Reviewer

Book: Intermediate Accounting 1 by Valix(2021)

Chapter 1: Cash and Cash Equivalents
Key Notes:
CASH is:
- Money
- Measured at
o Face Value
o Current Exchange Rate kung Foreign Currency
o Estimated Realizable Value kung may cash difficulty ang financial institution
(bank) at kung mas mababa ang Realizable/Recoverable Value compared sa
Face Value.
- Mga bagay na pwedeng bayaran ng pera at mga tinatanggap sa bangko for deposit
tapos nakecredit or nadadagdag agad sa bank balance WITHIN reporting period.
- Must be UNRESTRICTED (Dapat hindi siya nakalaan pangbayad sa long-term/non-
current liabilities/foreign exchange restriction).
- Readily available in payment of current obligations (Liquid).
- Cash Items Included in CASH ACCOUNT:
o Cash on hand (Manager’s check, traveler’s check, bank drafts and money
orders, accommodation check)
 Undeposited cash collections, technically yung mga cash/cheque
collections hindi pa deposited pero pwede madeposit within reporting
period.
o Cash in bank (Demand Deposit/Checking Account and Saving Deposit that
are UNRESTRICTED for withdrawal)
 Same lang bank statement balance at checkbook balance pero mas
updated ang bank statement kaya yung balance niya ang gagamitin
upon computation, hindi balance nilang dalawa.
 Value Added Tax Account ay example ng bank account na payment for
current liability which is yung Taxes.
o Cash Fund (Petty Cash Fund, Payroll Fund, and Dividend Fund
 Cash na naka set aside for Current purposes.
CASH EQUIVALENTS is:
- Short-term and Highly Liquid Investments na pwede nang i-convert sa cash or
malapit na yung maturity date as in malapit, na mababa na yung chance magbago
yung maturity value. (Acquired 3months before maturity)
 - Mahalagang macheck lagi ang DATE OF PURCHASE na 3 months or less before
maturity date.
- Items included in CASH EQUIVALENT ACCOUNT:
o 3 – month Treasury Bill
o 3 – year Treasury Bill purchased 3-months before maturity date.
o 3 – month Time Deposit
o 3 – month Money Market Instrument/Commercial Papers
o Preference Shares with specified Redemption date (acquired 3-months before
redemption date)
o Certificate of Deposit
o Sinking Fund kung para sa bonds payable na current liability or due within
one year.
IMPORTANT NOTES:
- If the problem is SILENT sa term ng cash equivalents. Assumed na 3months or less
siya since ganon yung normal banking practice.
- Window Dressing, or yung mga pagkakataon na ineextend ang reporting period.
Example is kapag December 31 ang end pero ginawa nilang January 3 para
magrecognize ng additional income. Procedure is to deduct the additional income na
pumasok during the extension.

- Items NOT included in Cash Equivalent Account

o Treasury Bill purchased 1 year ago kahit na 3 months nalang bago ang
maturity date.
o Equity Securities such as ordinary shares and preference shares redemption
fund with no redemption date because they do not have a MATURITY
DATE.
o Sinking Fund kung para sa bonds payable na non-current liability or due more
than one year.
Classification of Investment of Excess Cash
- 3months or less is Cash and Cash Equivalents
- 3months or more but within 1year is Current Assets/Short-term Investments
- More than 1year is Non-Current Assets/Long-Term Investments
o Kapag naging 1 year and below, babalik siya sa Current Asset.
o Kapag naging 3months and below HINDI magiging CCE, Current Asset pa
din.
Cash in Bank Account
- Bank Overdraft
o Credit in Cash in Bank balance.
 o A current liability
o Di pwedeng ioffset ang bank overdraft sa bank account A sa balance sa bank
account B unless immaterial ang amount.
o Pwedeng magkaroon ng offset ng overdraft sa pagitan ni bank account A-1 at
A-2 or in simple terms, may dalawang bank account ang entity sa isang bank.
- Compensating Balance
o Minimum balance na dapat meron sa isang bank account.
o Kung resulta ng bank loan ang compensating balance, at legally restricted,
ibabawas ang compensating balance sa cash value na marereceive galing sa
loan. If hindi naman legally restricted, part of cash pa din ang compensating
balance.
o Classified as current asset if short-term loan at non-current naman if related sa
long-term loan.

