Chapter 7 – Investments in Equity Securities and Debt Securities
CH HA APTER7 I NVESTME MENTSI N EQU QUI TY SECUR URI TI ESAND ND DEBTSECURI RI TI ES PROBLEMS MS 71.
( Vi ct ori aCo Cor porat i on) Ye ar1 ( a) Equi t yI nv es t ment s– FVPL Ot he rExpe ns es Cash ( b)
Equi t yI nv es t ment s–FVPL Unr eal i ze dGai nsonEqui t y I nv e s t ment s–Pr ofitorLos s
150, 000 3, 750 153, 750 30, 000 30, 000
Ye ar2 ( a)
Cash
94, 000 Gai nonSal eofEqui t y I nv es t me nt s–FVPL Equi t yI nv es t me nt s–FVPL
( b)
72.
Equi t yI nv es t ment s–FVPL Unr eal i ze dGai nsonEqui t y I nv e s t ment s–Pr ofitorLos s
4, 000 90, 000 6, 000 6, 000
( Vi ct or yComp mpany) Ye ar1 ( a) Equi t yI nv es t ment satFVt hr oughOCI 153, 750 Cash ( b)
153, 750
Equi t yI nv es t ment satFVt hr oughOCI 26, 250 Unr eal i ze dGai nsandLosseson Equi t yI nv es t me nt s-OCI
26, 250
Equi t yI nv es t ment satFVt hr oughOCI 10, 000 Unr eal i ze dGai nsandLosseson Equi t yI nv es t me nt s-OCI
10, 000
Cash Los sonSal eofEqui t yI nv es t me nt s Equi t yI nvest ment satFV t hr oughOCI
95, 000
Ye ar2 ( a)
( b)
73.
Equi t yI nv es t ment satFVt hr oughOCI Unr eal i ze dGai nsandLosseson Equi t yI nv es t me nt s-OCI
( A Company) a. Cas h
94, 000 1, 000
1, 000 1, 000
18, 000 Di vi dendRe v e nue 2, 400share sx7. 50
57
18, 000
Chapter 7 – Investments in Equity Securities and Debt Securities
b.
c .
74.
Memoe nt r y . Re cei v e d addi t i onal600 s har e sofB Cor p.or di nar y shar esas bonusi s sueon2, 400shar espr e v i ous l yhel d. Equi t yI nv e s t ment s-APr ef er ence Di vi dendRe v e nue 600x250 =
150, 000 150, 000 150, 000
d.
Memo moe nt r y . Rec ei ve daddi t i onalshar esofB Cor p.or di nar ys har esona4f or 1 s t o c ks pl i to ft he2, 400s ha r e sp r e v i o us l yhe l d.T o t a ls ha r e sno w he l d:9, 600.
e .
Equi t yI nv e s t ment s-C Or di nar y Di vi dendRe v e nue 2, 400/6=400shar esx50
20, 000 20, 000
( I nnCor por at i on) ( a) Dec emb mber31,Ye ar2l edg erbal ance( 30, 000shar esx65)
P1, 950, 000
Ye ar3 Mem mo o:Rece i ve d6, 000shar esofNPACo.or di nary as20% bonusi ss ueont he30, 000shar es pr e v i o us l yhe l d. Cas h( 15, 000x70) 1, 050, 000 Equi t yI nvest ment s–FVPL Gai nonSal eofEqui t yI nv es t me nt s 1, 950, 000x15, 000/36, 000=812, 500 Equi t yI nv e s t ment s–FVPL 374, 500 Unr eal i ze dGai nonEqui t yI nves t ment s atFVPL 21, 000x72 1, 512, 000 1, 950, 000–812, 500 1, 137, 500 Unr e al i z edg ai n 374, 500 ( b)
( c )
75.
Gai nonsal e Unr e al i z edg ai none qui t yi nv es t me nt satFVPL Tot alamo untr e por t e di npr ofitorl os s
812, 500 237, 500
374, 500
P237, 500 374, 500 P612, 000
Eq ui t yI nv e s t ment satFai rVal ue
P1, 512, 000
( I nnaCor por at i on) ( a) Dec e mbe r31,Year2l e dg erbal anc e( 30, 000xP65) Cos t Unre al i z edGai norLossonEqui t yI nve s t ment s-OCI
P1, 950, 000 1, 800, 000 P 150, 000
Ye ar3 Mem mo o:Rece i ve d6, 000shar esofNPACo.or di nary as20% bonusi ss ueont he30, 000shar es pr e v i o us l yhe l d. Equi t yI nves t ment satFai rVal uet hr oughOCI Unr eal i ze dGai norLossonEqui t y I nv es t me nt s–OCI
58
570, 000 570, 000
Chapter 7 – Investments in Equity Securities and Debt Securities
36, 000shx70 12/31/Y2FV Unr eal i z e dgai n
2, 520, 000 1, 950, 000 470, 000
Cas h( 15, 000x70) 1, 050, 000 Equi t yI nvest ment satFVt hr oughOCI Unr eal i zedGa Gai norLossonEqui t y I nv es t ment s–OCI 300, 000 Ret ai nedEarni ngs ( 150, 000+570, 000)x15, 000/36, 000
76.
