Midterm Quiz SolutionsProblem 1

A Corporation B Corporation C Corporation D Corporation E Corporation Shares Per Share Amount Shares Per Share Amount Shares Per Share Amount Shares Per Share Amount Shares Per Share Amount

3-Jan 1,000 64.00 64,000.00 8 1,000 50.00 50,000.00

5-Apr (1,000) 64.00 (64,000.00)8 1,000 20.00 20,000.00 1,000 36.00 36,000.00

15-Jul 500 80.00 40,000.00 8-Dec 50

Bal. - - - 1,000 50.00 50,000.00 1,000 20.00 20,000.00 1,000 36.00 36,000.00 550 72.73 40,000.00

5,000.00 16,000.00 (2,000.00) (19,100.00)

-100.00

Per audit - - - 1,000 55 55,000.00 1,000 36 36,000.00 1,000 34 34,000.00 550 38 20,900.00 145,900.00

Entry Made Should be Audit Adjusting Entries:

3-Jan Correct ---------

8-Jan Correct ---------

2-Apr Cash Dividend 1,000 Cash Dividend 1,000 Financial Assets at FV through P&L 1,000Financial Assets at FV through P&L 1,000 Dividend Income 1,000 Dividend Income 1,000

5-Apr Cash 28,000 Cash 28,000 Loss on Sale 36,000Financial Assets at FV through P&L 28,000 Loss on Sale 36,000 Financial Assets at FV through P&L 36,000

Assumed no gain on sale recorded Financial Assets at FV through P&L 64,000

8-Apr Correct C Corporation

Correct D Corporation

15-Jul Correct E Corporation

15-Jul Financial Assets at FV through P&L 33,000 Treasury Shares 33,000 Treasury Shares 33,000Cash 33,000 Cash 33,000 Financial Assets at FV through P&L 33,000

(200x165)

15-Aug Cash 20,000 Cash 20,000 Financial Assets at FV through P&L 20,000Financial Assets at FV through P&L 20,000 Treasury Shares 16,500 Treasury Shares 16,500

Paid in Capital From TS 3,500 Paid in Capital from Treasury Shares 3,500Note: The question (what is the correcting entry) must have not been changed.

8-Dec Financial Assets at FV through P&L 4,000 No entry required Dividend Income 2,000Dividend Income 4,000 Financial Assets at FV through P&L 2,000

10-Dec Cash 2,200 Cash 2,200 Financial Assets at FV through P&L 2,200Financial Assets at FV through P&L 2,200 Cash Dividend Income 2,200 Cash Dividend Income 2,200

15-Dec no entry made Dividend Receivable 5,000 Dividend Receivable 5,000 Dividend Income 5,000 Dividend Income 5,000 (1,000x5)

Unrealized Loss on FVPL 100Financial Assets at FV through P&L 100

Answers:1) 145,9002) (36,000)3) (1,000+2,200+5,000) 8,200.00 4) (100)5) Cash 20,000

Treasury Shares 16,500 Paid in Capital From TS 3,500

Year end Adj

NOTE: I changed the question in number five ( I thought the question is entry on Aril 5) because there's no information on gain on sale presented on the problem,

its either recorded or not, but the best assumption is NO RECORDED GAIN ON SALE)

Note: Correction - 4,000 should be in Debit ColumnNote: No effect in Arriving at Correct Answers

Problem 2 Creamy Company

Creamy Corporation Coffee Corporation Shares Per Share Amount Shares Per Share Amount

2-Jan-08 3,000 35.00 105,000.00 10-Aug-15 1,000 3.00 3,000.00 11-Oct-09 9,000 60.00 540,000.00

Total 12,000 645,000.00 Total 1,000 3,000.00 135,000.00

Adj to OCI 500.00

1-Jan-10 12,000 65.00 780,000.00 1,000 3.50 3,500.00

5-Mar 3,000 69.00 207,000.00 Bal 15,000 987,000.00

1-Jul (5,000) (281,250.00) Unrealized gain

Bal 10,000 705,750 beg 135,000.00

29-Dec (1,000) (71,250) realized 2010 56,250

Bal. 9,000 634,500 realized 2010 11,250

Adj to OCI 220,500.00 221,000.00 market adjustment 2010 to OCI

9,000.00 95.00 855,000.00 288,500.00 SHE

Entry Made Should be Audit Adjusting Entries:2-Jan Cash 12,000.00 Cash 12,000 Dividend Income 12,000

Dividend Income 12,000 Retained Earnings 12,000 Retained Earnings 12,000 (Credit to RE since no record on date of declaration)

