ACC 106

P2 EXAM

1. A foreign currency forward contract has which of the following features?

a. The exchange of the currency may or may not occur.
b. The parties to the contact do not know the number of currency units that will be exchanged until the date the
forward contract matures.
c. The parties to the contract must record journal entries at the date the forward contract is established.
d. The parties to the contract must exchange the currency regardless of the exchange rate on the date the
forward contract matures.
2. Which of the following statements is not correct with regard to foreign currency forward contracts?
a. The contract is between an individual buyer and seller.
b. The parties do not have to exchange the currency if the exchange rate is not favorable.
c. The forward contract can be for any number of currency units.
d. The exchange can tale place at any time.
3. What is the relationship between the foreign currency spot rate and the forward rate?
a. The spot rate is always higher.
b. The forward rate is always higher.
c. The two rates always start out the same.
d. The rates can be different (either can be higher) or they can be the same.
4. Which of the following statements is not correct with regard to speculative foreign currency contracts?
a. The gain or loss from a speculative contract is included in other comprehensive income.
b. Speculative contracts can be created with forward contracts and option contracts.
c. A speculative contract created with a forward contract does not require a journal entry at establishment while a
speculative contract created with an option contract does require a journal entry at establishment.
d. The hedge instrument must be revalued to its fair value at balance sheet dates.
5. May a derivative instrument be:
Financial Instrument? Other Contracts?
a. YES YES
b. YES NO
c. NO YES
d. NO NO
6. How are investments in financial derivatives valued on the balance sheet?
a. Market Value
b. Cost
c. Lower at cost or market value
d. Not reported
7. PFRS 9 on speculative forward exchange contracts requires that the contract be:
a. Revalued using spot rate throughout its life with any gains or losses to be deferred and amortized as they occur.
b. Revalued at fair value throughout its life with any gains or losses to be deferred and amortized as they occur.
c. Valued using spot rates throughout its life with any gains or losses to be taken into income as they occur.
d. Revalued at fair value throughout its life with any gains or losses to be taken into income as they occur.
8. A Philippine company enters a forward purchase contract for speculative purposes. When are gains and losses on
the hedge investment reported on the income statement?
a. When the forward contract changes in market value.
b. When the forward contract is closed.
c. When the forward contract is determined to be an effective hedge.
d. When the merchandise is sold.
9. In a forward-based derivative, the party in the favorable position cannot have which of the following risks?
a. Credit Risks
b. Liquidity Risks
c. Market Risks
d. Off-balance-sheet risk
10. Derivative financial instruments are contracts that create
a. Rights
b. Obligations
c. Both rights and obligations
d. Neither rights nor obligations
 On November 1, 20x7, Aurora Company concluded that the Thailand baht would weaken during the next six
months because of the coup that transpired recently. In hopes of reporting a gain, Aurora entered into a foreign
exchange forward for speculation on November 1, 20x7, to sell 1,000,000 baht on April 30, 20x8 at the forward
rate.
11/1/20x7 12/31/x7 4/30/x8
Spot rate (baht) P1.190 P1.180 P1.210
Forward rate (baht) 1.199 1.187 1.210
11. The December 31, 20x7 profit and loss statement, foreign exchange gain or loss on forward contract amounted
to:
a. P10,000 gain
b. P10,000 loss
c. P12,000 gain
d. P12,000 loss
12. On April 30, 20x8, foreign exchange gains or loss on forward contract amounted to (ignoring any discount
reversal):
a. P23,000 loss
b. P23,000 gain
c. P30,000 loss
d. P30,000 gain

