Professional Documents
Culture Documents
equity securities:
Interest dates on the bonds are January 1 and July 1. Mayon Corporation uses the income approach to
record the purchase of bonds with accrued interest. During 2012 and 2013, Mayon completed the
following transactions related to trading securities:
2012
Jan. 1 Received semiannual interest on bonds. Assume that the appropriate adjusting entry was made
April 1 Sold P 300,000 of 7 1/2 % Turkey bonds at 102 plus accrued interest. Brokerage fees were
P1,000.
May 21 Received dividend of P 1.25 per share on the Concave ordinary share capital. The dividend had
not been recorded on the declaration date.
July 1 Received semiannul interest on bonds and then sold the 7% Tipo bonds at 97 1/2 . Brokerage fees
were P1,250.
Aug. 15 Purchased 100 shares of Newman, Inc. ordinary share capital at P580 per share plus brokerage
fees of P250.
Nov. 1 Purchased P250,000 of 8% Toll Co. bonds at 101 plus accrued interest. Brokerage fees were P625.
Interest dates are January 1 and July 1.
Feb. 1 Sold the remaining 7 1/2 % Turkey bonds at 101 plus accrued interest. Brokerage fee were
P1,500.
Requirements:
a) 62,583
b) 82,208
c) 45,708
d) 49,402
a) 2,025
b) 6,376
c) 4,275
d) 3,125
3. What amount of unrealized gain or loss should be reported in the income statement for the year
ended December 31, 2012?
4. What is the carrying amount of the remaining trading securities on December 31, 2012?
a) 740,500
b) 725,225
c) 736,725
d) 726,125
PROBLEM 2
COLOONG CO. designates purchased debt securities as available for sale. The following schedules relates
to its 5-year, P1,000,000 7% bonds purchased on December 31, 2010 for P1,086,565. The bonds were
purchased to yield 5% interest.
12-31-10 P 1,086,565
The following schedule presents the amortized cost and fair value of the bonds at year-end.
Requirements:
5. What amount should be reported as investment in available for sale securities in the statement
of financial position of Coloong Co. on December 31, 2012?
a) 1086565
b) 1054438
c) 1075000
d) 1065000
a) 26455
b) 20562
c) 10000
d) 16455
7. What amount of unrealized loss should be shown as component of other comprehensive
income in the 2013 statement of comprehensive income?
a) 14393
b) 18500
c) 19340
d) 1222
PROBLEM 3
On January 1,2012, RAMBUTAN CORP. purchased debt securities for cash of P765,540. The securities
have a face value of P 600,000 and they mature in 15 years. The securities carry fixed interest of 10%,
that is receivable semiannually on June 30 and December 31. The prevailing market interest rate on
these debt securities is 7% compounded semiannually. Rambutan Corp. intends and has the financial
resources to hold these securities to maturity.
REQUIREMENTS:
11. What is the carrying value of the debt securities on December 31, 2012 at amortized cost using
the effective interest rate method?
a) 771840
b) 759016
c) 765540
d) 600000
PROBLEM 3:
SAXOPHONE COMPANY acquires a new manufacturing equipment on January 1, 2012, on installment
basis. The deferred payment contract provides for a down payment of P300,000 and an 8-year note for
P3,104,160. The note is to be paid in 8 equal annual installment payments of P388,020, including 10%
interest. The payments are to be made on December 31 of each year, beginning December 31, 2012. The
equipment has a cash price equivalent of P2,370,000. Saxophone’s financial year-end is December 31.