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Straight Problems

This document contains 5 multiple choice questions regarding the accounting treatment of equity investments. Question 1 asks about gains on trading securities sold in 2017. Questions 2-3 ask about gains on non-trading securities designated as either FVTOCI or FVPL that were sold in 2016. Questions 4-5 ask about impairment losses on a non-trading equity investment in 2017 designated as either FVOCI or FVPL.

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117 views1 page

Straight Problems

This document contains 5 multiple choice questions regarding the accounting treatment of equity investments. Question 1 asks about gains on trading securities sold in 2017. Questions 2-3 ask about gains on non-trading securities designated as either FVTOCI or FVPL that were sold in 2016. Questions 4-5 ask about impairment losses on a non-trading equity investment in 2017 designated as either FVOCI or FVPL.

Uploaded by

Maybelle
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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1. On January 1, 2016, Meredith Company purchased equity securities held for trading.

Purchase price Transaction cost Market - 12/31/2016


Security A 1,000,000 100,000 1,200,000
Security B 2,000,000 200,000 1,500,000
Security C 3,000,000 300,000 3,100,000

On July 1, 2017, the entity sold Security A for P1,800,000. What amount should be reported as gain on
sale of trading securities in the 2017 income statement?
a. 800,000 b. 600,000 c. 300,000 d. 700,000

FOR ITEMS 2 – 3 USE THE FOLLOWING INFORMATION


On January 1, 2015, Yuri Company purchased non-trading equity securities.

Purchase price Transaction cost Market - 12/31/2015


Security A 1,000,000 100,000 1,200,000
Security B 2,000,000 200,000 1,400,000
Security C 4,000,000 400,000 4,100,000

On July 1, 2016, the entity sold Security C for P4,900,000 incurring P100,000 in brokerage commission
and taxes.
2. What amount of gain on sale should be recognized in 2016 if the securities are designated as measured
at FVTOCI (PFRS 9)?
a. 900,000 b. 600,000 c. 800,000 d. 0

3. What amount of gain on sale should be recognized in 2016 if the securities are as FVPL?
a. 700,000 b. 500,000 c. 600,000 d. 400,000

FOR ITEMS 4 – 5 USE THE FOLLOWING INFORMATION


On January 1, 2016, Raphael Company acquired a non-trading equity investment for P5,000,000. On
December 31, 2016, the market value of the investment was P4,000,000. On December 31, 2017, the
issuer of the equity instrument was in severe financial difficulty and the fair value of the equity
investment has fallen to P1,500,000. The decline is judged to be non-temporary.

4. What cumulative loss should be reported in the statement of changes in equity for 2017 as component
of OCI if the investment is designated as measured at FVOCI (PFRS 9)?
a. 1,000,000 b. 2,500,000 c. 3,500,000 d. 0

5. What cumulative loss should be reported in the statement of changes in equity for 2017 as component
of OCI if the investment is classified as FVPL (PFRS 9)?
a. 1,000,000 b. 3,500,000 c. 2,500,000 d. 0

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