On December 1, 20x7 Blacklist International Company enters into forward contract for speculative purposes to acquire
100,000 Mexican New Peso on March 1, 20x8 a currency in which the company has no receivables, payables, or
commitments. The firm’s fiscal year-ends on December 31.
Following are the spot rates and forward rates at various dates:
12/1/20x7 12/31/x7 3/1/x8
Spot rate (New Peso) P2.35 P2.40 P2.42
Forward rate (New Peso) 2.36 2.37 2.42
13. The December 31, 20x7 profit and loss statement, foreign exchange gain or loss on forward contract amounted
to:
a. P1,000 loss
b. P1,000 gain
c. P5,000 gain
d. P5,000 loss
14. On March 1, 20x8 foreign exchange gains or loss on forward contract amounted to:
a. P5,000 loss
b. P5,000 gain
c. P2,000 gain
d. P2,000 loss

On September 1, 20x7, Fnatic Corp. entered into a foreign exchange contract for speculative purposes by purchasing
50,000 deutsche marks for delivery in 60 days. The rates to exchange follow:
9/1/20x7 9/30/20x7
Spot rate P21.00 P21.50
30-day forward rate 20.98 20.00
60-day forward rate 20.99 22.10

15. In its September 30, 20x7, income statement, what amount should Fnatic report as foreign exchange transaction
gain (loss).
a. P(49,000)
b. P55,500
c. P27,500
d. (49,500)

On December 12, 20x7, Falcons Co. entered into three forward exchange contract, each to purchase 100,000 foreign
currencies (FC) is 90 days. The relevant exchange rates are as follows:
Spot Rate Forward rate (for March 12, 20x8)
November 30, 20x7 P.87 P.89
December 12, 20x7 P.88 P.90
December 31, 20x7 P.92 P.93
 16. Falcons Co. entered into the third forward contract for speculation. At December 31, 20x7, what amount of
foreign currency transaction gain from this forward contract should Falcons include in net income?
a. P0
b. P3,000
c. P5,000
d. P10,000

The current rate on January 1, 20x1 is 10%. Team Liquid PH Company believes that market rates will decrease in the
future. Accordingly, on January 1, 20x1, Team Liquid enters into an interest rate swap on a P2,000,000 loan. Under the
agreement, Team Liquid agrees to receive fixed interest at 10% and pay variable interest. Swap payments shall be made
at the end of each year in the next three years. The following are the current market rates:
Jan. 1, 20x1 10%
Jan. 1, 20x2 12%
Jan. 1, 20x3 14%
17. What amount of derivative asset (liability) should Team Liquid recognize on Dec. 31, 20x1?
a. 40,000 c. (35,714)
b. (40,000) d. (67,602)
18. What amount of gain (loss) should Team Liquid recognize on Dec. 31, 20x3?
a. 2,573 c. (9,825)
b. (2,573) d. 10,365

Omega Company insured the life insurance of its President for P2,000,000, the entity being the beneficiary of the
ordinary life insurance policy. The annual premium is P80,000 and the policy is dated January 1, 2008. The cash surrender
value are:
December 31, 2010 15,000
December 31, 2011 19,000
The entity follows the calendar year as its fiscal period. President died on October 1, 2011 and the policy is settled on
December 31, 2011.
19. What amount should Omega Company report as gain on life insurance settlement in 2011 income statement?
a. 1,962,000
b. 2,000,000
c. 1,961,000
d. 1,981,000
20. What amount should Omega Company report as life insurance expense for?
a. 80,000
b. 60.000
c. 77,000
d. 57,000

The following information relates to a bond sinking fund that RSG Company placed in trust as required by the
underwriter:
Bond sinking fund, January 1, 2011 4,500,000
Additional Investment in 2011 900,000
Dividends on investments 150,000
Interest Revenue 300,000
Administration costs 50,000
Carrying amount of bonds payable 8,000,000
21. What is the carrying amount of the bond sinking fund on December 31, 2011?
a. 5,850,000
b. 5,800,000
c. 5,750,000
d. 5,400,000

