2019 Vol 1 Ch 3 Answers PDF

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CHAPTER 3INVESTMENTS IN DEBT SECURITIESAND OTHER NON-CURRENT FINANCIAL ASSETSDiscussion Question No. 15 15. 15. 15. 15. 15. PROBLEMS3-1. (Abu Company)(a)DateInterestInterest Revenue 26,Premium Amortization Carrying Value 01/01/Y1 8,274, 12/31/Y1 1,200,000 1,158,450 41,550 8,233, 12/31/Y2 1,200,000 1...

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CHAPTER 3 I NVESTMENTSI N DEBT SECURI TI ES AND OTHER NONCURRENT FI NANCI ALASSETS

Di scussi onQuest i onNo.15 15. 1 15. 2 15. 3 15. 4 15. 5 PROBLEMS 31.

( AbuCompany) ( a) Dat e 01/01/Y1 12/31/Y1 12/31/Y2 12/31/Y3 12/31/Y4 12/31/Y5 * r oundedoff. ( b) Y1 Jan. 1

Dec.31

Y2 Dec.31

32.

I nt er est Recei ved

I nt er estRevenue

Pr emi um Amort i zat i on

1, 200, 000 1, 200, 000 1, 200, 000 1, 200, 000 1, 200, 000

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 ryi ngVal ue 8, 274, 646 8, 233, 096 8, 185, 729 8, 131, 731 8, 070, 173 8, 000, 000

DebtI nvest ment satAmort i zedCost Cash

8, 274, 646

Cash DebtI nvest ment satAmor t i zedCost I nt er estRevenue

1, 200, 000

Cash DebtI nves t ment satAmor t i z edCos t I nt er estRevenue

1, 200, 000

8, 274, 646

41, 550 1, 158, 450

47, 367 1, 152, 633

( Sout hCompany) ( a) ( 1)Secur i t i esar ecl assi fiedasatamor t i zedcost Tof aci l i t at ecomput at i on,apar t i alamor t i z at i ont abl ei spr esent edbel ow. I nt er est I nt er estRe venue Amor t i z at i on Dat e Recei v ed ofDi scount Amor t i z edCost June1,Year1 3, 691, 500 Dec.1,Year1 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

DebtI nv es t ment satAmor t i z edCost

3, 691, 500

Chapt er3 –I nves t ment si nDebtSecur i t i es andOt herNoncur rentFi nanci alAsset s Cash Dec.1

31

3, 691, 500

Cash DebtI nv est ment satAmor t i z edCost I nt er estRevenue( seeabovet abl e)

160, 000 24, 575 184, 575

I nt er estRecei vabl e DebtI nv est ment satAmor t i z edCost I nt er estRevenue 160, 000x1/6=26, 667 25, 804x1/6=4, 301

26, 667 4, 301

I nt er estRe venue I nt er estRecei vabl e DebtI nv es t ment satAmor t i z edCost

30, 968

30, 968

Year2

Jan.1

June1

Dec.1

31

26, 667 4, 301

Cash DebtI nv est ment satAmor t i z edCost I nt er estRevenue( seeabov et abl e)

160, 000 25, 804

Cash DebtI nv est ment satAmor t i z edCost I nt er estRevenue( seeabovet abl e)

160, 000 27, 094

I nt er estRecei vabl e DebtI nv est ment satAmor t i z edCost I nt er estRevenue 160, 000x1/6=26, 667 28, 449x1/6=4, 742

185, 804

187, 094 26, 667 4, 742 31, 409

( 2)Secur i t i esar ecl assi fiedasatf ai rval uet hr oughpr ofitandl oss. Year1

June1

Dec.1

31

31

DebtI nv es t ment satFVPL Cash

3, 691, 500 3, 691, 500

Cash I nt er estRevenue( 4M x8% x½) I nt er estRecei vabl e I nt er estRevenue( 4M x8% x1/12) DebtI nv est ment satFVPL Unr eal i zedGai nonDebtI nv e st ment sat FVPL 4M x. 97=3, 880, 000 3, 880, 000–3, 691, 500=188, 500

