
1,500

04sol-Investments WB 1st

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IV AUDIT OF INVESTMENTS

PROBLEM NO. 1 - Isabela Corporation

Available for Sale (AFS)

Held to Maturity (HTM)

A.1) Purchase of investment:

A.2) Accrual of interest:

Interest receivable P80,000

Interest receivable P80,000

A.3) Amortization of discount (see schedule

NI (8%) Disc. Amort.

980,000 Fair value

Available for Sale (AFS)

Held to Maturity (HTM)

FV adjustment before sale

FV adjustment before sale

FV adjustment before sale

FV adj. G/L (OCI) P3,658*

PROBLEM NO. 2 - IMBC Corporation

Total cash paid

** after 10% share dividend

Total gain on sale of 4WARD shares

Aug. 15 (See requirement 1.b)

Sep. 1 (See requirement 1.b)

Dec. 31 (Fair value adjustment)

PROBLEM NO. 3 - Pin Shop Company

Loss on sale 5/20:

Gain on sale 12/10:

PROBLEM NO. 4 - La Cost Company

PROBLEM NO. 5 - Lee Buys Company

Investment in Silver Tab

Adjusting journal entry

Investment in Silver Tab

Note: in the absence of specific identification,

8/10 Investment in Red Tab

Investment in Red Tab

Adjusted Investment in Red Tab

From 2011 lot:

Adjusted Investment in Silver Tab

Adjusted Dividend Income

PROBLEM NO. 5 - Lee Buys Company

Adjusting journal entry

PROBLEM NO. 6 - Norte Corporation

*Computation of effective interest rate:

PROBLEM NO. 7 - Gateway Company

Gain on sale 11/30:

Investment in Templar ledger

Amount to be recognized in SFP - Investment in Templar

Amount to be recognized in profit or loss - Investment in Dark

PROBLEM NO. 8 - JR Company

PROBLEM NO. 9 - Panday Corporation

Carrying amount, 12/1/11 (see amortization schedule)

PROBLEM NO. 10 - Klootz Corporation

Carrying amount, 12/31/12 - without impairment

PROBLEM NO. 11 - Spurs Corporation (SME)

Requirement No. 1 - P/L amount (Cost Model)

Requirement No. 2 - SFP amount (Fair Value Model)

Requirement No. 2 - P/L amount (Fair Value Model)

Requirement No. 3 - SFP amount (Equity Method)

Requirement No. 3 - P/L amount (Equity Method)

*FV adjustment gain (loss)

*Impairment loss computation:

PROBLEM NO. 12 - Theory

Cash on hand and in bank