PROBLEM 15-1
PROBLEM 15-2
Template Company provided the following with respect to marketable equity securities held as
“trading”
On January 1, 2022, Spark Company purchased the following trading securities:
1. The entity carried the following securities on December 31, 2021:
Cost
Market
A ordinary – 4,000 shares
330,000
300,000
B ordinary – 1,000 shares
200,000
160,000
C preference – 2,000 shares
300,000
310,000
830,000
770,000
Cost
Aura Company ordinary
Bora Company preference
Cara Company bonds
600,000
350,000
500,000
Fair value
Dec 31, 2021
650,000
200,000
400,000
On October 1, 2022, the entity sold one-half of Aura Company ordinary for P375,000.
On December 31, 2022, the fair value of the remaining securities was P800,000.
2. On June 30, 2022, the entity sold all the B ordinary shares for P140,000.
3. On December 31, 2022, the securities are quoted as follows
A ordinary
C preference
80
180
Required:
Prepare journal entries to record the transactions.
Required:
Prepare journal entries to record the transactions.
PROBLEM 15-3
PROBLEM 15-4
Splendid Company purchased equity securities during 2021 to be held as investments. The
cost and market value of the investment are:
Transitory Company acquired the following equity securities:
December 31, 2020
Trading securities
Securities not held for trading
December 31, 2021
Trading securities
Securities not held for trading
Cost
2,000,000
3,000,000
Market
2,500,000
2,900,000
2,000,000
3,000,000
2,200,000
2,300,000
December 31, 2020
Moon Company
Star Company
Sun Company
December 31, 2021
Moon Company
Star Company
Sun Company
Cost
200,000
400,000
600,000
Market
120,000
280,000
650,000
200,000
400,000
600,000
220,000
300,000
580,000
The securities not held for trading are measured at fair value through other comprehensive
income by irrevocable election.
The equity securities do not qualify as held for trading.
Required:
The entity has elected irrevocably to present changes in fair value in other comprehensive
income.
Prepare the journal entries for 2021 and 2022.
Required:
Prepare journal entries on December 31, 2021 and December 31, 2022.
PROBLEM 15-5
Aborigine Company reported the following accounts in the statement of financial position on
January 1, 2021:
Noncurrent assets
Financial asset – FVOCI
Market adjustment for unrealized loss
Market value
Other comprehensive income
Unrealized loss
4,000,000
(500,000)
3,500,000
(500,000)
An analysis of the investment portfolio revealed the following on December 31, 2021.
XYZ ordinary share
ABC ordinary share
RST preference share
Cost
1,000,000
2,500,000
500,000
4,000,000
Market
1,200,000
2,000,000
200,000
3,400,000
On July 1, 2022, the ABC ordinary share was sold for P2,100,000.
On December 31, 2022, the remaining investments have the following market value:
XYZ ordinary share
RST preference share
1,000,000
150,000
Required:
1. Prepare journal entry to recognize the decrease in value on December 31, 2021.
2. Prepare journal entry to record the sale of ABC ordinary share on July 1, 2022.
3. Prepare journal entry on December 31, 2022 to recognize the change in fair value.
PROBLEM 15-6
PROBLEM 15-7
During 2021, the first year of operations, Beneath Company purchased the following equity
securities:
Chaplain Company was very active in acquiring and selling investments in equity securities.
Data regarding the securities are:
Cost
Security One
Security Two
Security Three
Security Four
2,200,000
700,000
1,600,000
2,000,000
Market Value
Dec 31, 2021
1,400,000
1,000,000
1,500,000
2,500,000
Market Value
Dec 31, 2022
900,000
1,100,000
1,600,000
1,200,000
Security One and Security Two are held for trading and Security Three and Security Four are
measured as at fair value through other comprehensive income by election.
During 2022, the entity sold one-half of Security One for P1,000,000, and one-half of Security
Four for P1,300,000.
Required:
Prepare journal entries for 2021 and 2022.
Cost
December 31, 2021
Trading securities
Securities not held for trading
December 31, 2022
Trading securities
Securities not held for trading
Market value
5,000,000
3,000,000
4,600,000
3,100,000
5,000,000
3,000,000
5,500,000
3,300,000
The entity made an irrevocable election present changes in fair value of the securities not held
for trading in other comprehensive income:
Required:
Prepare journal entries to recognize the changes in market value for 2021 and 2022.
PROBLEM 15-8
PROBLEM 15-9
At the beginning of current year, Alexis Company purchased marketable equity securities to
be held as “trading” for P5,000,000. The entity also paid transaction cost amounting to
P200,000.
During 2021, Garr Company purchased marketable equity securities as a trading investment.
The securities had a market value of P5,500,000 at year-end and the transaction cost that
would be incurred on sale is estimated at P100,000. No securities were sold during the current
year.
There were no security transactions during 2022. The entity provided the following information
on December 31, 2022:
For the year ended December 31, 2021, the entity recognized an unrealized loss of P200,000.
Security
A
B
What amount of unrealized gain or loss on these securities should be reported in the income
statement for the current year?
A
B
C
D
500,000 gain
500,000 loss
300,000 gain
400,000 gain
Cost
2,450,000
1,800,000
4,250,000
Market value
2,300,000
2,700,000
5,000,000
In the 2022 income statement, what amount should be reported as unrealized gain or loss?