300, 000
( b)
Equi t yI nve s t ment satFV t hro ughOCI Unr eal i ze dGai nonEqui t yI nves t ment s atFV t hr oughOC OCI 21, 000x( 72-70) None
( c )
Equi t yI nv e s t ment satFai rVa l uet hr oug hOCI
P1, 512, 000
( d)
Unre al i z edGai norLossi nEqui t y,12/31Ye ar3 ( 150, 000+570, 000–300, 000+42, 000)
P 462, 000
Fai rv al ue ,Dec embe r31,Year3 Cos t( 1, 800, 000x21, 000/36, 000) Unr e al i z edGa i n( Loss)i nEqui t y
P1, 512, 000 1, 050, 000 P 462, 000
42, 000 42, 000
( Gyps yCor por at i on) ( a)
Sal e spr i ce( 5, 000x54) CVatdat eofs al e Gai nonsal eofDi z ons har e s
P270, 000 250, 000 P 20, 000
( b)
Cumu mul at i v ebal anceo fUnr e al i z edGai nsandLos se s ( i nequi t y) -seebe l ow
P 35, 000
Mont e r e yPr ef e r ence Gar c i aOr di nar y Bar ne yCor por at i on
77.
1, 050, 000
#of s har e s 3, 500 1, 000 3, 000
Cos t P133, 000 180, 000 177, 000 P490, 000
FV,12/31/ Unr e a l i z e d Year3 Gai n( Loss) P135, 000 P 2, 000 190, 000 10, 000 200, 000 23, 000 P525, 000 P35, 000
( Mel odyCor por at i on) ( a) Unre al i z edGai nsorLos se sonEqui t yI nve s t ment st hro ughOCI Fai rv al ue( 1, 250x85) P106, 250 Cos t 110, 000 Unr e al i z edLos s,endofYe ar1 P 3, 750 Tot alFV,De c.31,Year2( 2, 000x90) Tot alc os t( 110, 000+60, 000) Cumul at i v ebal anc e,endofYear2
59
P180, 000 170, 000 P 10, 000
Chapter 7 – Investments in Equity Securities and Debt Securities
( b)
Amo mountt akent oOCI CI Fai rv al ue( 1, 250x85) Cos t Unr e al i z edLos sf orYe ar1
P106, 250 110, 000 P 3, 750
Fai rv al ue( 2, 000x90) Carr yi ngval ue/Cost( 106, 250+60, 000) Unr e al i z edgai nf orYear2 ( c)
P180, 000 166, 250 P 13, 750
Memo mo:Rec ei ve d2, 000st oc kri ght sf r om Musi c,I nc.f ort hepur chaseo fone sharef orever yfiveri ght ssubmi t t edatP80pershar e. Equi t yI nv e s t ment satFVt hr ough OCI Cash I nv es t me ntI nc ome 300x100=30, 000 300x80=24, 000 Cash
30, 000 24, 000 6, 000
2, 250 I nv es t me ntI nc ome 500x4. 50
2, 250
Equi t yI nv e s t ment satFVt hr oughOCI 15, 400 Unr eal i z edGai nsandLosseson Equi t yI nv es t ment s–OCI 2, 300x98=225, 400 225, 400–( 180, 000+30, 000) =15, 400
78.
( AntiCor por at i on) ( a) Cas h I nv es t me ntI nc ome 10, 000x 5 ( b)
50, 000 50, 000
Equi t yI nve s t ment satFVPL( 2, 000x75) Cash ( 2, 000x50) I nv es t me ntI nc ome Equi t yI nves t ment satFVPL Unr eal i ze dGai nonEqui t y I nv es t ment s–Pr ofitorLos s Marke tval ue( 12, 000share sx78) Ca r r y i ngv al uebe f o r et hi s adj ust ment( 660, 000+150, 000) Unr e al i z edgai n
79.
15, 400
150, 000 100, 000 50, 000 90, 000 90, 000 936, 000 810, 000 126, 000
( Tol i t sCor porat i on) ( a) Year2 a. Equi t yI nv es t ment satFVt hr oughOCI – Di ana Or di nar y
60
54, 000
Chapter 7 – Investments in Equity Securities and Debt Securities
Cash b.
c.
d.
54, 000
Me mo r andum e nt r y . Rec ei v ed500addi t i onal sharesofDi anaordi narysharesasar esul tof2f or 1s pl i t . Equi t yI nv es t ment satFVt hr ough OCI –Smi mi t h Pr ef er ence Cash ( 1, 000x120)+1, 200 Equi t yI nv es t ment satFVt hr oughOCI-Di ana Or di nar y Unr eal i zedGai nsandLossesonEqui t y I nv es t me nt satFV-OCI 15, 000/250=60;54, 000/1, 000=54 ( 60–54)x1, 000share s=6, 000 Cash Equi t yI nvest ment satFVt hr oughOCI–Di ana Or di nar y ( 60, 000/1, 000)x250share s
e.
Me mor andum e nt r y .Rec ei v e d750s t oc kr i ght s f r om Di anaf ort hepur chaseofonesharef orev ery t wori ght ssubmi t t edatP55pershare.
f .
Equi t yI nv es t ment satFVt hr oughOCI–Di ana Or di nar y Cas h I nv e s t mentI nc ome 60% x750=450;450/2=225s har es 225x61=13, 725;225x55=12, 375 225x( 61–55)=1, 350 Cas h I nv e s t mentI nc ome 750–450=300;300x3=900
g.
Equi t yI nv es t ment satFVt hr oughOCI–Di ana Or di nar y Unr eal i zedGai nsandLossesonEqui t y I nv es t me nt satFV-OCI 225x( 64–61)=675 Cash( 100x64) Equi t yI nvest ment satFV t hr oughOCI– Di anaOr di nar y
61
121, 200 121, 200
6, 000 6, 000
15, 000 15, 000
13, 725 12, 375 1, 350
900 900
675 675
6, 400 6, 400
Chapter 7 – Investments in Equity Securities and Debt Securities
h.
Cash( 1, 000x100x8%) Di v i dendRe v enue
i .