5-Mar Financial Assets at FV through OCI 210,000.00 Financial Assets at FV through OCI 207,000 Dividend Receivable 3,000 Cash 210,000 Dividend Receivables 3,000 Financial Assets at FV through OCI 3,000

Cash 210,000 (peso value of dividend =P1.00) see apr 1

1-Apr Cash 15,000.00 Cash 12,000 Dividend Income 3,000 Dividend Income 15,000 Dividend Income 12,000 Cash 3,000

1-Jul Cash 360,000.00 Cash 360,000 Financial Assets at FV through OCI 78,750

Financial Assets at FV through OCI 360,000 Financial Assets at FV through OCI 281,250 Gain on sale 78,750

Gain on sale 78,750

Unrealized Gain FVOCI 56,250 Unrealized Gain FVOCI 56,250

Retained Earnings 56,250 Retained Earnings 56,250

Assuming First in First out

Cost of FA@FVOCI

3000 shares (3,000x35) 105,000

2000 shares (2,000x60) 120,000

Total Cost of Investment Sold 225,000

Part of Fair Value adjustment sold 3000 shares (135,000x3/12) 33,750

(135,000x9/12) 101,250 2000 shares (2/9x101,250) 22,500 22,500 Total FV adjustment related to Investment Sold 56,250

10-Aug Financial Assets at FV through OCI (Coffee) 1,000.00 Financial Assets at FV through OCI (Coffee) 3,000 Financial Assets at FV through OCI (Coffee) 2,000 Dividend Income 1,000 Dividend Income 3,000 Dividend Income 2,000

20-Dec Cash 10,000.00 Cash 10,000 Correct Dividend Income 10,000 Dividend Income 10,000

29-Dec Miscellaneous Receivable 90,000.00 Miscellaneous Receivable 90,000 Financial Assets at FV through OCI 18,750 Financial Assets at FV through OCI 90,000 Financial Assets at FV through OCI 71,250 Gain on sale 18,750 note: Correcteion should be reflected in credit balance of Creamy Company Gain on sale 18,750

Financial Assets at FV through OCI 221,000 Unrealized Gain FVOCI 11,250 Unrealized gain OCI 221,000

Retained Earnings 11,250

Cost of FA@FVOCI (1000x60) 60,000

Shares Part of Fair Value adjustment sold Creamy 9,000 *95 855,000 Unrealized gain 135,000.00 Coffee 1,000 *3.5 3,500.0

Realized gain 56,250.00 858,500.0 Balance 78,750.00 Carrying amount 637,500.00

(1000*1/7) 11,250.00 11,250 Unrealized gain 2010 221,000.00

Answers1) 858,500.00 2) 97,500.00 3) 25,000.00 4) 221,000.00

Fair value Adjusment to OCI

FVOCI@FV

FVOCI@FV

Note: No effect in Arriving at Correct Answers

FVOCI @ FV

5) 67,500.00

Problem 3

P3,760,000

30-Jun-08 P180,000 188,000.00 P8,000 3,768,000.00 P180,000 188,400.00 8,400.00 3,776,400.00

30-Jun-09 P180,000 188,820.00 8,820.00 3,785,220.00 P180,000 189,261.00 9,261.00 3,794,481.00

30-Jun-10 P180,000 189,724.00 9,724.00 3,804,205.00 P180,000 190,210.00 10,210.00 3,814,415.00

P180,000 190,210.00 10,210.00 New scheduleNov 30, 2010 2,096,992.75 Dec 31 2010 16500 17,435.92 935.92 2,097,928.67 Continue to measure at Amortized Cost, No change in Business Model

Answers1) 376,400.00 2) 3,776,400.00 3) - 4) 48,278.75

Selling Price (1.8million x98%) 1,764,000.00 Cash 1,899,000.00 Carrying Value June 30 2010 (3,804,205*1.8/4) 1,711,892.25 Investment at amortized cost 1,715,721.25

Amortization interest receivable 135,000.00 June 30 to Nov 30 Gain on sale 48,278.75

(10,210*5/6)*(1.8/4) 3,829.00 1,715,721

Gain on sale on Nov 30 48,279

5) 2,097,928.67 Remaining Bond Investment: Carrying Value June 30 2010 (3,804,205*2.2/4) 2,092,312.75

Amortization June 30 to Nov 30

(10,210*5/6)*(2.2/4) 4,680.00 2,096,993

6) January to June 189,724.00 July 1 to November 30

(190,210*5/6) 158,508.33 Nov 30 to December 17,435.92

Total interest revenue 2010 365,668.25

10%Effective Interest

Discount Amortization

Amortized Cost, EndInterest

Date9%Interest Paid

Jan. 1, 2008

Dec. 31, 2008

Dec. 31, 2009

Dec. 31, 2010