19. If a financial asset classified as FVOCI is sold during the year, B.

The investment in associate is increased or decreased by the

A. the gain or loss on sale is recognized in profit or loss investor's share of the profit or loss of the investee after the date
B. the gain or loss on sale is recognized directly in equity of acquisition.
C. the cumulative unrealized gains or losses on the C. The investor's share of the profit or loss of investee is not
investment are transferred directly to retained earnings recognized in the investor's profit or loss.
D. profit in the year of sale is increased if the selling price D. Distributions received from the investee reduce the carrying
exceeds the acquisition cost of the investment amount of investment.
E. A and C
23. S1: Under the equity method of accounting, the maximum investor's share in the
22. The following statements are true regarding equity method, loss of the investee is the carrying amount of investment balance. S2: An investor shall
except A. The investment in associate is initially recorded at discontinNetCumulativeeto useLoss the=P148kequityFMCmethod–P170k Cost from the date
cost. that the investor ceases to have significant=(P22,000)influence over
the investee. Unrealized Loss = P22,000 – P1,500
= P20,500 loss
A. both are true B. both are false C. S1 is true D. S2 is true
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E. answer not given

31. Plack Co. purchased 10,000 shares (2% ownership) of Ty Corp. on
24.If under the equity method, an investor's share of losses of an February 14, 2018. Plack received a share dividend of 2.000 shares on April
associate equals or exceeds the carrying amount of investment, which 30, 2018, when the market value per share was P35. Ty paid a cash dividend
statement would be false? of P2 per share on December 15. 2018. In its 2018 income statement, what
A. The investment is reported at NIL value amount should Plack report as dividend income?
B. The investor discontinues its share of further losses. A. P20,000
C. Additional losses are provided for or a liability is recognized, to the B. P24,000 Dividend Income = number of shares x div. per share
extent that the investor has incurred legal or constructive C. P90,000 = 12,000 x P2
obligations or made payments on behalf of the associate. = P24,000
D. P94,000
D. If the associate subsequently reports profits, the investor resumes E. answer not given
its share of those profits without regard to the share of net losses
not previously recognized.

Share in Net Income (P150k x 40%) = P60,000

Less: Excess FV amortization 8,000
25. When the investor discontinues the use of the equity method because significant influence is lost the investment in associate
retained by the investor shall be measured at
A. fair value C. original cost
B. carrying amount D. answer not given
26. When an entity increases its interest in an investment in equity securities accounted for by fair value method, and changes to
equity method, what is the initial carrying amount for purposes of subsequent application of equity method?
A. Carrying amount at the date of the change
B. Original cost plus or minus the net market value change since acquisition
C. Fair value at the date of change
D. The amount that would be reflected in the investment account had equity method been used continually since the purchase
of the investment.
27. Kado Inc. began operations in 2017. The company's trading securities portfolio, which did not change in composition during
2018, is as follows:
Security Cost Market Value
12/31/18 12/31/17
DR P1,000,000 P1,000,000 P1,350,000
F P2,000,000 P1,500,000 P2,100,000
INC P2,500,000 P2,600,000 P1,800,000
What amount should be reported as an unrealized gain (loss) on trading securities in Kado's 2018 income statement?
A. (P150,000) 2017 2018 Change in MV
B. P150,000 DR 1.35M 1M (350k)
C. (P250,000) F 2.1M 1.5M (600k)
D. (P400,000) INC 1.8M 2.6M 800k

(150,000)

