AUDITING PROBLEMS

INVESTMENTS
DR. R. Y.CO

On January 4, 200A, Jodi

Corp.paid Pl,296,000for40,000 ordinary shares of Richard
Company. The investment representsa 30% interestin the netassets ofRichardand gave Jodi
the abilityto exereisesignificant
influence overRichard operating and financial
policydecisions.
Jodi receiveddividends of Plper share on Decemnber 4, 200A, and Richardreportednetincome
of P640,000 forthe yearended December 3 1,200A. The market value of Richardsordinary
shares at December 31,200A,was P32 per share. The book value of Richard's
net assetswas
P3,200,000 and,

Thefairmarketvalue ofRichard'sdepreciable assets,with an average remaininguseful

life
of8 years,exceededtheir book value by P320,000.
The remainderofthe excessofthe cost ofthe investmentover the book value ofthe
net

assets purchased was attributableto goodwill.

1.What amount ofthe investmentcost is attributable

to goodwill?
A. P240,000 C.P336,000
B.P96,000 D. Pl44,000

2.What amount ofinvestmentrevenueshould be reportedin Jodi'sincome statement for the

year ended December 31,200A?
A. P120,000 C.P180,000

B.PI08,000 D. P192,000

3. What value ofthe investmentin Richardordinary shares on December

is the carrying 3 1,
200A?
A. PI,280,000 C.P1,296,000
B. Pl,436,000 D. P1.368.000

Assume that the 40,000 shares represent in the net assetsofRichard

a 10% interest ratherthan a

30% interest.

4. What amount ofthe investment

revenue shouldbe reportedin Jodi'sincome statement forthe
yearended December 31,200A?
A. P40,000 C. P60,000

B. P64,000 D.P180,000

5.What is the carryingvalue oftheinvestmentin Richardordinary shares at December 31,

200A?
A.PI,296,000 C. P1,280,000
B.P1,436,000 D.P1,236,000
AUDITING PROBLEMS
AUDIT OF INVESTMENTS
DR. R. Y. C

Z1a CORP, investeditscxcess cash in cquitysecurities

during 200A. The busincss model for
these investments
is to profitfrom tradingon
priccchanges.

Investment Quantity Cost Fair Valuc

Vina,Inc. 1,000 slharcs P45,000 P63,000
Toni Co. 2,000 shares 120,000 126,000
ErichCorp. 2,000 shares 216,000 180,000
Totals
P381,000 P369,000

I.
IntheDecember 31, 200A, statcment of financialposition, what should be rcportedas
Carryng amount of the investments?
A. P369,000 C. P381,000
B. P345,000 D. P405,000

In the 200A income statement,what amount should be reported as unrcalizedgai/loss?

2.
A. Unrcalized
gain of P12,000
B.Unrcalized
loss ofP12,000
C. Unrealized
loss of P36,000
D. Unrcalizedgain ofP24,000

Duringthe year 200B, Zia Corp.sold 2,000 shares of ToniCo. for Pl4,600 and purçhased
2,000 more shares of Vina,Inc.,and 1,000 shares of Enchong Company. On December 31,200B,
Zia's portfolio
equity securities consistedofthefollowing.

Investment Quantity Cost Fair Value

Vina,Inc. 1.000 shares P45,000 60,000
Vina, Inc. 2,000 shares 99,000 120,000
Enchong Company 1,000 slhares 48,000 36,000
ErichCorp. 2,000 shares 216,000 66,000
Totals P408,000 P282,000

3. What isthe gain or loss on the sale of ToniCo. investment?

A. P5,400 gain C.Pl1,400 gain

B.P5,400 loss D. P1|,400 loss

4. Whatisthe carryingamount of theinvestments

on Deccmber 31,200B?
A. P408,000 C. P282,000

B. P444,000 D. P246,000

5. What amount ofunrealizedgain or loss should be reportcd in the income statemcnt for thc
yearended Decenmber 3 1,200B?
A. P126,000unrealized gain
B. P126,000unrealized loss
C. P108,000unrealizedgain
D. PI08,000 unrealized loss
During the year 200C, Zia sold 3,000 shares of Vina,Inc.for Pi19,700 and 500 shares of
Enchong Company at a loss of P8,100.On Dccember 31, 20, Zia'scquity investmentportfolio
consistedofthe following.

Investment Quantity Cost Fair Value

Enchong Company 500 shares P24,000 P 18,000
ErichCorp. 2,000 shares 216,000 246,000
Totals P240,000 P264,000

6.What should be reported

as losson sale oftradingsecuritiesin 200C?
A. P60,300 C.P24,300
B. P32,400 D. P68,400

7. What is theamount of unrealizedgain or loss should be reported

in the income statement for
theyear ended December 31, 200C?
A. P1S0,000 unrealized
gain
B.PI80,000 unreelized loss
C. P24,000
unrealized
gain
D. P24,000 unrealized
loss

8. In the December 31,

200C statement of financial
position,what should be reportedas carrying
amount of tradingsecurities?
A. P240,000
C.P264,000
B. P234,000
D. P270,000
AUDITING PROBLEMS
INVESTMENTS
DR. R. Y.CO

as availabl-for-sale.
Coco CO. designates purchased debt securities The following
amortization
schedulerelatesto its5-year,P1,000,000,7% bonds purchasedon December 3 1,200A for
PI,086,565.The bonds were purchased toyield 5% interest.

Interest Interest Premium

Date Received Income Amortization AmortizedCost
12.31.0A P1,086,565
12.31.0B P70,000 P54,328 Pl5,672 1,070,893
12.31.0C 70,000 53,545 1,054,438
16,455
12.31.0D 70,000 52,722 17,278 1,037,160
12.31.0E 70,000 51,858 18,142 1,019,01
8

12.31.0F 70,000 50,982* 19,018 1,000,000

The following
schedulepresentsthe amortizedcost and fairvalue ofthe bonds at year-end.

Fair Value AmortizedCost

December 31,200B PI,065,000 PI,070,893
December 31,200C 1,075,000 1,054,438
December 31,200D 1,056,500 1,037,160
December 31,20OE 1,030,000 1,019,018
December 31,200F 1,000,000 1,000,000

1.What amount should be reportedas investmentin available

for sale securities
in the statement
offinancial ofCoco Co. on December 31,200C?
position
A. P1,086,565 C.P1,075,000

B. P1,054,438 D. P1,065,000

2.What amount ofunrealized

gain shouldbe shown as component ofother comprehensive
income inthe 200C statement ofcomprehensiveincome?
A. P26,455 C. P10,000

B.P20,562 D. P16,455

3. What amount ofunrealizedloss shouldbe shown as component ofother comprehensive

income in the 200D statementofcomprehensiveincome?
A, P14,393 C. P19,340

B.P18,500 D. P1,222

4.What amount ofunrealizedloss should be shown as component ofothercomprehensive

income in the 20OE statement ofcomprehensiveincome?
A. P8,350 C. P9,792

B.P26,500 D. PI0,982

5.What amount ofunrealized

gain should be shown in the 200F statement ofchanges in equity?
A. P26,455 P25,233
C.
B. Pl6,883 D. PI0,990