Problem 1. On January 1, 2016, ABC Co. acquired 10,000 shares of XYZ, Inc.

at P20 per share,

the quoted price on this date. ABC Co; incurred P7,500 brokerage commission on the
acquisition.

On December 31, 2016 the quoted price per share is P18. If the shares are acquired on this
date, the transaction cost is P.65 per share.

On December 31, 2017, the quoted price per share is P25. If the shares are acquired on this
date, the transaction cost is P1 per share.

On January 6, 2018, 7,000 shared were sold at P27 per share. The commission paid on sale is
P1.50 per share.

Questions:
1. If the investment is classified as investment in equity securities measured at FVOCI, how
much is the carrying amount of the investment in ABC’s December 31, 2016 statement
of financial position?
2. If the investment is classified as investment in equity securities measured at FVOCI, how
much is the balance of accumulated unrealized gains (losses) on fair value changes as of
December 31, 2017?
3. If the investment is classified as investment in held for trading securities, how much is
the effect of the year-end valuation of the investment in ABC’s 2017 profit or loss?
4. If the investment is classified as investment in equity securities measured at FVOCI, how
much is the effect of the year-end valuation of the investment in ABC’s 2017 profit or
loss?
5. If the investment is classified as FVPL assets, how much is the realized gain (loss) on the
January 6, 2018 sale?

Problem 2. On January 1, 2016, C Corp purchased P1,000,000 10% bonds solely to collect
principal and interest until maturity. The bonds were purchased to yield 12%. Interest is payable
annually ever December 31. The bonds mature on December 31, 2020. On December 31, 2016
the bonds were selling at 99. On December 31, 2017, C sold P500,000 face value bonds at 101.
The bonds were selling at 103 on December 31, 2018.

Questions:
1. The purchase price of the bonds on January 1, 2016 is
2. The carrying amount of the investment in bonds on December 31, 2016 is
3. How much is the realized gain on sale of the investment in bonds in 2017?
4. How much is the net unrealized gain in accumulated other comprehensive income as of
December 31, 2017?
5. How much is the net unrealized gain in accumulated other comprehensive income in
equity as of December 31, 2018?
Problem 3. ABC Co. changes its business model and determines the following information:

Carrying amount of financial asset under previous classification ……… P80,000

Fair value on reclassification date ……………………………………………………. P95,000

Provide the entries on reclassification date under the following scenarios:

a. Amortized cost to FVPL
b. FVPL to amortized cost
c. Amortized cost to FVOCI (mandatory)
d. FVOCI (mandatory) to Amortized cost – the cumulative balance of gain previously
recognized in equity amounts to P5,000.
e. FVPL to FVOCI (mandatory)
f. FVOCI 9mandatory) to FVPL – the cumulative balance of gain previously recognized in
equity amounts to P5,000.