E. answer not given

28. At the end of 2017, Lane Co. held trading securities that cost P86,000 and which had a market value of P92,000. During 2018, these
securities were sold for P104,500. During 2018, Lane Co. acquired additional trading securities that cost P73,000 and had a year-end
market value of P71,000. What is the impact of these activities on Lane Co.'s
2018 income statement?
A. Loss of P2,000 Realized Gain on Securities Sold = Sales Price – CV
B. Gain of P10,500 = 104,500 – 92,000 = 12,500
C. Gain of P12,500 Unrealized Loss in Sec. Acquired = Yr.-end MV – Cost
= 71,000 – 73,000 = (2,000)
D. Gain of P18,500 Total I/S Impact = 12,500 + (2,000) = 10,500 gain
E. answer not given
29. During 2017, XYZ Co. purchased marketable equity securities to be measured at fair value thru other comprehensive income.
On December 31, 2017, the balance of unrealized loss was P75,000. There were no security transactions during 2018. Pertinent
data on December 31, 2018 are as follows:
Security Cost Market Value Gain (Loss)
ABC P1,000,000 P900,000 (P100k)
DEF P850,000 P800,000 (P50k)
MNO P950,000 P1,000,000 P50k
(P100k)
In the statement of changes in equity for 2018, how much should be included as cumulative unrealized loss as component of
other comprehensive income?
A. P25,000 C. P100,000
B. P75,000 D. answer not given
30. Data regarding Stone Co's portfolio of equity securities accounted for as fair value through other comprehensive income is as
follows:
Aggregate cost as of 12/31/2018 P170,000 Market value as of 12/31/2018 P148,000 Net realized gains
during 2018 P30,000
At December 31, 2017, Stone Co. reported an unrealized loss of P1,500 to reduce investments to market value. This was the first
such adjustment made by Stone Co. on these types of securities. In its 2018 statement of comprehensive income, what amount of
unrealized loss should Stone report?
A. P30,000
Net Cumulative Loss = P148k FMV – P170k Cost
B. P22,000 = (P22,000)
C. P20,500 Unrealized Loss = (P22,000) – P1,500
D. P0 =P20,500 Loss
32. On January 1, 2018, AC Co. purchased 10,000 ordinary shares of SABM Co. at P90 per share. On December 31, 2018, AC
Co. received 2,000 share of SABM Co. in lieu of cash dividend of P10 per share. On this date, the SABM Company share has a
quoted market price of P60 per share. In its 2018 income statement what amount should AC Co. report as dividend income?
A. P120,000
Number of Shares Received x Market Price per Share
B. P100,000
= 2,000 x P60
C. P20,000 Dividend Income = P120,000
D. P0
E. answer not given
33. On July 1, 2018, Beast Co, exchanged a land for 25,000 ordinary shares of Beauty Co. On this date, the land has carrying
value of P2,500,000 and fair value of P3,000,000 while the ordinary share of Beauty Co. has P60 carrying value and market
value of P150.
On December 31, 2018, Beauty Co. have 250,000 ordinary shares with P80 carrying value. On December 31, 2018, how much
should be reported by Beast Co. as investment in Beauty Co.?
A. P1,500,000 D. P3,750,000
B. P2,500,000 E. answer not given
C. P3,000,000
34. Soprano Co. acquired 50,000 ordinary shares of Alto Co. on September 30, 2017 for P8,250,000. On October 30, the shares
were split into 2:1 (split-up). On November 30, 2018, Alto distributed 10% ordinary share dividends when the market price of the
share was P250 per share. On December 31, 2018, Soprano sold 6,000 of its Alto shares for P600,000. For the year ended
December 31, 2018, how much should Soprano report as gain on sale of investment?
A. P105,000 8,250k/110 = 75 Cost per Share
B. P150,000
Net Proceeds 600,000
C. P200,000
Cost (6,000 x 75) (450,000)
D. P250,000 Gain on Sale 150,000

35. Wa Is Co. acquired 20,000 shares of ABC Co. on March 1, 2017 for P2,000,000 and acquired additional 30,000 shares of
ABC CO. on October 31,2017 at P120 per share. Wais Company received cash dividend of P10 per share on February 14, 2018
and 20% share dividend on April 1,2018. On July 16,2018, Wa Is Co. sold 30,000 shares at P125. How much is the gain on sale
of investment assuming the FIFO method is used?
A. P150,000 # of share Fraction Total Cost NP (30k x 125) 3,750k
B. P550,000 24,000 8333 2M TC (2,600k)
C. P950,000 6,000 100 600k Gain on Sale 1,150k
D. P1,150,000 30,000 2.6M