8, 000 8, 000
Unr eal i z edGai nsandLos sesonEqui t y I nv es t me nt s-OCI Equi t yI nvest ment satFVt hr oughOCI–Di ana ordi nary Equi t yI nv es t me nt satFVt hr oughOCI-Smi t h
4, 950 1, 250 6, 200
Mar ke t CV Di ana 1( 875sh) 54, 250 53, 000* Smi t h( 1, 000x115) 115, 000 121, 200 Tot al 169, 250 174, 200 * Or i gi nalDi anas har e s 500shar esa tP108 2f or 1s pl i t 500s har e s 1, 000s har esatP54 Adj us tpr i ort os al e Bal anc e 1, 000s har esatP60 Sal e ( 250shares Ba l anc e 750shar esatP60 Exe r ci s eofr i ght s 225sha r esatP61 Adj us tpr i ort os al e Sa l e ( 100s ha r e sa tP64 Bal ance 875share s ( b)
I nv es t me nti nc ome( 1, 350+900) Di vi de ndsr e v e nue Tot ali nc ome
Unr eal 1, 250 ( 6, 200) ( 4, 950 P54, 000 _ _ _ _ P54, 000 6, 000 P60, 000 15, 000) P45, 000 13, 725 675 6, 400) P53, 000 P 2, 250 8, 000 P10, 250
710. ( Car l oComp mpany) Year2
Apr .1
May15
Jul y10
Nov .30
Dec .31
31
Cash( 5, 000x25) LossonSal eofEqui t yI nv e s t me nt s Equi t yI nv es t me nt satFVPL–AviOr di nar y Equi t yI nv es t ment satFVt hr oug hOC OCI–Ghi o Pr ef er ence Cash( 600x50)+550 Me mo r andum ent r y . Re ce i v ed 4, 000 addi t i onal share s of Darr el or di nary r epr es ent i ng a 20% bonusi s sue .Shar esnow hel dar e24, 000. Cash( 1x24, 000) Di v i dendRe v enue
125, 000 14, 000 139, 000
30, 550 30, 550
24, 000 24, 000
Unr eal i z edLos sonEqui t yI nve s t ment s–Pr ofitor Loss Equi t yI nv es t me nt satFVPL–AviOr di nar y 5, 000x26=130, 000;130, 000–139, 000 Equi t yI nv es t ment satFVt hr oug hOCI-Dar r el Eq ui t yI nv es t ment satFVt hr oug hOCI-Ghi o
62
9, 000 9, 000
110, 000 650
Chapter 7 – Investments in Equity Securities and Debt Securities
Unr eal i ze dGai nsandLossesonEqui t y I nv es t me nt s-OCI FV Darr el 480, 000 Ghi o 31, 200 Tot al 511, 200
CV Changei nFV 370, 000 110, 000 30, 550 650 400, 550 110, 650
711. ( Hos t elComp m pany) ( a) 1. I nv es t me nti nAssoci at e s Cash 2.
3.
4.
5.
( b)
110, 650
2, 000, 000 2, 000, 000
I nv es t me nti nAssoci at e s Shar ei nPr ofitofAs soc i at e s 20% x1, 500, 000
300, 000 300, 000
Me mo. Re ce i v ed 2, 000 addi t i onals har e s of At l ant aor di nar yas10% bonusi s sue . Shar e s now hel dare22, 000. I nv es t me nti nAssoci at e s Shar ei nPr ofitofAs soc i at e s 20% x3, 000, 000
600, 000
Cash I nv e s t me nti nAs soc i at es 20% x1, 000, 000
200, 000
600, 000
200, 000
I nv es t me ntcos t Shar ei npr ofit–2012 Shar ei npr ofit–2013 Shar ei ndi vi de nds Car r yi ngamo unt ,De c embe r31,2013
712. ( Byr on,I nc. ) 2013 Jan. 1 I nv es t me nti nAssoci at e s–Pi r at e sOr di nar y Cash Dec.31
Dec.31
I nv es t me nti n As soci at e s–Pi r at e sOr di nar y Sharei nPr ofitofAssoci at es 30% x3, 600, 000 Cash( 30% x400, 000) I nv e s t me nti nAs soc i at e s–Pi r at esOr di nar y
P2, 000, 000 300, 000 600, 000 ( 200, 000) P2, 700, 000
5, 160, 000 5, 160, 000 1, 080, 000 1, 080, 000
120, 000 120, 000
713. ( Bar bi e,I nc. ) ( a) 2012
Mar .1
I nv es t me nti nAssoci at e s–Ki t c hi e Cash
63
1, 365, 000 1, 365, 000
Chapter 7 – Investments in Equity Securities and Debt Securities
Dec.31
31
31
( b)
Cash( 30% x800, 000) I nv e s t menti nAs soc i at e s–Ki t c hi e
240, 000
I nv es t me nti nAssoci at e s–Ki t c hi e Shar ei nPr ofitofAs soc i at e s ( 1. 2M x10/12)x30%
300, 000
Shar ei nPr ofitofAs soc i at e s–Ki t c hi e I nv e s t me nti nAs soc i at e s–Ki t c hi e Amo r t i z a t i o no funde r v a l ua t i o no fa s s e t s ( 30% x750, 000)/5yr s.=45, 000 45, 000x10/12=37, 500 50, 000x30% =15, 000 37, 500+15, 000=52, 500
