Intermediate Accounting III
Investments
Theories
1. Which of the following is not a category of financial assets?
a) Financial assets at fair value through profit or loss
b) Financial assets at fair value through other comprehensive
income
c) Financial assets at amortized costs
d) Financial assets held for sale
2. All of the following financial assets shall be measured at
fair value through profit or loss, except?
a) Financial assets held for trading
b) Financial assets designated on initial recognition as at
fair value through profit or loss
c) Investments in quoted equity instruments
d) Financial assets at amortized costs
3. Transaction costs include
a) Fees and commission paid to agent, levaies by regulatory
authorities, transfer taxes and duties
b) Debt premiums or discounts
c) Financing costs
d) Internal administrative costs
4. Which of the following is not a characteristic of a financial
asset held for trading?
a) It is acquired principally for the purpose of selling or
repurchasing it in near term
b) On initial recognition, it is part of a portfoloio of
financial assets that are managed together and for which
there is evidence of a recent actual pattern of short-term
profit taking
c) It is derivative that is not designated as an effective
hedging instrument
d) It is a derivative that is designated as as effective
hedging instrument
5. As a rule, trasaction costs that are directly attributable to
the acquisition of a financial asset shall be
a) Capitalized as cost of the financial asset
b) Expensed when incurred
c) Charged to retained earnings
d) Included as a component of OCI
6. If the financial asset is measured at FVPL, transaction costs
directly attributable to the acquisition shall be
a) Capitalized as cost of the financial asset
b) Expensed when incurred
c) Charged to retained earnings
d) Included as a component of OCI
7. Depending on the business model for managing financial assets,
an entity shall classify financial assets subsequent to initial
recognition at
a) FVPL
b) Amortized Cost
c) FVOCI
d) All of these are used in measuring financial assets
8. A financial asset shall be measured subsequently at amortized
cost
a) By irrevocable election
b) When the debt investment is managed and evaluated on a
documented risk-management strategy
c) When the debt investment is held for trading
d) D. When the business model is to collect contractual cash
flows that are solely payments of principal and interest
9. What is the ‘reclassification date’ for purposes of
reclassifying financial assets?
a) End of current reporting period
b) First day of the next reporting period following the change
in business model
c) Date when management decided to change the business model
for managing financial assets
d) No definition of reclassification date as this would depend
on the judgment of management
10. What financial assets are assessed for impairment?
a) FVPL
b) FAAC
c) Debt investments at FVOCI
d) Financial assets at amortized costs and debt investments at
FVOCI
Computations
1. Maita Company acquired a financial asset at market value of
P3,200,000. Broker fees p200,000 were incurred in relation to
the purchase. At what amount should the financial asset
initially be recognized respectively if it is classified as at
FVPL or as at FVOCI?
2. On January 1, 2022, Mingwith Company purchased marketable
equity securities to be held as “trading” for P5,000,000.The
entity also paid commission, taxes and other transaction costs
amounting to P200,000. The securities had a market value of
P5,500,000 on December 31, 2022 and the transaction costs that
would be incurred on sale are estimated at P100,000. No
securities were sold during 2014. What amount of unrealized gain
or loss on these securities should be reported in the 2022
income statement?
3. On December 31, 2022, Whey Company appropriately reported a
P100,000 unrealized loss. There was no change during 2023 in the
composition of the portfolio of marketable equity secutirities
held as FVOCI.
Security Cost Market Value at 12/31/2023
A 1,200,000 1,300,000
B 900,000 500,000
C 1,600,000 1,500,000
What amount of loss on these securities should be included in
the statement of comprehensive income for the year ended
December 31, 2023 as component of OCI?
4. Waray Company had trading and nontrading investments held
throughout 2022 and 2023. The nontrading investments are
measured at FVOCI. The investments had a cost of P3,000,000 for
trading and P3,000,000 for nontrading. The investments had the
following fair values at year-end:
December 31, 2022 December 31, 2023
Trading 4,000,000 3,800,000
Nontrading 3,200,000 3,700,000
A. What amount of unrealized gain or loss should be recognized in
the income statements for 2023?
B. What amount of cumulative unrealized gain or loss should be
reported as component of OCI in the statement of chnages in
equity on December 31, 2023?
5. On January 1,2022, March Company purchased 10% bonds with face
value of P5,000,000 plus transaction costs of P101,500 with a
yield rate of 8%. The bonds mature on December 31, 2026 and pay
interest annually on December 31. The carrying amount of the
investment on December 31, 2022 using the effective interest
method is P5,333,620. What is the initial acquisition cost of
the bond investment?
6. On January 1, 2022, Russia Company purchased 5-year bonds with
face value of P8,000,000 and stated interest of 10% per year
payable semiannually on January 1 and July 1. The bonds were
acquired to yield 8%. Present value factors are:
Present value of an annuity of 1 for 10 periods at 5% 7.72
Present value of an annuity of 1 for 10 periods at 4% 8.11
Present value of 1 for 10 periods at 4% 0.6756
A. What is the purchasee price of the bonds?
B. What is the carrying amount of the bond investment on
December 31, 2022?