22. In January 2011, TNC Company established a sinking fund in connection with its issue of bonds due in 2013. A
bank was appointed as independent trustee of the fund. On December 31, 2011 the trustee held P364,000 cash
in the sinking fund account representing P300,000 in annual deposits to the fund, and P64,000 of interest
earned. In TNC Company statement of financial position on December 31, 2011, the sinking fund should be
reported as:
 a. No part of the sinking fund should appear in TNC Company statement of financial position.
b. P64,000 should appear as a current asset
c. P364,000 should appear as a current asset
d. P364,000 should appear as noncurrent asset

On January 1, 2011, Rogue Company adopted a plan to accumulate funds for a new plant building to be erected
beginning July 1, 2016, at an estimated cost of P6,000,000. Rogue intends to make five equal annual deposits in a fund
that will earn interest at 8% compounded annually. The first deposit is made on July 1, 2011. Present value factors are as
follows:
Present value of 1 at 8% for 5 periods 0.68
Present value of 1 at 8% for 6 periods 0.63
Future Value of an ordinary annuity of 1 at 8% for 5 periods 5.87
Future Value of an annuity of 1 in advance at 8% for 5 periods 6.34
23. What is the annual deposit to the fund?
a. 1,022,150
b. 816,000
c. 946,400
d. 756,000

On October 1, 2017, MAD Lions Corp. owns 15,000 fair value through other comprehensive income shares acquired at a
cost of P172,500. The shares represent 15% of the shares outstanding of XL Corp. On the same date, XL Corp. declared
15% share dividends payable to stockholders on October 31. On October 31, the stock is selling at P20 per share.
However, on October 31, XL Corp. gave P18 per share cash in lieu of the supposed share dividends previously declared.
24. How much is the dividend income to be recognized in 2017?
a. P22,500
b. P25,875
c. P45,000
d. P0
25. What amount of gain or loss on sale of investment to be recognized in 2017?
a. P22,500
b. P25,875
c. P45,000
d. P0
On October 1, 2017, G2 Corp. owns 15,000 fair value through other comprehensive income shares acquired at a cost of
P172,500. The shares represent 15% of the shares outstanding of Fnatic Corp. On the same date, Fnatic declared P4 cash
dividends on its outstanding shares payable to stockholders on October 31. However, on October 31, Fnatic Corp. issued
1 share for every 5 shares held by the shareholders in lieu of the supposed cash dividends previously declared. The
stocks were selling at that time at P22 per share.
26. How much is the dividend income to be recognized in 2017?
a. P0
b. P54,400
c. P60,000
d. P66,000
On January 1 of the current year, Nidorina Company acquired 10,000 shares of Fair value through other comprehensive
income securities of Arcanine Company at P200,000 plus brokerage expense of P10,000. On March 1, of the current year,
Arcanine ordinary share was split on a 5-for-2 basis. On October 1, Arcanine Company made a special assessment of
P1.60 per share on all ordinary shareholders. Nidorina Company accordingly paid the assessment. The fair value
amounted to P15 per share.
27. What is the total number of shares at the end of the year?
a. 5,000
b. 10,000
c. 15,000
d. 25,000
28. How much is the unrealized gain to be presented in the other comprehensive income for the current year?
a. P0
b. P70,000
c. P125,000
d. P375,000
On June 15 of the current year, Magnemite Company owns 10,000 shares with a cost of P700,000 of Grimer Company’s
stocks. During the same period, Grimer Company issued stock rights to existing shareholders. Magnemite received
10,000 stock rights entitling him to purchase 5,000 new shares at P80. The ordinary share was trading ex-rights at P80 a
share and the rights had a market value P20 per right.
29. Assuming that the above securities are FVPL, the stock rights should be initially recognized at
a. P0
b. P100,000
c. P150,000
d. P200,000
30. Assuming that the above securities are FVPL, the cost of investment acquired through exercised of stock rights
should be
a. P100,000
b. P200,000
c. P400,000
d. P600,000