A
B
C
D
Unrealized gain of P950,000
Unrealized loss of P950,000
Unrealized loss of P750,000
Unrealized gain of P750,000
PROBLEM 15-10
PROBLEM 15-11
During 2021, Haggard Company purchased marketable equity securities for P1,850,000 to be
held as trading investments.
During 2021, Latvia Company purchased trading securities with the following cost and market
value on December 31, 2021:
In 2021, the entity appropriately reported an unrealized loss of P200,000 in the income
statement.
There was no change during 2021 in the composition of the portfolio of trading securities.
Pertinent data on December 31, 2022 are:
Security
A
B
C
Cost
600,000
450,000
800,000
Market value
900,000
400,000
1,200,000
What amount of unrealized gain on these securities should be included in the 2022
income statement?
A
B
C
D
400,000
650,000
900,000
700,000
Security
A - 1,000 shares
B - 10,000 shares
C - 20,000 shares
Cost
200,000
1,700,000
3,100,000
5,000,000
Market value
300,000
1,600,000
2,900,000
4,800,000
The entity sold 10,000 shares of Security B on January 15, 2022 for P150 per share.
What amount should be reported as loss on sale of trading investment in 2022?
A
B
C
D
200,000 gain
200,000 loss
100,000 gain
100,000 loss
PROBLEM 15-12
PROBLEM 15-13
At the beginning of current year, Carmela Company acquired nontrading equity instrument for
P4,000,000. The transaction cost incurred amounted to P700,000.
Judicious Company acquired an equity investment a number of years ago for P3,000,000 and
classified it as at fair value through other comprehensive income.
The equity instrument is irrevocably designated as financial asset at fair value through other
comprehensive income.
On December 31, 2021, the cumulative loss recognized in other comprehensive income was
P400,000 and the carrying amount of the investment was P2,600,000.
The fair value of the instrument was P5,500,000 at year-end and the transaction cost that
would be incurred on the sale of the investment is estimated at P600,000.
On December 31, 2022, the issuer of the equity instrument was in severe financial difficulty
and the fair value of the equity investment had fallen to P1,200,000.
What amount of gain should be recognized in other comprehensive income for the
current year?
What cumulative amount of unrealized loss should be reported as component of other
comprehensive income in the statement of changes in equity for the year ended
December 31, 2022?
A
B
C
D
200,000
900,000
800,000
0
A
B
C
D
1,400,000
1,800,000
1,000,000
0
PROBLEM 15-14
PROBLEM 15-15
During 2021, Knickknack Company purchased marketable equity securities to be measured at
fair value through other comprehensive income.
At the beginning of current year, Manifold Company began operations. The following
information related to the portfolio of equity securities held for trading at year-end:
On December 31, 2021, the balance in the unrealized loss on these securities was P100,000.
There were no security transactions during 2022. Pertinent data on December 31, 2022 are:
Security
X
Y
Z
Cost
2,100,000
1,850,000
1,050,000
Market value
1,600,000
2,000,000
900,000
In the statement of changes in equity for 2022, what amount should be included as
cumulative unrealized loss as component of other comprehensive income?
A
B
C
D
500,000
300,000
200,000
0
Aggregate cost
Aggregate fair value
Aggregate lower of cost or market value
applied to each security in the
portfolio.
Trading
360,000
320,000
304,000
Nontrading
550,000
450,000
420,000
The nontrading investments are measured at fair value through other comprehensive income.
What amount should be reported as unrealized loss in the income statement for the
current year?
A
B
C
D
140,000
186,000
40,000
56,000
PROBLEM 15-16
PROBLEM 15-17
Nightmare Company provided the following information at year-end regarding the portfolio of
equity securities:
During 2020, Opulence Company purchased marketable equity securities as short-term
investment to be measured at fair value through other comprehensive income. The cost and
market value on December 31, 2021 were:
Aggregate cost
Unrealized gains
Unrealized losses
Net realized gains during the current year
1,700,000
40,000
260,000
300,000
The equity investments are measured at fair value through other comprehensive income.
At the beginning of current year, the entity reported an unrealized loss of P15,000 to reduce
investments to market on a portfolio basis.
In the year-end statement of changes in equity, what amount of unrealized loss should
be reported?
A
B
C
D
260,000
220,000
205,000
0
A
B
C
Security
1,000 shares
10,000 shares
20,000 shares
Cost
300,000
1,700,000
3,150,000
Market value
350,000
1,550,000
2,950,000
The entity sold 10,000 shares of B on January 5, 2022 for P1,450,000.
What total amount should be charged to retained earnings as a result of the sale of
equity securities in 2022?
A
B
C
D
200,000
100,000
250,000
50,000
PROBLEM 15-18
On January 1, 2021, Jerome Company purchased nontrading equity investments which are
irrevocably designated at FVOCI:
Purchase price
Security A
Security B
Security C
1,000,000
2,000,000
4,000,000
Transaction
cost
100,000
200,000
400,000
Market value
Dec 31, 2021
1,500,000
2,400,000
4,700,000
On July 1, 2022, the entity sold Security C for P5,200,000.
What amount of gain on sale should be recognized in the income statement for 2021?
A
B
C
D
800,000
500,000
300,000
100,000