160, 000 160, 000 26, 667 26, 667 188, 500 188, 500

Year2

Jan.1

June1

Dec.1

31

I nt er estRecei vabl e I nt er estRevenue

26, 667

Cash I nt er estRevenue

160, 000

Cash I nt er estRevenue

160, 000

I nt er estRecei vabl e I nt er estRevenue

26, 667

26, 667

160, 000

160, 000

26, 667

34

Chapt er3 –I nves t ment si nDebtSecur i t i es andOt herNoncur rentFi nanci alAsset s

Dec. 31

De btI nv est ment satFVPL Unr eal i zedGai nonDebtI nv e st ment sat FVPL 4M x0. 99=3, 960, 000 3, 960, 000–3, 880, 000=80, 000

80, 000 80, 000

( 3)Secur i t i esar ecl assi fiedasatFai rVal ueThr oughOt herCompr ehensi veI ncome Year1

June1

Dec.1

Dec. 31

Dec.31

DebtI nv es t ment satFV t hr oughOCI Cash

3, 691, 500 3, 691, 500

Cash DebtI nv est ment satFai rVal uet hr oughOCI I nt er estRevenue( seet abl e)

160, 000 24, 575

I nt er es tRecei vabl e DebtI nv est ment satFai rVal uet hr oughOCI I nt er estRevenue

26, 667 4, 301

Fai rVal ueAdj us t ment–DebtI nvest ment s atFVt hr oughOCI Unr eal i zedGai nonDebtI nv e st ment sat FVPL Amor t i z edcost 3, 716, 075+4, 301=3, 720, 376 3, 880, 000–3, 720, 376=159, 624

184, 575

30, 968

159, 624 159, 624

Year2

Jan.1

June1

Dec.1

31

31

I nt er estRe venue I nt er estRecei vabl e De btI nvest ment satFV t hr oughOCI

30, 968 26, 667 4, 301

Cash DebtI nv est ment satAmor t i z edCost I nt er estRevenue( seet abl e)

160, 000 25, 804

Cash DebtI nv est ment satAmor t i z edCost I nt er estRevenue( seet abl e)

160, 000 27, 094

I nt er estRecei vabl e DebtI nv est ment satAmor t i z edCost I nt er estRevenue 160, 000x1/6=26, 667 28, 449x1/6=4, 742

26, 667 4, 742

Fai rVal ueAdj us t ment–DebtI nvest ment s atFVt hr oughOCI Unr eal i zedGai nonDebtI nv e st ment sat FVPL Amor t i z edcost 3, 768, 973+4, 741=3, 773, 715 3, 960, 000–3, 773, 715=186, 285 186, 285–159, 624=26, 661

35

185, 804

187, 094

31, 409

26, 661 26, 661

Chapt er3 –I nves t ment si nDebtSecur i t i es andOt herNoncur rentFi nanci alAsset s

( b) Jour nalent r y/ent r i est or ecor dsal eofi nvest mentonNovember1,Year4. ( 1)Secur i t i esar ecl assi fiedasatamor t i zedcost . Nov .1

1

DebtI nv est ment satAmor t i z edCost I nt er estRecei vabl e I nt er estRe venue192, 933x5/6 32, 933x5/6=27, 444 Cash LossonSal eofDe btI nves t ment satAmor t i z ed Cos t I nt er estRecei vabl e DebtI nv es t ment satAmor t i z edCost

27, 444 133, 333 160, 777

3, 925, 000 94, 435 133, 333 3, 886, 102

CV ofDebtI nv est ment ssol d: AsofJune1,Year4 3, 858, 658 Amor t i z at i onJune1t o Nov .1,Year4 27, 444 AsofNov .1,Year4 3, 886, 102 Sal espr i ce 3, 791, 667 Lossonsal e 94, 435 ( 2)Secur i t i esar ecl assi fiedasatf ai rval uet hr oughpr ofitorl oss Nov .1