240, 000
300, 000
52, 500 52, 500
Acqui s i t i oncos t ,Mar c h1,2013 Cas hdi vi dendsr ec ei v e d Shar ei nr epor t edpr ofitofas soc i at e Adj us t me nti nr e por t edpr ofit I nv es t mentcar r yi ngv al ue ,Dece mbe r31,2013
P1, 365, 000 (240, 000) 300, 000 ( 52, 500) P1, 372, 500
I ncome mereport edbyBarbi ef r om i t si nvest menti nassoci at es: ( 300, 000–52, 500)
P 247, 500
714. ( Ri chmo mondeCorpor at i on) ( a) Year1
Jan. 1
Dec.31
31
Equi t yI nv es t me nt satFVt hr oughOCI–Pen Cash
900, 000
Cash Di v i dendRe v enue 10% x2, 000, 000
200, 000
Equi t yI nv es t ment satFVt hr oughOCI–Pe n Unr eal i ze dGai nsandLossesonEqui t y I nv e s t me nt s-OCI
480, 000
900, 000
200, 000
480, 000
Year2
Jan. 1
I nv es t me nti nAssoci at e s–Pen,I nc.( atFV) Equi t yI nvest ment satFV t hr oughOCI–Pen Unr eal i ze dGa Gai nsandLossesonEqui t y I nv es t me nt satFV-OCI Re t ai nedEar ni ngs
1
Dec.31
31
1, 380, 000 1, 380, 000
480, 000 480, 000
I nv es t me nti nAssoci at e s–Pen,I nc. Cash
2, 600, 000
I nv es t me nti nAssoci at e s–Pen,I nc. Shar ei nPr ofitofAs soc i at e s( 30% x6, 500, 000)
1, 950, 000
Cash
2, 600, 000
1, 950, 000 900, 000
64
Chapter 7 – Investments in Equity Securities and Debt Securities
I nv e s t me nti nAs soc i at e s( 30% x3, 000, 000) ( b)
900, 000
Cos tt r ansf er r edf r om Equi t yI nves t ment satFV Addi t i onali nv es t me nt Shar ei npr ofit Cashdi v i dendsr ec e i v ed Car r yi ngamo unt ,De c embe r31,Year2
1, 380, 000 2, 600, 000 1, 950, 000 ( 900, 000) 5, 030, 000
715. ( E Cor por at i on) ( a) Year1
Jan. 1
Aug.1
De c.31
I nv es t me nti nAssoci at e s–FCompany Cash( 50, 000x165)
8, 250, 000 8, 250, 000
Cash I nv e s t menti nAs soc i at e s–FCompany
210, 000
I nv es t me nti nAssoci at e s–FCo mpany Shar ei nPr ofitofAs soc i at e s 25% x 680, 000
170, 000
Cash I nv e s t menti nAss oci at es–FCompany
240, 000
I nv es t me nti nAssoci at e s–FCompany Shar ei nPr ofitofAs s oci at es–FCompany 25% x1, 000, 000
250, 000
210, 000
170, 000
Year2
Dec.31
31
240, 000
250, 000
Year3
Jan.2
2
Dec.31
31
Cash ( 20, 000x175) I nv e s t menti nAss oci at es–FCompany Gai nonSal eofI nv es t menti nAssoci at e s Ac q ui s i t i o nc o s t 8, 250, 000 Sharei npr ofit( Year1) 170, 000 Cashdi vi dendsr ecei ved( Year1) ( 210, 000) Cashdi vi dendsr ecei ved( Year2) ( 240, 000) Sharei npr ofit( Year2) 250, 000 I nvest mentcar ry i ngam mo ount 8, 220, 000 Port i onsol d 20/50 CVofi nves t mentsol d 3, 288, 000
3, 500, 000
Equi t yI nv es t ment satFVt hr oughOCI I nv e s t menti nAss oci at es–FCompany I nvest mentI ncome me 30, 000x175=5, 250, 000 8, 220, 000–3, 288, 000=4, 932, 000 5, 250, 000–4, 932, 000=318, 000
5, 250, 000
3, 288, 000 212, 000
4, 932, 000 318, 000
Cash Di v i dendRe v enue
120, 000
Equi t yI nv es t ment satFVt hr oughOCI Unr eal i ze dGai nsandLossesonEqui t y I nv e s t me nt s-OCI
450, 000
120, 000
65
450, 000
Chapter 7 – Investments in Equity Securities and Debt Securities
30, 000x( 190 -175)= ( b) . Cos t /Car r yi ngVal ue,begofye ar I nc omef r om as soc i at e s Cashdi vi dendsr ecei ved Sal eofs har es Car r yi ngv al ue,endofy ea r Mar ke tv al ue30, 000x190
Year1 Ye ar2 P8, 250, 000 P8, 210, 000 170, 000 250, 000 ( 210, 000 ( 240, 000)
Year3
P8, 210, 000 P8, 220, 000 P5, 700, 000
716. 1. 2. 3. 4. 5. 6.
AandB A B andC AandB C C
7. 8. 9. 10. 11.