Haunter Company acquired on January 1, 2023, a 5-year, 10%, P5,000,000 face value bonds for P4,639,522 dated January
1, 2023. The bonds which pay interest every December 31 had a 12% prevailing interest rate on the date of acquisition.
Haunter’s business model is to collect contractual cash flows and the cash flows are solely for payment of principal and
interest. On October 31, 2024, the P4,000,000 face value was disposed of when the bonds were quoted at 98 plus
accrued interest. The management decided that the business model is no longer appropriate and reclassified the
remaining investment to FVTPL. On December 31, 2024, the bonds were quoted at 99. (Use 6 decimal places for PV
factors).
31. How much is the realized gain (loss) on sale related to the bonds sold?
a. P123,210 gain
b. P123,210 loss
c. P120,620 loss
d. P120,620 gain

32. Statement 1: Debt investments at fair value through other comprehensive income is initially measured at fair
value plus transaction cost and shall recognized interest income based on the effective interest on initial
recognition.
Statement 2: If an entity reclassifies a financial asset out of the amortized cost measurement category and into the fair
value through other comprehensive income measurement category, its fair value is measured at the reclassification date
with any gain or loss arising from a difference between the previous amortized cost of the financial asset and fair value is
recognized in other comprehensive income.
a. Only statement 1 is correct
b. Only statement 2 is correct
c. Both statements are true
d. Both statements are false

33. Statement 1: If an entity reclassifies a financial asset out of the amortized cost measurement category and into
the fair value through other comprehensive income measurement category, its fair value is measured at the
reclassification date with any gain or loss arising from a difference between the previous amortized cost of the
financial asset and fair value is recognized in other comprehensive income. The effective interest rate is adjusted
because of the reclassification.
Statement 2: If an entity reclassifies a financial asset out of the fair value through profit or loss measurement category
and into the amortized cost measurement category, its initial fair value at the purchase date becomes its new gross
carrying amount.
a. Only statement 1 is correct
b. Only statement 2 is correct
c. Both statements are true
d. Both statements are false

34. On January 1, 2023, Scyther Company purchased P1,000,000 ,12% bonds for P1,031,024, a price that yields 11%.
Interest on theses bonds is payable every December 31. The bonds mature on December 31, 2026. On April 1,
2024, Syther Company sold P800,000 face value bonds at a total of P830,000. Market values of the bonds were
as follows:
December 31, 2023 102
December 31, 2024 101
How much is the gain (loss) on sale on April 1, 2024, if Scyther Company’s business model has an objective of collecting
contractual cash flows?
a. P11,913 loss
b. P11,913 gain
c. P12,087 loss
d. P12,087 gain

On June 1, 2022, Jynx Company acquired a 5-year, 10%, P1,000,000 face value bonds at 92. The company paid broker’s
fees and non-refundable taxes amounting to P118,896. As a result, yield rate on the bond was 9%. Interests are
collectible annually every May 31. The bonds were selling at 120, 105, 98 as of December 31, 2022, December 31, 2023
and December 31, 2024; respectively. On September 30, 2024, Jynx sold P250,000 face value bonds for a total cost of
P280,000.
35. Assuming the company classifies the investment as financial assets at amortized cost, how much is the net
increase in the company’s profit for the year ended December 31, 2022?
a. 58,333
b. 54,542
c. 93,501
d. 48,300
36. Assuming the company classifies the investment as financial assets at amortized cost, how much is the
December 31, 2024 interest receivable?
a. 43,750
b. 18,750
c. 17,259
d. 0
37. Assuming the company classifies the investment as financial asset at fair value through profit or loss, how much
is the carrying value of investment on December 31, 2024?
a. 787,500
b. 980,000
c. 765,606
d. 735,000
38. Assuming the company classifies the investment as financial asset at fair value through other comprehensive
income, how much is the unrealized gain/loss that should be reported in OCI for the year 2022?
a. 280,000
b. 161,104
c. 157,313
d. 164,895