- Types of Checks
o Undelivered/Unreleased Check
 Check na recorded sa book natin pero hindi pa naibigay sa entity na
babayaran natin bago matapos ang reporting period.
 Ia-add pabalik sa cash balance.
o Postdated Delivered Check
 Naibigay sa payee within reporting period, recorded sa book natin pero
yung date na nakalagay sa check is outside the reporting period.
 Ia-add pabalik sa cash balance.
o Stale Check/Check Long Outstanding
 Naibigay kay payee, within reporting period ang date, recorded natin
sa libro pero hindi na-encash ni payee within a reasonable amount of
time.
 Within 6months or depende sa entity policy ang reasonable amount of
time kung kalian sila mag iisue ng stop-payment order.
 If immaterial, recognized as Miscellaneous Income.
 If material, recognized as accounts payable or yung account ng payee
na hindi nag encash.
- IMPORTANT NOTE: ALWAYS CHECK KUNG KANINO PAYABLE ANG
BANK CHECKS SA PROBLEM. IF SA ATIN DEDUCT IF SA IBANG ENTITY
THEN INCREASE of cash balance.

Accounting for Cash Account

- Cash Shortage
o Cash count is less than cash balance in book.
o Debit ng cash short or over account
  If cashier custodian ang responsible adjustment ay credit cash short or
over account debit due from cashier
 If hindi malaman kung bakit short, adjustment ay credit cash short or
over account debit loss from cash shortage.
- Cash Overage
o Cash count is more than cash balance in book.
o Credit ng cash short or over account
 If cashier custodian ang may-ari adjustment ay debit cash short or
over account credit Payable to cashier
 If walang may-ari, adjustment ay debit cash short or over account
credit Miscellaneous Income.
- Imprest System
o Cash receipts ay diretso sa bank account then cash expenses/disbursements ay
via check para maibawas sa bank account.
- Petty Cash Fund ay ginagamit para sa small amount ng expenses or kung
nagmamadali. Main point is ginagamit ito pag impractical ang paggamit ng check
disbursement sa isang transaction.
o Ang Salary ng Cash Custodian ay example ng accommodation check so
kasama siya sa PCF value dahil part siya ng cash.
o Imprest Fund System
 Usually ginagamit sa petty cash transactions
 Memo entry lang ang ginagawa sa payment ng expenses
 Dine-debit ang expenses upon replenishment ng PCF then credit
diretso sa Cash in Bank (usually equal ang replenishment value sa cash
disbursements unless may increase sa PCF)
 Upon replenishment nirerecord ang expenses at binabangga sa cash in
bank para ipakita na ang replenishment ng PCF ay dapat kinukuha sa
check/bank at hindi sa undeposited collections/cash in hand
 Adjusment ng expenses are necessary sa end ng reporting period kung
hindi nareplenished ang PCF para makita ang totoong value ng PCF
then irereverse sa start ng next reporting period.
o Fluctuating Fund System
 Debited agad ang expenses tas credit sa PCF, hindi na inaantay ang
replenishment.
 Upon request ng petty cashier custodian ang replenishment ng PCF so
hindi na siya necessarily kasing value ng expenses kaya parang
nagpafluctuate ang fund hence the name of this system.
 No adjustment needed na since recorded naman ang expense
immediately.
Chapter 4: Accounts Receivable
Key Notes:
- Initially measured at Face Amount or ORIGINAL invoice amount.
- Subsequently measured at Amortized Cost/Net Realizable Value of AR/Estimated
Recoverable Amount.
o Yung mga term sa Subsequent measurement (NRV/ERA) ay tumutukoy sa
recoverable amount or yung value ng cash na masisingil natin sa utang, kase
may mga accounts na hindi nakakapagbayad.
o Face Amount – Adjustments = NRV/ERA
o These are the following adjustments/deductions:
 Allowance for Freight Charge
 FOB Destination (Responsibility to pay)
o Meaning ang may-ari ng purchased goods during transit
ay si Seller kase ang ownership ng goods ay
matatransfer sa point of destination (lugar ni buyer)
o Since si seller ang may-ari during transit, seller ang
may responsibility to pay for the freight charge.
 FOB Shipping Point (Responsibility to pay)
o Meaning ang may-ari ng purchased goods during transit
ay si Buyer kase ang ownership ng goods ay
matatransfer upon shipment ng goods (shipping point)
o Since si buyer ang may-ari during transit, Buyer ang
may responsibility to pay for the freight charge.
 Freight Collect (Who actually paid)
o Not yet paid and to be collected
o Paid by the Buyer
 Freight Prepaid (Who actually paid)
o Paid by the Seller
 Freight Collect, Shipping Point
o Buyer has the responsibility to pay for the freight
charge and buyer is the one who actually paid
o No Journal Entry
 Freight Prepaid, Destination
o Seller has the responsibility to pay for the freight
charge and seller is the one who actually paid
o Debited to Freight Out
 Freight Collect, Destination
o Seller has the responsibility to pay for the freight
charge BUT buyer is the one who actually paid
 o Pinaluwalan ni buyer yung freight charge so ibabawas
sa utang(AR) na babayaran niya. Check page 119 of
IA1 2021 by Valix for journal entry.
 Freight Prepaid, Shipping Point
o Buyer has the responsibility to pay for the freight
charge BUT seller is the one who actually paid
o Pinaluwalan ni seller yung freight charge so idadagdag
sa utang (AR) na babayaran ni buyer.
o Debit to AR then credit to Sales and Cash (para sa
pinaluwalan na freight charge)
 Allowance for Sales Return
 Estimated value ng goods na possibly ibalik ng customers.
 Estimated value ng allowance na hihingin due to defects and
shortage
 Deducted sa AR since humihingi nga ng reduction sa utang nila
due to the reasons above.
 Allowance for Sales Discount
 Allowance for sales discount is para sa Cash discount na
binibigay natin sa customer.
 Invoice Price
o Price sa resibo or yung actual price na babayaran ni
customer
o Pwedeng bawasan ng tinatawag na “Cash/Sales
discount”
 Selling Price
o Sale price ng item
o Dito binabawa ang “trade discount”