B A,B,andC C B A
717. ( AbuComp mpany) ( a) Dat e 01/01/Ye ar1 12/31/Ye ar1 12/31/Ye ar2 12/31/Ye ar3 12/31/Ye ar4 12/31/Ye ar5 * r oundedoff. ( b) Year1 Jan. 1
Dec.31
Year2 Dec.31
I nt e r e s t Recei v e d 1, 200, 000 1, 200, 000 1, 200, 000 1, 200, 000 1, 200, 000
Pr emi mi um I nt e r es tRev enue Amo r t i z at i on 1, 158, 450 1, 152, 633 1, 146, 002 1, 138, 442 1, 129, 827*
41, 550 47, 367 53, 998 61, 558 70, 173*
Car r yi ngVal ue 8, 274, 646 8, 233, 096 8, 185, 729 8, 131, 731 8, 070, 173 8, 000, 000
De btI nv e s t me nt satAmo r t i z e dCos t Cash
8, 274, 646
Cash DebtI nves t ment satAmort i ze dCost I nt er es tRe v e nue
1, 200, 000
Cash DebtI nves t ment satAmort i ze dCost I nt er es tRe v e nue
1, 200, 000
8, 274, 646
41, 550 1, 158, 450
47, 367 1, 152, 633
718. ( Sout hComp mpany) ( a) ( 1)Securi ti esarecl assi fiedasatf ai rval uethr ough pr ofit fitandl oss. Year1
June1
Dec.1
De btI nv e s t me nt satFVPL Cash Cash
3, 691, 500 3, 691, 500 160, 000
66
Chapter 7 – Investments in Equity Securities and Debt Securities
I nt e r e s tRe v enue( 4M x8% x½) Dec. 31
31
I nt er es tRe ce i v abl e I nt e r e s tRe v enue( 4M x8% x1/12) De btI nv e s t me nt satFVPL Unr eal i zedGai nonDebtI nves t ment sat FVPL 4M x0. 97=3, 880, 000 3, 880, 000–3, 691, 500=188, 500
160, 000 26, 667 26, 667 188, 500 188, 500
Year2
Jan.1
June1
Dec.1
31
De c.31
I nt er es tRe ce i v abl e I nt e r e s tRe v enue
26, 667
Cash I nt e r e s tRe v enue
160, 000
Cash I nt e r e s tRe v enue
160, 000
I nt er es tRe ce i v abl e I nt e r e s tRe v enue
26, 667
De btI nv e s t me nt satFVPL Unr eal i zedGai nonDebtI nves t ment sat FVPL 4M x0. 99=3, 960, 000 3, 960, 000–3, 880, 000=80, 000
80, 000
26, 667
160, 000
160, 000
26, 667
80, 000
( 2)Securi ti esarecl assi fiedasatam mo ort i zed cost Tof aci l i t at ecomput at i on,apar t i alamo r t i z at i ont abl ei spr es ent e dbe l ow. I nt e r e s t I nt er e s tRe v e nue Amo mor t i z at i on Dat e Re c e i v e d ofDi sc ount Amo mor t i z edCos t June1,Year1 3, 691, 500 Dec1,Ye ar1 160, 000 184, 575 24, 575 3, 716, 075 June1,Year2 160, 000 185, 804 25, 804 3, 741, 879 Dec.1,Year2 160, 000 187, 094 27, 094 3, 768, 973 June1,Year3 160, 000 188, 449 28, 449 3, 797, 422 Dec.1,Year3 160, 000 189, 871 29, 871 3, 827, 293 June1,Year4 160, 000 191, 365 31, 365 3, 858, 658 Dec.1,Year4 160, 000 192, 933 32, 933 3, 891, 591 Year1
June1
Dec.1
31
De btI nv e s t me nt satAmo r t i z e dCos t Cash
3, 691, 500 3, 691, 500
Cash DebtI nves t ment satAmort i ze dCost I nt er es tRe v e nue( s eeabov et abl e)
160, 000 24, 575
I nt er es tRe ce i v abl e DebtI nves t ment satAmort i ze dCost I nt er es tRe v e nue 160, 000x1/6=26, 667
26, 667 4, 301
67
184, 575
30, 968
Chapter 7 – Investments in Equity Securities and Debt Securities
25, 804x1/6=4, 301 Year2
Jan.1
June1
Dec.1
31
I nt er es tRe v e nue I nt er es tRe ce i v abl e De btI nv e s t me nt satAmo r t i z e dCos t
30, 968 26, 667 4, 301
Cash De btI nv e s t me nt satAmor t i z e dCo s t I nt er es tRe v e nue( s eeabov et abl e )
160, 000 25, 804
Cash De btI nv e s t me nt satAmor t i z e dCo s t I nt er es tRe v e nue( s eeabov et abl e)
160, 000 27, 094
I nt er es tRe ce i v abl e De btI nv e s t me nt satAmor t i z e dCo s t I nt er es tRe v e nue 160, 000x1/6=26, 667 28, 449x1/6=4, 742
26, 667 4, 742
185, 804
187, 094
31, 409
( b) Jour nalent ry/ent ri est orecordsal eofi nvest menton Novemb mber1,Year4. ( 1)Securi ti esarecl assi fiedasatf ai rval uethr ough pr ofit fitandl oss. Year4
Nov .1
Cash LossonSal eofDebtI nv es t ment satFVPL I nt er es tRe v e nue De btI nv e s t ment satFVPL Acc .I nt .=4M x8% x5/12=133, 333 Sal espri ce( 3, 925, 000–133, 333)3, 791, 667 Carr yi ngval ue( 4M x0. 98) 3, 920, 000 Lossonsal e 128, 333 ( 2)Securi ti esarecl assi fiedasatam mo ort i zed cost
3, 925, 000 128, 333 133, 333 3, 920, 000
Year4
Nov .1
1
De btI nv e s t ment satAmor t i z e dCos t I nt e r e s tRe c e i v a bl e I nt er es tRe v e nue192, 933x5/6 32, 933x5/6=27, 444 Cash LossonSal eofDebtI nves t ment satAmort i zed Cos t I nt e r e s tRe c e i v a bl e De btI nv e s t ment satAmor t i z e dCos t CVofDebtI nves t ment ssol d: AsofJune1,Year4 3, 858, 658 Amort i zat i onJune1t o Nov.1,Year4 27, 444 AsofNov .1,Year4 3, 886, 102 Sal espri ce 3, 791, 667 Lossonsal e 94, 435
719. ( Gr ow Comp mpany)
68
27, 444 133, 333 160, 777
3, 925, 000 94, 435 133, 333 3, 886, 102
Chapter 7 – Investments in Equity Securities and Debt Securities
( 1)
Cl as si fiedasDebtI nves t ment satFV t hroughProfitorLoss ( a) I nt er es ti nc ome( 1, 000, 000x12%) P 120, 000 ( b) Sal espr i c e( 600, 000x1. 01) P 606, 000 Car r yi ngv al ue,12/31/Ye ar2( 600, 000x1. 06) 636, 000 Lossons al e P 30, 000 ( c) Car r yi ngval ue,12/31/Year2( FV)( 1, 000, 000x1. 06) P1, 060, 000 Car r yi ngval ue,12/31/Year3( 400, 000x1. 04) P 416, 000
( 2)
Cl as si fiedasatAmo m or t i zedCost
Dat e 1/1/Year1 12/31/Ye ar1 12/31/Ye ar2 12/31/Ye ar3 ( a) ( b)
( c)
( d)
720.