39. For an investment in debt securities portfolio classified as Investment at Amortized Cost, which of the following
amounts should be included in the period profit or loss?
I. Unrealized temporary gains and losses during the period as a result of change in fair value.
II. Amortization of discount or premium.
III. Interest received and accrued
a. I and II
b. III
c. II and III
d. I and III

40. If an entity failed to amortize the discount on its investment in bond classified as FVPL, this may result to
a. Understatement of net income
b. Overstatement of net income
c. No effect on net income
d. Overstatement on investment account

Pokémon Company acquired on January 1, 2023, a 5-year, 10%, P5,000,000 face value bonds, for P4,639,522 dated
January 1, 2023. The bonds which pay interest every December 31 had a 12% prevailing interest rate on the date of
acquisition. Pokémon’s business model is to collect contractual cash flows and the cash flows are solely for payment
of principal and interest. On October 31, 2024, the P4,000,000 face value was disposed of when the bonds were
quoted at 98 plus accrued interest. The management decided the that the business model is no longer appropriate
and reclassified the remaining investment to FVTPL. On December 31, 2024, the bonds were quoted at 99. (Use 6
decimal places for PV factors).

41. How much is the realized gain (loss) on sale related to the bonds sold?

a. P124,000 b. P123,210 c. P122,290 d. P120,620

42. If the company’s cash flows test determined that the cash flows were representing payment solely for principal
and interest. What is the proper classification of the debt investment?

a. Debt investment at fair value through profit or loss

b. Debt investment at fair value through other comprehensive income

c. Debt investment at amortized cost

d. Either choice a or choice b of whether to sell or not to sell

43. Statement 1: Debt investments at fair value through other comprehensive income is initially measured at fair
value plus transaction cost and shall recognized interest income based on the effective interest on initial recognition.

Statement 2: If an entity reclassifies a financial asset out of the amortized cost measurement category and into the
fair value through other comprehensive income measurement category, its fair value is measured at the
reclassification date with any gain or loss arising from a difference between the previous amortized cost of the
financial asset and fair value is recognized in other comprehensive income.

a. Only statement 1 is true c. Both statements are true

b. Only statement 2 is true d. Both statements are false

On January 1, 2021, Shineboi Company purchased 5-year bonds with face value of
P8,000,000 and stated interest of 10% per year payable semi-annually January 1 and
July 1. The bonds were acquired to yield 8%. Present value factors are:
PV of an annuity of 1 for 5 periods at 8% 3.993
PV of 1 for 5 periods at 8% 0.681
PV of an annuity of 1 for 10 periods at 4% 8.111
PV of 1 for 10 periods at 4% 0.676

44. What is the purchase price of the bonds?

A. P8,000,000
B. P8,642,400
C. P8,652,400
D. P8,662,400

45. On January 1, 2020, Dantay Company purchased 3,000, P1,000 face value term bonds with a stated rate of 10%
as at amortized cost. The bonds pay interest annually on December 31 and will be redeemed entirely by the issuer
on December 31, 2023. The bond investment was purchased for P2,819,100 at an effective rate of 12%. On
December 31, 2021, the entity changed business model for managing its financial assets and this investment was
reclassified as debt investments at fair value through profit or loss. On this date, the bonds are quoted at 101.
What is the carrying value of the debt investment on December 31, 2021 prior to reclassification and the difference
between market value and amortized cost is taken to
Carrying Value – 12/31/2021 Difference is taken to
A. P3,030,000 Equity
B. P3,000,000 Other Comprehensive Income
C. P2,900,279 Profit or Loss
D. P2,857,392 Not reported

46. On January 1, 2020, Edmond Company purchased bonds with face value of P5,000,000 designated as at
amortized cost. The company paid P4,742,000. The bonds mature on December 21, 2022 and pay 6% interest
annually on December of each year with 8% effective yield. The bonds are quoted at 105 on December 31, 2020. The
bonds are sold at 110 on December 31, 2021. What amount of gain on sale of Edmond Company’s bonds should be
reported in the 2021 statement of comprehensive income?
a. P758,000
b. P592,931
c. P672,291
d. P678,640