 Trade Discount
o Direct discount na binabawas sa selling price para
magreresult sa invoice price.
o Reasons for this type of discount are usually of bulk
buy or cash payment.
 Sales Discount/Cash Discount
o Discount na binabawas sa invoice price
o Sales Discount sa Point of View ni Seller
o Purchase Discount naman sa PoV ni Buyer.
o Two methods for accounting Sales Discount
 Gross Method
 Usual Method, gross amount ng AR at
Sales ang irerecord then if pumasok sa
discount period, tyaka lang irerecognize
yung discount
 Net Method
  Deducted na agad sa AR at Sales yung
discount kahit di pa bayad, net of
discount na agad ang nirerecord.
 Magkakaroon ng Sales Discount
Forfeited if hindi umabot sa discount
period si customer.
 Sales Discount forfeited is considered as
other income since nirecognize mo na
nga siya as discount kaya lang hindi
natuloy yung pagdidiscount.
 Allowance for Bad Debts/Doubtful Accounts
 Estimation ng possibility na hindi magbayad yung nangutang
 Two methods for accounting
o Allowance Method
 Only method na allowed ni IFRS
 Use of the account doubtful accounts expense
for doubtful recognition
 Adjustment if proven ang uncollection (see page
122)
o Direct Writeoff Method
 Not allowed by the IFRS kase di aligned sa
matching principle
 No entry sa recognition, nagkakaroon lang ng
entry kapag proven na(see page 124)
o NOTE: Upon recovery of accounts, ADA at Cash lang
ang magiincrease ang balance, sa AR kase offset
lang(see page 123, no.3)
 Doubtful accounts classification in Income Statement:
o Distribution Cost
 Credit and collection are under the charge of
Sales Manager
o Administrative Expense
 Credit and collection are NOT under the charge
of Sales Manager.
 If no statement under who is in charge
 Formula for ADA, ending balance (Try to Understand the
idea behind the formula using the notes above, not just
memorize)
o Ito yung mga nangyayare if we will use a T-Account
o ADA, Beg. Balance
ADD: Recovery of accounts written off
Doubtful Accounts Expense (Journal Entry
partner kase siya ni ADA so kung ano value niya is
value ng mai-aadd sa balance ng ADA)
Total: ADA during the current year
 Less: Accounts written off (Binangga na kase dito
yung ADA sa AR since written off na nga)
o If may isang nawawala sa formula, try to write the
formula again then workback(squeeze)
Trade Receivables
- Utang ng ibang entity sa atin na result ng ordinary course of business like Accounts
Receivable at Notes Receivables.
o Account Receivables are also known as Open Accounts/Unsecured Accounts
mainly dahil walang issued promissory note para sa mga ito.
 Other names ng AR: Customer’s Account/Trade Debtors/Trade
Accounts Receivables
o Notes Receivables is a secured account dahil supported sila ng formal
promises to pay or promissory notes.
- If expected to be realize within normal cycle or one year(whichever is longer)
classified as current asset.
Nontrade Receivables
- Utang na galing sa ibang activity ng company at hindi sa ordinary course ng business.
- Examples of Nontrade Receivables
o Advances or Receivables from associates (Employee,sharholders,etc.) or mga
pautang/advance pasahod sa tauhan or co-owner/s.
 Advances to affiliates (subsidiary group/business partner) are