Nom I nt 120, 000 120, 000 120, 000
Amor t i zat i onTabl e Effec tI nt Pr e m Amor t 106, 339 104, 973 103, 471
13, 661 15, 027 16, 529
Amor t i z edcos t ,e nd 1, 063, 394 1, 049, 733 1, 034, 706 1, 018, 177
Car r yi ngv al ue ,12/31/Ye ar2 ( s eet abl e ) P1, 034, 706 Sal espr i c e P 606, 000 Carr yi ngv al ue,1/1/Year3( 1, 034, 706x6/10 P620, 824 Amo r t i z at i on1/1/Ye ar3–4/1/Year3 16, 529x3/12x600/1000 ( 2, 479) 618, 345 Lossons al e P 12, 345 I nt er es ti ncome mef orYe ar3: Jan1t oMar31 103, 471x3/12 P 25, 868 Apr1t oDec31 103, 471x400/1000x9/12 31, 041 Tot ali nt e r es ti nc omef orYe ar3 P 56, 909 Car r yi ngv al ue,12/31/Ye ar3 1, 018, 177x400/1000 P 407, 271
( Powe wer puff Comp mpany) Feb.1
Apr i l1
Jul y1
Oc t .1
Equi t yI nv e s t ment s-FVPL–Bl ossom Or di nar y Cas h DebtI nv es t me nt s–FVPL–Pe ac hCo.Bonds Cas h
374, 000 374, 000 1, 010, 000 1, 010, 000
DebtI nv es t me nt s–FVPL –But t er cup Bonds I nt e r es tRe c ei v abl e( 150, 000x12% x4/12) Cas h
150, 000 6, 000
Cas h I nt e r es tI nc ome( 1, 000, 000x10% x6/12)
50, 000
De c.31 I nt e r es tRec ei v abl e I nt e r es tI nc ome 1M x10% x3/12=25, 000 150, 000x12% x6/12 =9, 000 25, 000+9, 000=34, 000
69
156, 000
50, 000 34, 000 34, 000
Chapter 7 – Investments in Equity Securities and Debt Securities
31 Unr e al i z edLos sonI nv e s t me nt satFVPL Equi t yI nv e s t ment s–FVPL-Bl ossom Or di nar y DebtI nv es t me nt s–FVPL-But t er cup Bonds De btI nv e s t ment s–FVPL-Peac hBonds Cos t 374, 000 1, 010, 000 150, 000 1, 534, 000
Bl oss om Or di nar y Pe ac h10% Bonds But t e r cup12% Bonds
11, 000 6, 000 3, 000 20, 000 Fai rv al ue 380, 000 990, 000 153, 000 1, 523, 000
UGL 6, 000 ( 20, 000) 3, 000 ( 11, 000)
721. ( Nar i t oComp mpany)
Dat e Jan.1,Year1 De c .31,Year1 De c .31,Year2 De c .31,Year3 De c .31,Year4 De c .31,Year5
Amo r t i z at i onTabl e Nom mi i nal Effe c t i v e Pr emi mi um I nt e r e s t I nt e r e s t Amo r t i z at i on 7, 000 7, 000 7, 000 7, 000 7, 000
5, 433 5, 355 5, 272 5, 186 5, 094
1, 567 1, 645 1, 728 1, 814 1, 906
Amo r t i z edCos t , End 108, 660 107, 093 105, 448 103, 720 101, 906 100, 000
Year1
Jan.1
DebtI nv es t me nt satAmo r t i z edCos t–Wol fBonds Cas h
De c.31 Cas h DebtI nv es t me nt satAmor t i z edCos t–Wol fBonds I nt e r es tI nc ome
108, 660 108, 660 7, 000 1, 567 5, 433
Year2
De c.31 Cas h DebtI nv es t me nt satAmor t i z edCos t–Wol fBonds I nt e r es tI nc ome
7, 000 1, 645 5, 355
Year3
De c.31 Cas h DebtI nv es t me nt satAmor t i z edCos t–Wol fBonds I nt e r es tI nc ome I mpai r mentLossonDebtI nv es t ment s DebtI nv es t me nt satAmor t i z edCos t–Wol fBonds Carr yi ngval ue,Dec.31,Year3 P103, 720 Pr esentval ueoff ut ur ecashi nflows 100, 000x0. 9070 90, 700 4, 500x1. 8594 8, 367 99, 067 I mpai r mentLoss P 4, 653
7, 000 1, 728 5, 272 4, 653 4, 653
Year4
De c.31 Cas h De btI nv es t me nt satAmor t i z edCos t–Wol fBonds I nt e r es tI nc ome
70
4, 500 453 4, 953
Chapter 7 – Investments in Equity Securities and Debt Securities
Year5
De c.31 Cas h De btI nv es t me nt satAmor t i z edCos t–Wol fBonds I nt e r es tI nc ome
B andC A B andC A B andC
4, 980
Revi sedAmortization Table Nom mi i nal Effe c t i v e Di sc ount I nt e r e s t I nt e r e s t Amo r t i z at i on
Dat e Dec.31,Year3 Dec.31,Year4 Dec.31,Year5
722. 1. 2. 3. 4. 5.
