PROBLEM 1

The following Investment in Trading Securities account appears in the books of ABC, Co.

Date Explanation Debit Credit

2020
Jan 1 Balance 5,349,000
31 Sold Robusta ordinary 640,920
Mar 31 Bought Wilma ordinary 365,000
June 30 Dividend on Bulik ordinary 300,000
July 31 Sold Bulik ordinary 262,500
Aug 1 Sold Gudo bonds 675,000

The audit work papers of the preceding year show that the account balance as of January 1, 2020
consisted of the following:

Robusta Company ordinary:

30,000 shares, purchased in June 2017, P20 per share…......................P600,000
60,000 shares, purchased in August 2018, P16 per share…...................960,000
45,000 shares, purchased in May 2019, P22 per share….......................990,000
Wilma Company ordinary:
60,000 shares, purchased in January 2019, P33 per share…...................1,980,000
Bulik Company ordinary:
3,000 shares, purchased in August 2018, P73, per share (par P100)….....219,000
Gudo Company 15% bonds
600 bons, P1000 each, purchased in July 2019, at par
(interest dates: February 1 and August 1)…........................................600,000
5,349,000

Your examination discloses the following:

1) On January 31, 2020, 30,000 ordinary shares of the Robusta Company purchased in May 2019
were sold for P640,920.
2) On March 31, 2020, 15,000 ordinary shares of Wilma Company were purchased at P24.24 per share plus
brokerage fee, for P365,000.
3) In June 2010, the Bulik Company paid a 100% ordinary share dividend on ordinary shares
4) In July 2020, ABC company sold to its president, for P125 per share, 3,000 ordinary shares of
Bulik Company, for which the president gave his check for P262,500 and a letter in which he agreed
to pay the balance upon demand of the treasurer of the company.
5) On August 1, 2020, ABC Co, sold it Gudo Company 15% bonds at 110 plus accrued interest.
6) The total market value of the securities at year-end amounted to P4,500,000.

Questions:
1. What is the gain on sale of Bulik Company shares on July 31, 2020?
2. What is the gain on sale of Gudo Company bonds on August 1, 2020?
3. The adjusting entry for the sale of Robusta Company ordinary shares on January 31, 2020?
4. The December 31, 2020, carrying amount (before market adjustment) of ABC, Co.
investment in trading securities is?
5. What amount of unrealized gain should be reported in the income statement
for the year ended December 31, 2020?

PROBLEM 2
DEF Company invested its excess cash in equity securities during 2019. The business model for these investments is to
profit from trading on price changes.

a) As of December 31, 2019, the equity investment portfolio consisted of the following:
Investment Quantity Cost Fair Value
LJ, Inc 1,000 shares P90,000 P126,000
Polland Co. 2,000 shares 240,000 252,000
Alabang Corp. 2,000 shares 432,000 360,000
Total P762,000 P738,000
1. In the December 31, 2019, statement of financial position, what should be reported
 as carrying amount of the investments?
2. In the 2019 income statement, what amount should be reported as unrealized gain or loss?

b) During the year 2020, DEF Company sold 2,000 shares of Polland Co. for P229,200 and purchased 2,000 more shares of LJ, Inc
and 1,000 shares of Dwarfy Company. On December 31, 2020, DEF Company equity securities portfolio consisted of the following:
Investment Quantity Cost Fair Value
LJ, Inc 1,000 shares P90,000 P120,000
LJ, Inc 2,000 shares 198,000 240,000
Dwarf Company 1,000 shares 96,000 72,000
Alabang Corp 2,000 shares 432,000 132,000
Total P816,000 P564,000

3. What is the gain or loss on the sale of Polland Co. investment?

4. What is the carrying amount of the investment on December 31, 2020?
5. What amount of unrealized gain or loss should be reported in the income statement for the year ended December 31,2020?

c) During the year 2021, DEF sold 3,000 shares of LJ, Inc for P239,400 and 500 shares of Dwarfy Company at a loss of P16,200. On December 31, 2021
DEF Company's equity investment portfolio consisted of the following:
Investment Quantity Cost Fair Value
Dwarfy Company 500 shares P48,000 P36,000
Alabang Corp 2,000 shares 432,000 492,000
Total P480,000 P528,000
6. What should be reported as loss on sale of trading securities in 2021?
7. What amount of unrealized gain or loss should be reported in the income statement for the year ended December 31, 2021?
8. In the December 31, 2021, statement of financial position, what should be reported as carrying amount of trading securities?