noncurrent assets/investments.
 Advances to suppliers are current assets.
o Subscription Receivables (Corporation Topic)
 If non-current, deducted in Subscribed share capital
 If current, included in Nontrade Receivables
o Creditors Account with Debit balances
 Accounts Payable or utang natin na overpaid. Literally na sobra yung
nabayad natin kesa dapat na babayaran talaga natin which means need
nila ibalik kaya receivable.
 Classified as current assets.
o Special Deposits
 Basta noncurrent. Sasabihin naman sa prob yan haha.
o Dividend Receivables and Accrued Receivables
 Usually current assets
o Claims Receivables
 Usually result ng Insurance and Tax Refund
 Classified as Current Assets.
Customer’s credit balances
 - Utang sa atin ng customer na overpaid, sila naman yung sobra ang binayad so need
natin magbalik
- Classified as Current Liabilities
- Balance ni Customer A is hindi pwedeng I-offset sa balance ni customer B
- Upon computation ng Collection from customers, dinededuct ang credit balances. If
included sa collection, if hindi edi hindi.
Formulas
- For Accounts Receivable, Ending
AR, Beg.
ADD: Credit Sales
Total: AR during the current year
Less: Collections
Accounts written off
Sales Return
Total: AR, End. (Tirang Utang ng mga customer sa’yo, laging based sa sale price if
merchandise/goods ang inutang)
- For Net Realizable Value
AR, End.
Less: Allowances
Total: Net Realizable Value (Tirang utang ng mga customer sa’yo na siguradong
macocollect mo as per estimation)
IMPORTANT NOTE:
- Gross Sales ay yung tubo so dinadagdag siya sa value ng inventory sold.
- Above cost meaning additional sa purchase/cost value ng inventory sold.
CHAPTER 5: Estimation of Doubtful Accounts
Key Notes:
Estimating Doubtful Accounts
- Methods:
o Aging the Accounts Receivables/Statement of Financial Position Approach
 As per the name implies it is based sa age ng AR. The term Past Due
is used pag lumagpas na sa given term. Kung 30days ang term then
ang first day ng PAST DUE is the 31st day or 1-day past due.
 Ang Allowance for Doubtful Accounts is computed base sa experience
ng company sa value ng hindi nabayarang utang in the past or also
known as Experience Rate.
  See page 143 for deeper understanding and visualization.
 Advantage is Fair presentation of AR in statement of financial
position/Balance sheet at NRV
 Disadvantage is that it is Time Consuming lalo pag maraming
account.
o Percent of Accounts Receivable
 Usually based sa past experience ang rate na gagamitin
 If hindi given, try to squeeze the ADA of the past year then divide it
with the AR of the past year to get the rate
 If multiple years are included then add them except for the current year
then divide sa AR or getting their average.
 If di kayang isqueezed then Subtract the total recoveries of past years
to total write offs of past year then divide sa total credit sales ng past
years to get the rate then multiply sa AR ng current year.
 The reason ay dahil ang written off is equivalent sa value ng
ADA na nabawas while the recoveries are recovered ADA
which is supposedly magiincrease sa balance ng ADA kaya
ibinabawas sila sa isa’t isa or ino-offset.
o Percent of Sales