4, 500 480
4, 500 4, 500
6. 7. 8. 9. 10.
4, 953 4, 980*
A A A C B andC
453 480*
11. 12. 13. 14. 15.
Amo r t i z edCos t , End 99, 067 99, 520 100, 000
B B andC A A C
723.R .Raffy Comp mpany) Tof aci l i t at ecomput at i on,apar t i alamo r t i z at i ont abl ei spr es ent e dbe l ow. I nt e r e s t I nt er es tRe v e nue Amo mor t i z at i on HTM Dat e Re c e i v e d ofDi scount Carr yi ngVal ue June1,2010 5, 353, 150 Dec.31,2010 350, 000 312, 267 37, 733 5, 315, 417 Dec.31,2011 600, 000 531, 542 68, 458 5, 246, 959 Dec.31,2012 600, 000 524, 696 75, 304 5, 171, 655 Dec.31,2013 600, 000 517, 166 82, 834 5, 088, 821 2010
June1
Dec.31
2011 Dec.31
2012 Dec.31
2013 Se pt .1
1
He l dt oMat ur i t ySec ur i t i es–Bl es si eCor p.Bonds I nt er es tRe v e nue( 5M x12% x5/12) Cash
5, 353, 150 250, 000 5, 603, 150
Cash I nt er es tRe v e nue He l dt oMat ur i t ySec ur i t i es–Bl es si e
600, 000
Cash I nt er es tRe v e nue He l dt oMat ur i t ySec ur i t i es–Bl es si e
600, 000
Cash I nt er es tRe v e nue He l dt oMat ur i t ySec ur i t i es–Bl es si e
600, 000
I nt er es tRe ce i v abl e( 3M x12% x8/12) He l dt oMat ur i t ySec ur i t i es–Bl es si e I nt er es tRe v e nue( 517, 166x3/5x8/12)
240, 000
Cas h( 3, 090, 000+240, 000) Gai nonsal eofHTM Sec ur i t i es
71
562, 267 37, 733
531, 542 68, 458
524, 696 75, 304
33, 134 206, 866 3, 330, 000 20, 141
Chapter 7 – Investments in Equity Securities and Debt Securities
I nt er es tRe ce i v abl e He l dt oMat ur i t ySec ur i t i es–Bl es si e
240, 000 3, 069, 859
CVofHTM securi t i essol d: Asof12/31/11( 5, 171, 655x3/5) 3, 102, 993 Amor tf r om 1/1/129/1/12 33, 134 CVasof9/1/12 3, 069, 859 Sa l e spr i c e 3, 090, 000 Gai nonsal e 20, 141 Sept .1
Dec.31
Dec31
Avai l abl ef orSal eSecuri t i es–Bl ess i e He l dt oMa t ur i t ySe c ur i t i e s 5, 171, 655–3, 102, 993=2, 068, 662
2, 068, 662
Cash I nt er es tRe v e nue Av ai l a bl ef o rSa l eSe c ur i t i e s–Bl e s s i e 2M x12% =240, 000 5, 171, 655–3, 102, 993=2, 068, 662 2, 068, 662x10% =206, 866 240, 000–206, 866=33, 134
240, 000
2, 068, 662
206, 866 33, 134
Mar ke tAdj us t ment–AFS Unr eal i ze dGai norLossonAFS Amort i zedcost 2, 068, 662–33, 134= P2, 035, 528* Mar ketval ue2M x103. 5% 2, 070, 000 Mar ketAdj ust ment P 34, 472 * or5, 088, 821x2/5=P2, 035, 528
34, 472 34, 472
724. ( Gr ow Comp mpany) Amor t i zat i onTabl e Dat e Nom I nt Effe ctI nt Pr e m Amor t 1/1/Ye ar1 12/31/Year1 120, 000 106, 339 13, 661 12/31/Year2 120, 000 104, 973 15, 027 12/31/Year3 120, 000 103, 471 16, 529 ( a) Mar ke tv al ue,12/31/Year2( 1. 06x1M) Amo r t i z edcos t ,12/31/Ye ar2 Unr e al i z edGai norLoss( I nEqui t y) ( b) I nt er es ti nc omef orYear2 ( c) Mar ke tv al ue ,12/31/Year3( 1. 04x400, 000) Amo r t i z edcos t( 1, 018, 177x4/10) Unr eal i z edGai non12/31/Year3
Amor t i z edcos t ,e nd 1, 063, 394 1, 049, 733 1, 034, 706 1, 018, 177 P1, 060, 000 1, 034, 706 P 25, 394 P 104, 973 P 416, 000 407, 271 P 8, 729
725. ( Nar ut oComp mpany)
Dat e Jan.1,2010 De c .31,2010 De c .31,2011 De c .31,2012
Amor t i zat i onTabl e Nom mi i nal Effec t i v eI nt er es t Pr e mi um I nt e r e s t Amo r t i z at i on 7, 000 7, 000 7, 000
5, 433 5, 355 5, 272
72
1, 567 1, 645 1, 728
Amo r t i z edCos t , End 108, 660 107, 093 105, 448 103, 720
Chapter 7 – Investments in Equity Securities and Debt Securities