PROBLEM 3
Supporting records of GHI Co trading securities portfolio show the following debt and equity securities:

Security Cost Fair Value

400 ordinary shares Concave Co. P254,500 P243,000
P800,000 Tipo Co. 7% bonds 796,500 774,000
P1,200,000 Turkey Co. 7 1/2 % bonds 1,207,500 1,218,900
Total P2,258,500 P2,235,900

Interest dates on the bonds are January 1 and July 1. GHI corporation used the income approach to record the purchase of bonds
with accrued interest. During 2020 and 2021, GHI completed the following transactions related to trading securities:

2020
Jan 1 Received semiannual interest on bonds. Assume that the appropriate adjusting entry was made on December 31, 2019.
April 1 Sold P600,000 of 7 1/2 % Turkey bonds at 102 plus accrued interest.
May 21 Received dividend of P1.25 per share on the Concave ordinary share capital. The dividend had not been recorded
on the declaration date.
July 1 Received semiannual interest on bonds and the sold the 7% Tipo bonds at 97 1/2.
Aug 15 Purchased 200 shares of Newmann, Inc ordinary share capital at P580 per share plus brokerage fees of P500.
Nov 1 Purchased P500,000 of 8% Toll Co. bonds at 101 plus accrued interest. Brokerage fees were P1,250. Interest dates
are January 1 and July 1.
Dec 31 Market prices of securities were:
Concave ordinary shares P550
71/2% Turkey bonds 101 3/4
8% Toll bonds 101
Newman ordinary shares P583.75
2021
Jan 2 Recorded the receipt of semiannual interest on bonds.
Feb 1 Sold the remaining 7 1/2 % Turkey bonds at 101 plus accrued interest.

Questions:
1. What is the total interest and dividend income for 2020?
2. What amount should be reported as gain on sale of trading securities in 2020?
3. What amount of unrealized gain or loss should be recorded in the income statement for the year ended
December 31, 2020?
4. What is the carrying amount of the remaining trading securities on December 31, 2020?
 5. What is the loss on the sale of the remaining Turkey bonds on February 1, 2021?

PROBLEM 4

JKL Company invested its excess cash in non-trading equity securities during 2020. On initial recognition, the entity
made an irrevocable election to present its securities and fair value through other comprehensive income (FVOCI).
As of December 31, 2020, the company's securities portfolio consisted of the following:

Investee Company Shares Cost Market Value

Kelly, Inc 30,000 P450,000 P425,000
Eloy, Corp 60,000 1,500,000 1,610,000
Yogi Enterprises 60,000 2,160,000 2,300,000
Total P4,110,000 P4,335,000

During the year 2021, JKL sold 60,000 shares of Eloy Corp for P1,700,000 and purchased 60,000 additional shares
of Kelly, Inc and 30,000 shares of Konggo Company.

On December 31, 2021, JKL portfolio of non-trading securities comprised the following:
Investee Company Shares Cost Market Value
Kelly, Inc 30,000 P450,000 P500,000
Kelly, Inc 60,000 1,300,000 1,450,000
Konnga Company 30,000 520,000 480,000
Yogi Enterprises 60,000 2,160,000 700,000
Total P4,430,000 P3,130,000

During the year 2022, JKL sold all the Kelly, Inc. shares for P2,300,000 and 15,000 shares of Konggo Company at a loss
of P90,000. On December 31, 2022, JKL portfolio of non-trading equity securities consisted of the following:

Investee Company Shares Cost Market Value

Yogi Enterprises 60,000 P2,160,000 P4,200,000
Kongga Company 15,000 260,000 180,000
Total P4,380,000

Questions:
1. What total amount should be credited to retained earnings as a result of the sale of Eloy Corp
Securities in 2021?
2. What unrealized loss on the remaining financial assets should be reported in the 2021
statement of comprehensive income as component of other comprehensive income?
3. What cumulative amount of unrealized loss should be reported as component of other
comprehensive income in the statement of changes in equity on December 31, 2021?
4. What unrealized gain on the remaining financial assets should be reported in the 2022
statement of comprehensive income as component of other comprehensive income?
5. What cumulative amount of unrealized gain should be reported as component of other
comprehensive income in the statement of changes in equity on December 31, 2022?