Module 17: Investment in Associate
BOOK: IA VOL.1 2021 BY CONRADO T. VALIX
17-8
Blush company purchased 20% of OS (outstanding shares)
Take Notes:
*According to PAS 28, par. 5, an investor that holds directly or indirectly 20% of the outstanding
shares has significant influence.
*Kapag may significant influence, equity method ang gagamitin at kapag equity method, yung
percentage na hawak natin which is 20% sa case na to, ang imumultiply sa net income ng
INVESTEE para makuha yung share natin ng income.
*PRT = Principal (Example Net Income) multiplied by Rate (Ex. Yung percentage ng share
natin) multiplied by Term/Time (Ex. Yung lumipas na months after natin mapurchased yung
shares) KAHIT BALI-BALIKTAD IMULTIPLY SA CALCU SAME LANG LABAS SINCE
MULTIPLICATION NAMAN
Based sa problem, JULY 1 binili ang share which means 6 months natin hawak yung investment.
SOLUTION:
NET INCOME OF THE INVESTEE FOR 6MONTHS ENDED(GIVEN): 1,600,000
Percentage of shares: 20%

INV. INCOME = 1,600,000 x .20

= 320,000
17-9
Solution:
Investment Income = 1,000,000 x 9/12 x .40
= 300,000

17-10
SOLUTION:
Acquisition Price – 7,000,000
ADD: Investment Income – 360,000
Total: - 7,360,000
Less: Amortized Excess attributed identifiable to intangible asset – (100,000)
Cash Dividend – (120,000)
Total: Investment in associate, end – 7,140,000
17 – 11
Solution
Find the percentage first
30,000 shares purchased by Focus Company (us) / 100,000 Outstanding Shares = 30%
Next compute the investment income using PRT, yung kanina pa natin ginagawa
Investment Income = 5,000,000 x 6/12 x .30
= 750,000
17 – 12
10% lang ang share percentage so kung percentage based ay hindi siya pasok as significant
influence pero declared na may significant influence ang company dahil sa sinabing “Bliss
Company officers are a majority on Board Of Directors” meaning kasali sila sa decision
makers ng investee (yung pinag-investan na company). Kaya Equity Method pa din.

Solution:
Purchase Cost/Acquisition Cost: 4,000,000
ADD: Investment Income: 500,000
Total: 4,500,000
LESS: Cash Dividend paid: 150,000
Total: Investment in Associate, End - 4,350,000
17 – 13
So dito, ang nawawala is yung purchased cost based sa problem at sa word na “pay” so
squeezing.

Take Note: Wag na wag iooverlook ang month, yun yung usual point of error ng
computation dahil madali maoverlook
Solution:
Acquisiton Cost – 1,870,000 (SQUEEZED)
ADD: Share in Net Income – 150,000
Total – 2,020,000
LESS: Cash Dividend – 120,000
Total: Investment in Associate, End – 1,900,000
17 – 14
Excess computations, isa sa pinakamagandang unang gawin hanapin yung kumpleto ang given
para maisolve.
Solution:
Acquisition Cost – 2,560,000 (Given)
LESS: Carrying Amount of Net Assets – 2,000,000
Total: Excess attributable / Excess of Cost over Carrying Amount – 560,000

Undervaluation:
Equipment: 2,000,000 – 1,200,000 = 800,000
Building: 1,600,000 – 1,000,000 = 600,000

ADD: Excess attributable to Equipment – 320,000

Excess attributable to Building – 240,000
Total: Excess of Cost Over Carrying Amount – 560,000 (Ito din ung kinompyut natin kanina)

Investment Income: 640,000

LESS: Excess attributable to Equipment FOR ONE YEAR – 80,000
Excess attributable to Building FOR ONE YEAR – 20,000
Total: Net Investment Income – 540,000

Purchase Cost – 2,560,000 (GIVEN)

ADD: Net Investment Income – 540,000 (Ito yung nakuha kanina)
Total: 3,200,000
LESS: Cash Dividend – 400,000
Total: Investment in Associate, End – 2,700,000
17 -15
Solution
Net Income REPORTED – 5,000,000 (Given)
LESS: Preference Share Dividend – 200,000
TOTAL: Net Income for Ordinary Share – 4,800,000

Investment Income – 4,800,000 x .5 x 12/12 = 2,400,000

17 – 16
Solution:
Acquisition Cost – 5,000,000 (Given)
LESS: Carrying Amount of Net Assets – 3,600,000
Total: Excess of Cost over Carrying Amount – 1,400,000

Excess of Cost over Carrying Amount – 1,400,000

LESS: Excess attributable to Land – 300,000
Total: Goodwill – 1,100,000

Investment Income – 1,800,000

LESS: Excess attributable to Land – 300,000
Total: Net Investment Income – 1,500,000

Purchase Cost – 5,000,000 (Given)

ADD: Net Investment Income – 1,500,000 (Nakuha kanina)
Total – 6,600,000
LESS: Cash Dividend – 450,000
Total: Investment in Associate, End – 6,050,000
17-17
Solution:
Same ng 17–14
17 – 18
Solution:
Purchase Cost – 15,000,000
LESS: Carrying Amount of Net Assets – 10,200,000
Total: Excess of Cost over Carrying Amount – 4,800,000
Undervaluation:
Inventory: 9,000,000 – 8,000,000 = 1,000,000
Land: 7,000,000 - 5,500,000 = 1,500,000
Plant and Equipment: 22,000,000 – 14,000,000 = 8,000,000