De c .31,2013 De c .31,2014 ( a) ( b) ( c)
( d)
Theor y MC1 MC2 MC3 MC4 MC5
B B C A C
Probl ems ms MC18 B MC19 B MC20 C MC21 D
MC22 MC23 MC24 MC25 MC26 MC27 MC28 MC29 MC30 MC31
A C D C B B B A B A
MC32 MC33
A B
MC34 MC35 MC36
A C B
MC37 MC38 MC39 MC40
C B B A
MC41 MC42
C C
7, 000 7, 000
5, 186 5, 094
1, 814 1, 906
101, 906 100, 000
I nt e r e s ti ncomef or2010 P 5, 433 Car r yi ngamountatDec embe r31,2011( amor t i z e dc os t ) P105, 448 Af t ert hesal e,t hei nves t mentshal lber ecl assi fied asAFS,appl yi ngt ai nt i ngrul e i nI AS39. Fai rv al ueofr e mai ni ng105, 650x40/100 P42, 260 Amo r t i z edc os tofr e ma i ni ng103, 720x40/100 41, 488 Unr e al i z edg ai ni nequi t y ,Dec e mber31,2011 P 772 I nt e r e s ti ncomef or2013 5, 186x40/100 P 2, 074 MULTI PLE CHO HOI CE QUESTI ONS MC6 MC7 MC8 MC9 MC10
D B A A B
MC11 MC12 MC13 MC14 MC15
B C A C C
MC16 B MC17 D
535, 000–525, 000=10, 000 2, 000, 000–1, 750, 000=250, 000l oss 2, 100, 000–( 2, 000, 000+50, 000)=50, 000 FV12/31/Y e ar2( 600x440)+( 2, 000x138)=540, 000 FV 12/31/Year1 =270, 000+280, 600=550, 600 Changei nFV=540, 000–550, 600=10, 600decr easeordebi t 1, 000x150)+2, 250=152, 250;152, 250–( 1, 000x10)=142, 250 10, 000x150=1, 500, 000;1, 500, 000+( 20% x3M)–( 10, 000x50)=1, 600, 000 960500=460;460+600=1, 060;1, 060/10=106shar e s ( 500x20)–500=9, 500;106x( 620–450)=18, 020;9, 500+18, 020=27, 520 88÷1. 10=80 1, 200, 000–( 3x40, 000)+( 25% x640, 000)=1, 240, 000 1, 000x( 140-130)+900x( 170–180)+800x( 200-220)=15, 000addi t i onall os s 1, 000x( 20)+15, 000=35, 000 40% x450, 000=180, 000;150, 000÷12=12, 500;180, 000–12, 500=167, 500 25, 000x180=4, 500, 000;25% x( 2, 400, 000–480, 000)=480, 000 4, 500, 000+480, 000–60, 000–60, 000=4, 860, 000 CVatdat eofr ec l as si fic at i oni sequalt oFV=15, 000x200=3, 000, 000 10, 000x200=2, 000, 000;4, 860, 000x10/25=1, 944, 000 2, 000, 000–1, 944, 000=56, 000 P0;Noi ncomei sr ecogni z e duponr e c ei ptofbonusi s sue. 750, 000+1, 500, 000=2, 250, 000 40% x1, 200, 000=480, 000;( 40% x900, 000)÷18=20, 000 40% x100, 000=40, 000;480, 000–20, 000–40, 000=420, 000 4, 000, 000+420, 000–( 40% x200, 000)=4, 340, 000 20% x5. 5M =1, 100, 000;1, 100, 000–( 20% x1, 000, 000)=900, 000 3, 700, 000+900, 000–( 20% x1, 500, 000)=4, 300, 000 ( 1. 04x1, 000, 000)=1, 040, 000;i nt er es tr ec ei vabl e=1, 000, 000x12% x4/12= 40, 000 8, 750, 000x5% =437, 500 3, 692, 000x5% =184, 600;4M x4% =160, 000
73
Chapter 7 – Investments in Equity Securities and Debt Securities
MC43 MC44
C B
MC45
D
MC46 MC47 MC48 MC49
D B D C
MC50
D
184, 600–160, 000=24, 600;3, 692, 000+24, 600=3, 716, 600 3, 692, 000x5% =184, 600 912, 400x10% =91, 240;1, 000, 000x8% =80, 000 91, 24080, 000=11, 240;912, 400+11, 240=923, 640 7, 850, 000–( 8M x. 08x6/12)=7, 530, 000s el l i ngpr i ce ;7, 383, 000x5% =369, 150 8M x4% =320, 000;369, 150–320, 000=49, 150 7, 383, 000+49, 150=7, 432, 150CVDec.1,Year1; 7, 432, 150x5% =371, 608 371, 608–320, 000=51, 608;7, 342, 150+51, 608=7, 483, 758CVJune1,Yr2. 7, 530, 000–7, 483, 758=46, 242 Car r yi ngamounti sequalt oFV( 472, 500) 500, 000x4% =20, 000 460, 000–472, 500=12, 500l oss Sel l i ngpr i ce=3, 000x120=360, 000;co s tofshar esso l d=560, 000x3, 000/6, 000 =280, 000;Gai n=360, 000–280, 000=80, 000 Cos tofshar esso l d( f or2, 400s har es ,P200, 000)+600/3, 600x360, 000=200, 000 +60, 000=260, 000;Gai n=360, 000–260, 000=100, 000
74