Cash LossonSal eofDe btI nv es t ment satFVPL I nt er estRev enue DebtI nves t ment satFVPL Acc.I nt .=4M x8% x5/12=133, 333 Sal e spr i ce( 3, 925, 000– 133, 333)3, 791, 667 Car r yi ngval ue( 4M x0. 98) 3, 920, 000 Lossonsal e 128, 333

3, 925, 000 128, 333 133, 333 3, 920, 000

( 3)Secur i t i esar ecl assi fiedasatFai rVal uet hr oughOt herCompr ehensi veI ncome Nov .1

1

1

DebtI nv est ment satFV t hr oughOCI( 32, 933x5/6) I nt er estRecei vabl e I nt er estRe venue( 192, 933x5/6) Unr eal i z edGai ns/LossesonDe btI nv es t ment sat FV t hr oughOCI Fai rVal ueAdj us t ment–De btI nvest ment sat FV t hr oughOCI 3, 858, 658+( 32, 933x5/6)=3, 886, 102 3, 886, 102–3, 791, 667=94, 435decl i ne 94, 435+186, 285=280, 720 Cas h Fai rVal ueAdj us t ment DebtI nv est ment satFV t hr oughOCI I nt er estRecei vabl e DebtI nv es t ment satFVt hr oughOCI Re t ai nedEar ni ngs

27, 444 133, 333 160, 777

280, 720 280, 720

3, 925, 000 94, 435 133, 333 3, 886, 102 94, 435

36

Chapt er3 –I nves t ment si nDebtSecur i t i es andOt herNoncur rentFi nanci alAsset s Unr eal i z edGai n/LossesonDe btI nvest ment s atFVt hr oughOCI

33.

94, 435

( Gr ow Company) ( 1)

Cl assi fiedasatAmor t i zedCost Dat e 1/1/Year1 12/31/Year1 12/31/Year2 12/31/Year3

( 3)

Amor t i zat i onTabl e Effe ctI nt Pr em Amor t

120, 000 120, 000 120, 000

106, 339 104, 973 103, 471

13, 661 15, 027 16, 529

Amor t i z edc os t ,end 1, 063, 394 1, 049, 733 1, 034, 706 1, 018, 177

( a)

Car r yi ngval ue ,12/31/Year2 ( seet abl e)

( b)

Sal e spr i ce P 606, 000 Car r yi ngval ue ,1/1/Year3( 1, 034, 706x6/10P620, 824 Amor t i z at i on1/1/Ye ar3–4/1/Year3 16, 529x3/12x600/1000 ( 2, 479) 618, 345 Lossonsal e P 12, 345

( c)

I nt er esti ncomef orYear3: Jan1t oMar31 103, 471x3/12 Apr1t oDec31 103, 471x400/1000x9/12 Tot ali nt er es ti ncomef orYear3

P 25, 868 31, 041 P 56, 909

Car r yi ngval ue ,12/31/Y3( 1, 018, 177x400/1000)

P 407, 271

( d) ( 2)

Nom I nt

P1, 034, 706

Cl assi fiedasDebtI nvest ment satFV t hr oughPr ofitorLoss ( a)

I nt er esti ncome( 1, 000, 000x12%)

P 120, 000

( b)

Sal e spr i ce( 600, 000x1. 01) Car r yi ngval ue ,12/31/Year2( 600, 000x1. 06) Lossonsal e

P 606, 000 636, 000 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

Cl assi fiedasatFai rVal ueThr ough Ot herCompr ehensi veI ncome ( a)

Car r yi ngval ue ,12/31/Year2( 1M x1. 06) ( 1, 034, 760+25, 240FVAdj )

P1, 060, 000

( b)

Sal e spr i ce Amor t i z edcost Lossonsal e

P 606, 000 618, 345 P 12, 345

( c)