2021
ADD: Excess attributable to Inventory – 400,000
Excess attributable to Land - 0
Excess attributable to Plant and Equipment – 3,200,000
Goodwill (Remainder, Squeezed) – 1,200,000
Total: Excess of Cost over carrying Amount – 4,800,000

Investment Income – 1,200,000

LESS: Excess attributable to Inventory – 400,000
Excess attributable to Plant and Equipment – 320,000
Total: Net Investment Income – 480,000

Purchase Cost – 15,000,000

ADD: Net Investment Income – 480,000
Total – 15,480,000
LESS: Cash Dividend – 400,000
Total: Investment in Associate, End (2021) - 15,080,000

2022
ADD: Excess attributable to Land – 600,000
Goodwill (Remainder, Squeezed) – 600,000
Excess attributable to Plant and Equipment – 3,200,000
Excess of Cost Over Carrying Amount – 4,400,000
Investment Income – 2,000,000
LESS: Excess attributable to Land – 600,000
Excess attributable to Plant and Equipment – 320,000
Total: Net Investment Income – 1,080,000

Investment in Associate, Beg. – 15,080,000

ADD: Net Investment Income – 1,080,000
Total – 16,160,000
LESS: Cash Dividend – 800,000
Total: Investment in Associate, End – 15,360,000
Module 18: Investment in Associate (Other Accounting Issues)
BOOK: IA VOL. 1 2021 BY CONRADO T. VALIX
18-7
Solution:
Fair Value of 10% - 900,000(Given)
ADD: Purchase cost of additional 20% - 1,500,000
Total: Investment in Associate, End – 2,400,000

Fair Value of 10% - 900,000 (GIVEN)

LESS: Purchase Cost of 10% - 500,000 (GIVEN)
Total: Income from remeasurement of equity – 400,000
18-8
Solution:
Compute for the purchase cost first using the number of shares acquired and price per share.
Purchase Cost = 30,000acquired shares x 120 per share
= 3,600,000 for 30,000 acquired shares or 30% of the company.

Purchase Cost – 3,600,000

ADD: Retained Earnings – 180,000
Total: Investment in Associate, End – 3,780,000
18-9
Solution:
Investment Income – 2,000,000 x 10%share percentage = 200,000
Investment Income – 6,500,000 x 12/12 x .30 = 1,950,000
2021
Fair Value of 10% - 6,000,000

2022
Fair Value of 10% - 6,000,000
ADD: Purchase Cost – 10,000,000
Total: Investment in Associate, Beg – 16,000,000

Investment in Associate, Beg – 16,000,000

ADD: Investment Income – 1,950,000
Total – 17,950,000
LESS: Dividend Paid – 900,000
Total: Investment in Associate – 17,050,000

18-10
Solution:
2022
Fair Value of 10% - 4,500,000
LESS: Purchase cost of 10% - 3,000,000
Total: Gain from remeasurement of equity (Other term) - 1,500,000

Purchase Cost of 15% - 6,750,000

ADD: Fair Value of 10% - 4,500,000
Total: Cost of Investment – 11,250,000
LESS: Carrying Amount of Net Assets – 9,000,000
Total: Excess of Cost over Carrying Amount – 2,250,000
Excess attributable to Equipment – 1,000,000
Goodwill (Remainder,Squeezed) – 1,250,000
Total: Excess of Cost over Carrying Amount – 2.250,000

Investment Income – 2,000,000

LESS: Excess attributable to equipment – 200,000
Total: Net Investment Income – 1,800,000

Investment in Associate, Beg. – 11,250,000

ADD: Net Investment Income – 1,800,000
Total – 13,050,000
LESS: Cash Dividend – 1,250,000
Total: Investment in Associate, End – 11,800,000

*Mostly naulit lang naman siya may iba lang nadagdag pero halos parehas lang din sila ng naaral
sa 17.
18-11
Solution:
2021
Investment Income – 1.500,000 x 12/12 x .30 = 450,000

Purchase Cost – 2,000,000

ADD: Investment Income – 450,000
Total: 2,450,000
LESS: Cash Dividend – 150,000
Total: Investment in Associate, End – 2,300,000

2022
Compute for the gain from selling first since yun yung pinaka unang nangyare kaya nagkaroon
ng loss of significant influence

Selling Price – 2,000,000 (GIVEN)

