Investment Accounting
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MaxineInvestment Accounting
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MaxineMaligaya Co.
provided you with the following information regarding its investment in equity
securities classified as financial assets at fair value through profit or loss.
Cost Fair Value on December 31,
2017
Malungkot Co. 100 shares 21,000 19,000
MagagalitinInc. 500 shares 10,000 9,000
Madamdam Corp. 200 shares 20,000 23,000
Mahinahon 1,000 shares 15,000 17,000
The following transactions and events transpired in 2018:
a. A cash dividend of P4,000 was received from Madamdam Corp. on December 1, 2018.
b. A 10% stock dividend was declared and issued in October by Malungkot Co. when the
market value per share was P22.
c. Mahinahon shares were sold during the year for P16,500.
d. The market values per share of the stocks on December 31, 2018 are as follows:
Malungkot – P200; Magagalitin – P14; David – P85.
Requirements:
1. How much is the dividend income that should be recognized in 2018? 4000
2. What should be recognized in Profit or Loss on sale of Mahinahon shares? - (500) = 16,500 -
17,000
3. What is the effect of change in fair value of financial assets at fair value through profit or loss
on the net income of 2018?
- (5000)
On December 31, 2017, MONITORS Corporation’s balance sheet showed the following balances
related to its securities account:
FVPL P738,750
FVOCI 590,000
Interest receivable – James bonds 6,250
Unrealized gain - FVOCI 50,000
MONITORS’s securities portfolio on December 31, 2017, was made up of the following securities:
Securit Classificatio Cost Fair Value
y n
5,000 Faye Corp. shares FVPL P375,00 P381,250
0
4,000 Kyrie Inc. shares FVPL 275,000 264,125
10% James bonds (interest payable semiannually on Jan. 1 and FVPL 125,000 93,375
Jul. 1)
5,000 Irving Inc. shares FVOCI 295,00 315,000
0
10,000 Lebron Inc. shares FVOCI 245,00 275,000
0
During 2018, the following transactions took place:
January 3 Received interest on the James bonds.
March 1 Purchased 1,500 additional shares of Faye Corp. for
P114,750, classified as held for trading. April 15 Sold 2,000 shares of
Kyrie Inc. for P69 per share.
May 4 Sold 2,000
shares of Irving Inc. for P62 per
share July 1 Received
interest on the James bonds.
October 30 Purchased 7,500 shares of Mia Co. stock for P416,250, classified as held
for trading.
The fair values of the shares and bonds on December 31, 2018 are as follows:
Faye Corp. P76.60 per
share
Kyrie Inc. P68.50 per
share
Mia Co. P55.25 per
share
James bonds P102,775
Irving Inc. P61.00 per
share
Lebron Inc. P27.00 per
share
Based on the above and the results of your audit, determine the following:
1. Gain or loss that should be recognized in P&L on sale of 2,000 Kyrie’s shares. - 5938
2. Gain or loss that should be recognized in P&L on sale of 2,000 Irving’s shares. - 0
3. Amount of unrealized gain or loss that should be recognized in 2018 profit or loss. - 14363
4. Amount of unrealized gain or loss that should be recognized in 2018 OCI. - 310