I nt er esti ncomef orYear3: Jan1t oMar31 103, 471x3/12 Apr1t oDec31 103, 471x400/1000x9/12 Tot ali nt er es ti ncomef orYear3

P 25, 868 31, 041 P 56, 909

Fai rval ue,December31,Year3( 400, 000x1. 04)

P416, 000

( d)

37

Chapt er3 –I nves t ment si nDebtSecur i t i es andOt herNoncur rentFi nanci alAsset s Amor t i z edcost ,December31,Year3 1, 018, 177x4/10 Cumul at i v eamountofunr eal i z edgai ns/l oss 34.

407, 270 P 8, 730

( Power puff Company) Apr i l1

Jul y1

Oct .1

DebtI nv es t ment s–FVPL–Pe achCo.Bonds Cash

1, 010, 000 1, 010, 000

DebtI nv est ment s–FVPL –But t er cup Bonds I nt er estRecei vabl e( 150, 000x12% x4/12) Cash

150, 000 6, 000

Cash I nt er estI ncome( 1, 000, 000x10% x6/12)

50, 000

156, 000

50, 000

Dec.31 I nt er estRecei vabl e I nt er estI ncome 1M x10% x3/12=25, 000 150, 000x12% x6/12 =9, 000 25, 000+9, 000=34, 000

34, 000 34, 000

31 Unr eal i z edLos sonI nves t ment satFVPL DebtI nv est ment s–FVPL-But t er cup Bonds DebtI nv est ment s–FVPL-Peac hBonds Cost Pe ach10% Bonds 1, 010, 000 But t er cup12% Bonds 150, 000 1, 160, 000

35.

17, 000 3, 000 Fai rval ue 990, 000 153, 000 1, 143, 000

20, 000 UGL ( 20, 000) 3, 000 ( 17, 000)

( Nar i t oCompany)

Dat e Jan.1,Year1 Dec.31,Year1 Dec.31,Year2 Dec.31,Year3 Dec.31,Year4 Dec.31,Year5

Nomi nal I nt er est 7, 000 7, 000 7, 000 7, 000 7, 000

Amor t i z at i onTabl e Effe ct i ve Pr emi um I nt er est Amor t i z at i on 5, 433 5, 355 5, 272 5, 186 5, 094

1, 567 1, 645 1, 728 1, 814 1, 906

Amor t i z edCos t , End 108, 660 107, 093 105, 448 103, 720 101, 906 100, 000

Year1

Jan.1

DebtI nvest ment satAmor t i z edCos t–Wol fBonds Cash

Dec.31 Cash DebtI nv es t ment satAmor t i z edCost–Wol fBonds I nt er estI ncome

108, 660 108, 660 7, 000 1, 567 5, 433

Year2

Dec.31 Cash DebtI nv es t ment satAmor t i z edCost–Wol fBonds I nt er estI ncome

7, 000 1, 645 5, 355

Year3

Dec.31 Cash DebtI nv es t ment satAmor t i z edCost–Wol fBonds

38

7, 000 1, 728

Chapt er3 –I nves t ment si nDebtSecur i t i es andOt herNoncur rentFi nanci alAsset s I nt er estI ncome

5, 272

I mpai r mentLossonDebtI nv est ment s

4, 653

31 DebtI nv es t ment satAmor t i z edCost–Wol fBonds Car r yi ngval ue ,Dec.31,Year3 P103, 720 Pr esentv al ueoff ut ur ecas hi nflows 100, 000x0. 9070 90, 700 4, 500x1. 8594 8, 367 99, 067 I mpai r mentLoss P 4, 653

4, 653

Year4

Dec.31 Cash DebtI nv est ment satAmor t i z edCost–Wol fBonds I nt er estI ncome

4, 500 453 4, 953

Year5

Dec.31 Cash DebtI nv est ment satAmor t i z edCost–Wol fBonds I nt er estI ncome

Dat e Dec.31,Year3 Dec.31,Year4 Dec.31,Year5

36.