LESS: Investment in Associate, Beg. – 1,150,000
Total: Gain from selling – 850,000

Dividend Income – 1,000,000 x 15% = 150,000

Fair Value of Retained Investment, End – 2,400,000 (Given)

LESS: Initial Balance of Retained Investment – 1,150,000
Gain from remeasurement of Equity – 1,250,000
Computation of Income:
Gain from upon sale of shares – 850,000
ADD: Dividend Income – 150,000
Gain from remeasurement of Equity – 1,250,000
Total: Net Income – 2,250,000

Review Upstream

Module 19: Financial Asset at Amortized Cost (Bond Investment)

BOOK: Practical Financial Accounting Vol 1(2021) by Conrado T. Valix
36-1
Solution:
Date Interest Interest Income Amortization Carrying amount
Received (Premium) of bonds
7/01/2021 (Date - - - 1,198,000
of acquisition)
12/31/2021 (End 50,000 47,920 (2,080) 1,195,920
of Reporting
Period)

36-2
Solution:
Date Interest Interest Income Amortization Carrying
Received Discount Amount of
bonds
01/01/2021 - - - 4,562,000
12/31/2021 400,000 456,200 56,200 4,618,200
12/31/2022 400,000 461,820 61,820 4,680,020

36 – 3 UP TO 36 – 7 is same method lang,

NOTE:
*Sa 36-5, interest receivable at interest income ay iisa lang ang value usually since magkasama
sila sa entry.
*DON’T EVER, NEVER OVERLOOK A SINGLE DETAIL*
*Wag din masyadong magenjoy magsolve, be wary of tim*
36 – 8
Medyo tricky and analytical pero kaya naman siya.
Solution:
Premium on sale of bonds – 140,000
ADD: Unamortized discount received upon purchased of bonds – 80,000
Gain on sale of bonds – 220,000
36-9
Solution:
Present Value (Pv) of Principal – 377,000
ADD: Present Value (Pv) of Semi-annual interest payments – 498,480
Total Present Value of bonds – 875,480
36 – 10
Use the effective interest rate table pero yung carrying amount ng bonds is yung market price
(Pv of principal + Pv of semi-annual interest)
36 – 11
Same lang sa 36-9,
36 – 12
Solution:
2021
Principal Payment – 1,000,000(Given)
ADD: Interest Income – 360,000
Total Payment – 1,360,000
2022
Principal Payment – 1,000,000(Given)
ADD: Interest Income – 240,000
Total Payment – 1,240,000
2023
Principal Payment – 1,000,000(Given)
ADD: Interest Income – 120,000
Total Payment – 1,120,000

Present Value of 2021 payment – 1,237,600

Present Value of 2022 payment – 1,029,200
Present Value of 2023 payment – 840,000
Total Present Value on 2021 – 3,106,800
Module 20: Effective Interest Method
Book: IA VOL.1 2021 BY CONRADO T VALIX
20-13
Solution:
Face Amount of Bonds – 8,000,000
CA of Bonds – 7,800,000 (Given)
Face Amount of Sold Bonds – 4,000,000
Cash Received – 3,920,000 (Given)
Interest Income – 65,000
Interest Received – 60,000
Discount Amortization – 5,000
CA of Sold Bonds – 3,905,000
Gain on Sale of Bonds – 15,000
20-14
Solution:
Face Amount of Bonds – Kunyare 300 (Imaginary lang para madali mag compute)
CA of Bonds – 200
Face Amount of Sold Bonds – 200
Cash Received – 340
Discount Amortization – 20,000 (Given)
CA of Sold Bonds – 220
Gain on Sale of Bonds – 120
20-15
Solution:
Face Amount of Bonds – 4,000,000 (Given)
CA of Bonds – 3,767,000 (Given)
Interest Income – 527,380
Interest Received – 480,000
Discount Amortization 47,380
CA of Bonds, Ending – 3,814,380
20-16
Solution:
CA of Bonds – 3,756,000 (Given)
Interest Income/Revenue – 375,600
20-17
Solution:
Face Amount of Bonds – 5,000,000 (Given)
Interest Received – 200,000
20-18
Solution:
Face Amount of Bonds purchased – 1,000,000 (Given)
CA/MP/AC of Bonds purchased,Beg. – 1,198,000 (Given)
Interest Income/Revenue – 47,920
Interest Received – 50,000
Premium Amortization – 2,080
CA/MP/AC of Bonds purchased, End. – 1,195,920
20-19
Solution:
Face Amount of Bonds purchased – 1,000,000(Given)
CA/MP/AC of Bonds, Beg. – 906,000
Interest Income/Revenue – 45,300
Interest Received – 40,000
Discount Amortization – 5,300
CA/MP/AC of Bonds, End. – 911,300
20-20
Solution:
Date Interest Received Interest Income Discount Carrying
Amortization Amount
01/01/2021 - - - 4,562,000
12/31/2021 400,000 456,200 56,200 4,618,200
12/31/2022 400,000 461,820 61,820 4,680,020