47. Dante Corporation insures the life of its president for P8,000,000, the corporation being the beneficiary of an
ordinary life policy. The premium is P200,000. The policy is dated January 1, 2017. The cash surrender value on
December 31, 2020 and 2021 are P60,000 and P80,000 respectively. Dante follows the calendar year as its fiscal
period. The president died on October 1, 2021 and the insurance proceeds was collected on December 31, 2021. No
premium was refunded on the insurance settlement.
What is the gain on life insurance settlement of Dante Corporation?
a. P7,800,000
b. P7,870,000
c. P7,875,000
d. P7,890,000

48. Boyet Company purchased P8,000,000, 11%, 5-year bonds on April 1, 2021, when the market interest was 10%.
The financial instruments meet the business model test and are classified as debt investments at amortized cost. The
bonds are purchased at P8,295,000 and pay interest annually on March 31. Boyet Company uses the effective
interest method of amortization and its accounting year ends on December 31.
How much is the interest revenue reported in Boyet Company's statement of comprehensive income for the year
ended December 31, 2021 and December 31, 2022??
a. P829,500 and P824,450
b. P622,125 and P825,713
c. P880,000 and P880,000
d. P622,125 and P824,450

 On January 1, 2015, Sheila Company established a sinking fund to retire bonds payable due in 2025. A bank
was appointed as an independent trustee to manage the fund investment. On December 31, 2021, the
trustee held P3,900,000 cash and P1,600,000 of securities in the sinking fund account. The cash amount of
P3,900,000 represents P3,700,000 in annual deposits to the fund and P200,000 of investment income
earned in those deposits prior to 2021. A bank representative informed Sheila that P80,000 of interest and
dividends has been earned in 2021; however, this amount will be received in the first month of 2022.

 On December 31, 2021, IBM Company had outstanding P20 million face value convertible bonds maturing
on December 31,2019. Each P1,000 bond is convertible into 60 shares of IBM Company's P10 par ordinary
shares. The unamortized premium balance and Bond Conversion Privilege is P350,000 and P640,000,
respectively. On this date, an individual holding 2,000 of the bonds exercised the conversion privilege When
the market value of IBM Company's ordinary share was P18.

49.How much should Shell Company’s sinking fund be included in the statement of financial position of Sheila
Company among its non-current assets on December 31,2021?
a. P5,580,000
b. P5,380,000
c. P3,900,000
d. P3,700,000

50. What is the amount credited to share premium upon conversion of the bonds of IBM Company?
a. P1,790,000
b. P899,000
c. P800,000
d. P-0-

51. Assume that on December 31, 2021, IBM Company retired the at 103. Without the conversion
privilege, these bonds would been 102%. How much is the gain or loss on the retirement taken to
profit or loss?
a. P60,000
b. P54,000
c. P15,000
d. P0
52. Euclid Company purchased P8,000,000, 11%, 5-year bonds on April 1, 2021, when the market interest was 10%.
The financial instruments meet the business model test and are classified as debt investments at amortized cost. The
bonds are purchased at P8,295,000 and pay interest annually on March 31. Euclid Company uses the effective
interest method of amortization and its accounting year ends on December 31.
At how much were the debt investments reported in the December 31, 2021 and December 31, 2022 statement of
financial position of Euclid Company?
a. P8,244,500 and P8,188,950
b. P8,295,000 and P8,244,500
c. P8,257,125 and P8,202,837
d. P8,257,125 and P8,188,950

53. How much is the interest revenue reported in Euclid Company's statement of comprehensive income for the year
ended December 31, 2021 and December 31, 2022?
a. P829,500 and P824,450
b. P622,125 and P825,713
c. P880,000 and P880,000
d. P622,125 and P824,450