4, 500 480 4, 980

Revi sedAmor t i zat i on Tabl e Nomi nal Effe ct i ve Di scount I nt er est I nt er est Amor t i z at i on 4, 500 4, 500

4, 953 4, 980*

453 480*

Amor t i z edCos t , End 99, 067 99, 520 100, 000

( RaffyCompany) Tof aci l i t at ecomput at i on,apar t i alamor t i z at i ont abl ei spr esent edbel ow. I nt er est I nt er estRe venue Amor t i z at i on HTM Dat e Recei v ed ofDi scount Car r yi ngVal ue June1,2018 5, 353, 150 Dec.31,2018 350, 000 312, 267 37, 733 5, 315, 417 Dec.31,2019 600, 000 531, 542 68, 458 5, 246, 959 Dec.31,2020 600, 000 524, 696 75, 304 5, 171, 655 Dec.31,2021 600, 000 517, 166 82, 834 5, 088, 821 2018

June1

Dec.31

DebtI nv es t ment satAmor t i z edCost( Bl e ssi e) I nt er estRe venue( 5M x12% x5/12) Cash

5, 353, 150 250, 000 5, 603, 150

Cash I nt er estRevenue DebtI nv es t ment satAmor t i z edCost( Bl essi e)

600, 000

Cash I nt er estRevenue DebtI nv es t ment satAmor t i z edCost( Bl essi e)

600, 000

Cash I nt er estRevenue DebtI nv es t ment satAmor t i z edCost( Bl essi e)

600, 000

562, 267 37, 733

2019

Dec.31

531, 542 68, 458

2020

Dec.31

39

524, 696 75, 304

Chapt er3 –I nves t ment si nDebtSecur i t i es andOt herNoncur rentFi nanci alAsset s 2021

Sept .1

1

I nt er estRecei vabl e( 3M x12% x8/12) DebtI nv es t ment satAmor t i z edCost( Bl essi e) I nt er estRevenue( 517, 166x3/5x8/12)

240, 000

Cas h( 3, 090, 000+240, 000) Gai nonSal eofDe btI nv es t ment s I nt er estRecei vabl e DebtI nv es t ment satAmor t i z edCost( Bl essi e)

3, 330, 000

33, 134 206, 866

20, 141 240, 000 3, 069, 859

CVofdebti nv e st mentsol d: Asof12/31/19( 5, 171, 655x3/5) 3, 102, 993 Amor tf r om 1/1/209/1/20 33, 134 CV asof9/1/20 3, 069, 859 Sal espr i ce 3, 090, 000 Gai nonsal e 20, 141 Dec.31

37.

Cash I nt er estRevenue DebtI nv es t ment satAmor t i z edCost( Bl essi e) 2M x12% =240, 000 517, 166x2/5=206, 866 82, 834x2/5=33, 134

206, 866 33, 134

( Gr ow Company)

Dat e 1/1/Year1 12/31/Year1 12/31/Year2 12/31/Year3

38.

240, 000

Nom I nt 120, 000 120, 000 120, 000

Amor t i zat i onTabl e EffectI nt Pr em Amor t 106, 339 104, 973 103, 471

13, 661 15, 027 16, 529

Amor t i zedcos t ,end 1, 063, 394 1, 049, 733 1, 034, 706 1, 018, 177

( a)

Mar ketval ue ,12/31/Year2( 1. 06x1M) Amor t i z edcost ,12/31/Year2 Unr eal i z edGai norLos s( I nEqui t y)

P1, 060, 000 1, 034, 706 P 25, 394

( b)

I nt er esti ncomef orYear2

P 104, 973

( c)

Mar ketval ue ,12/31/Year3( 1. 04x400, 000) Amor t i z edcost ( 1, 018, 177x4/10) Unr eal i z edGai non12/31/Year3