20-21
Solution:
Date Interest Received Interest Income Discount Carrying
Amortization Amount
07/01/2021 - - - 4,200,000
12/31/2021 200,000 218,000 18,000 4,218,000
20-22
Solution:
Date Interest Interest Income Premium Carrying
Received Amortization Amount
01/01/2021 - - - 4,206,000
12/31/2021 400,000 336,480 63,520 4,142,480
12/31/2022 400,000 331,398 68,602 4,073,878

Carrying Amount, Dec, 2021 – 4,142,480

LESS: Quoted Price, 2021 – 3,800,000
Total: Unrealized Loss – 342,480 - #1

Carrying Amount, Dec. 2022 – 4,073,878

LESS: Quoted Price, 2022 – 3,600,000 - #4
Unrealized Loss, 2021 – 342,480
Total: Unrealized Loss, 2022 – 131,398 - #2
Carrying Amount, Dec, 2022 – 4,073,878
LESS: Quoted Price, 2022 – 3,600,000
Total: CUMULATIVE Unrealized Loss – 473,878 - #4
20-23
Solution:
Face Amount of Bonds purchased – 5,000,000 (Given)
CA/MP/AC of Bonds – 5,400,000
Interest Income/Revenue – 600,000
Gain/(Loss) on change of fair value of Bonds – 350,000
Quoted Price – 5,750,000
Net Investment Income – 950,000

TRY COMPLEX PROBLEMS IN PRACFIN

Module 21: Effective Interest Method

Book: IA VOL.1 2021 BY CONRADO T VALIX
Module 22: Investment Property (Cash Surrender Value)
BOOK: IA VOL. 1 2021 BY CONRADO T. VALIX
22-3
Solution:
Purchase Cost – 2,200,000 (Given)
LESS: Depreciation – 165,000
Total: Investment Property, Beg. – 2,035,000

Net Proceeds – 2,900,000(Given)

LESS: Investment Property, Beg. – 2,035,000
Total: Gain/Loss upon selling – 865,000 Gain
22-4
Solution:
Total of Fair Value for 2022 – 9,700,000
LESS: Total Fair Value for 2021 – 10,100,000
Total: Gain/Loss from market value adjustments – (400,000) Loss
22-5
Solution:
COST MODEL
Purchase Cost - 9,000,000(Given)
LESS: Depreciation Expense – 600,000 (300,000 each for 2021 and 2022)
Total: Investment Property, Initial – 8,400,000
22-6 – 22-8
Solution:
Try to apply mentally. ANSWERS (6-B,7-A, 8-D)
22-9
Solution:
Purchase Cost of 10 legally separate property– 200,000,000 (GIVEN)
LESS: NON-REFUNDABLE TRANSFER TAXES – 20,000,000 (GIVEN)
Legal cost DIRECTLY ATTRIBUTABLE TO ACQUISITION – 1,000,000 (GIVEN)
Total: 221,000,000/10
Purchase cost per Investment Property – 22,100,000
Purchase Cost of 9 legally separate property/Investment Property, Beg. - 198,900,000

Land – 221,000,000 x .2
= 44,200,000/10 properties
Land per Property = 4,420,000

Investment Property – 22,100,000 (100%)

LESS: Land per property – 4,420,000 (20%)
Total: Building per property – 17,680,000 (80%)

Fair Value of Investment Property – 225,000,000

LESS: Investment Property,Initial – 198,900,000
Total: Gain/Loss from market value adjustments – 26,100,000

Depreciation Expense – 17,680,000/50 years of useful life = 353,600 per building

22-10
Solution:
Fair Value – 35,000,000
LESS: Carrying Amount of Building – 20,000,000
Total: Revaluation Surplus – 15,000,000

Fair Value – 15,000,000

LESS: Carrying Amount of Land – 10,000,000
Total: Gain from transfer of land - 5,000,000

22-14,22-15,22-16
Solution
Nasa Pracfin hahaha, page540.