54. Several years ago, Irene company purchased a P3,000,000 ordinary life insurance policy on its president and the
company is the named beneficiary. Additional data are available for the year ended December 31, 2021. Cash
surrender value of life insurance, December 31,2021- P117,000; Annual premium paid in advance on January 1,
2021- P50,000; Life insurance expense recognized in the statement of comprehensive income for the year ended
December 31, 2021-
P38,000. How much must have been the cash surrender value of life insurance at Irene’s December 31, 2020,
financial statements?
a. P12,000
b. P105,000
c. P117,000
d. P129,000

On January 1, 2020, Grace Company acquired 30% of the voting share capital of Ruby Company for P5,000,000 which
was equal to the book value of interest acquired. The investee reported net profit of P4,000,000 for 2020 and
P6,000,000 for 2021 but paid no dividends during the two-year period. On July 1, 2022, Grace Company sold one-half
of the investment for net proceeds of P4,480,000. The fair value of the remaining investment was P4,500,000 on July
1, 2022 and P4,850,000 on December 31 2022. The remaining investment is to be held at fair value through other
comprehensive income.
55. How much is the unrealized gain on equity investment reported in
the 2022 other comprehensive income?
a. P2,230,000
b. P1,880,000
c. P950,000
d. P350,000

56. Edmond Company purchased of P4,000,000 of 10% bonds of Sapphire Company on January 1, 2021, paying
P3,761,000. The bonds mature January 1, 2029; interest is payable each July 1 and January 1. The discount of
P239,000 provides an effective yield of 11%. Edmond Company uses the effective-interest method and appropriately
carries this debt investment at amortized cost. For the year ended December 31, 2021, Edmond Company should
report interest revenue from the Sapphire bonds of
a. P376,000
b. P411,087
c. P414,087
d. P400,000

On January 2, 2020 Entity B acquired 15% interest in Entity Y by paying P2,000,000 for 10,000 ordinary shares. On
this date, the net assets of Entity Y totaled P12,000,000. The fair values of Entity Y’s identifiable assets and liabilities
were equal to their book values. The investment in Entity Y is classified as Financial Asset at Fair value through Other
Comprehensive Income (FVTOCI). On January 1, 2021, Entity B paid P4,500,000 for 30,000 additional ordinary shares
of Entity Y, which represents a 25% interest in Entity Y. The fair value of Entity Y’s identifiable net assets, was equal to
their book values of P13,000,000. During 2020 and 2021 the following occurred:
Entity Y’s Profit Dividends paid by Entity Y
2020 P2,000,000 P1,000,000
2021 5,000,000 1,500,000

The fair values of Entity B’s investment in Entity Y shares are as follows: December 31, 2020 – P2,700,000; December
31, 2021 – P8,700,000.
57. The amount to be recognized in Entity A’s 2020 profit or loss related to investment is:
a. P150,000
b. P300,000
c. P700,000
d. P850,000

Entity C issued a financial liability designated as FVTPL for P1,000,000. At the end of the reporting period, the fair
value of the financial liability decreased by P100,000 attributable to the following:
Credit risk – P30,000; Interest rate risk – P60,000; Other price risk – P10,000.

58. The decrease in fair value of the financial liability to be recognized in profit or loss is:
a. P-0-
b. P70,000
c. P90,000
d. P100,000
59. The decrease in fair value of the financial liability to be recognized in other comprehensive income (OCI) is:
a. P-0-
b. P10,000
c. P30,000
d. P70,000
60. If recognition of certain changes in fair value in OCI would create or enlarge an accounting mismatch in profit or
loss, the decrease in fair value of the financial liability to be recognized in OCI
is:
a. P-0-
b. P10,000
c. P30,000
d. P70,000

END

“It does not matter how slowly you go as long as you do not stop.”
Confused-cius