P 416, 000 407, 271 P 8, 729

( Nar ut oCompany) Amor t i zat i onTabl e Dat e Jan.1,2018 Dec.31,2018 Dec.31,2019 Dec.31,2020 Dec.31,2021 Dec.31,2022

Nomi nal I nt er est 7, 000 7, 000 7, 000 7, 000 7, 000

Pr emi um Effec t i v eI nt er est Amor t i z at i on 5, 433 5, 355 5, 272 5, 186 5, 094

40

1, 567 1, 645 1, 728 1, 814 1, 906

Amor t i z edCos t , End 108, 660 107, 093 105, 448 103, 720 101, 906 100, 000

Chapt er3 –I nves t ment si nDebtSecur i t i es andOt herNoncur rentFi nanci alAsset s

( a)

I nt er esti ncomef or2018

P 5, 433

( b)

Car r yi ngamountatDecember31,2019( amor t i zedcos t )

P105, 448

( c) 2020

Dec.31Cash

7, 000 I nt er estRe venue DebtI nvest ment satAmor t i z edCos t

5, 272 1, 728

2021

May31I nt er estRe cei vabl e DebtI nvest ment satAmor t i z edCos t I nt er estRe venue 7, 000x5/12=2, 917 5, 186x5/12=2, 161 1, 814x5/12=756

2, 917 2, 161 756

31Cash( 106, 000+2, 917) 108, 917 Gai nonSal eofDe btI nv es t ment s 4, 441 I nt er estRec ei vabl e 2, 917 DebtI nvest ment satAmor t i z edc os t 101, 559 100, 000x1. 06=106, 000 103, 720–2, 161=101, 559 106, 000–101, 559=4, 441 39.( DonnaCor por at i on) ( a) Amor t i zat i onTabl e Nomi nal I nt er est

Pr emi um Dat e Effe ct i veI nt er est Amor t i z at i on Jan.2,Year1 Dec.31,Year1 6, 000 5, 217 783 Dec.31,Year2 6, 000 5, 177 823 Dec.31,Year3 6, 000 5, 136 863 Dec.31,Year4 6, 000 5, 093 907 Dec.31,Year5 6, 000 5, 044 954* * Adj us t ed,P4di ffer encei sduet or oundi ngoff

Amor t i z edCos t , End 104, 330 103, 547 102, 724 101, 861 100, 954 100, 000

( b)

Pr esentval ueofmodi fiedcashflow basedoncompl e t ednegot i at i on Pr esentval ueofne w pr i nci pal( 90% x100, 000=90, 000) 90, 000x0. 9070 81, 630 Pr esentval ueofr educedi nt er es t( 6% x90, 000=5, 400) 5, 400x1. 8594 10, 041 Tot al 91, 671

( c . 1)

Car r yi ngval ueofbondi nv es t ment ,December31,Year3 Pr esentval uebasedonmodi fiedt er ms I mpai r mentl oss

( c . 2)

I mpai r mentLoss DebtI nvest ment satFai rVal ueThr oughOCI

41

101, 861 91, 671 10, 190 10, 190 10, 190

Chapt er3 –I nves t ment si nDebtSecur i t i es andOt herNoncur rentFi nanci alAsset s PLEASE CHECK ANSWERS.AsofDecember31,Year2,Unr eal i z edLoss( de bi tbal anc e) andFai rVal ueAdj us t ment( cr edi tbal anc e)account shavebal anceofP5, 724( 102, 724 – 97, 000) . SI NCE THERE I S NO QUOTED PRI CE ATDEC.31,YEAR 3,IDI D NOTHAVE ANYADJUSTMENTRELATED THERETO. ( d)

I nt er estI nc ome ,Year4 ( seet abl ebe l ow) I nt er estI nc ome ,Year5 ( seet abl ebe l ow)

Dat e Dec.31,Year3 Dec.31,Year4 Dec.31,Year5

P4, 584 P4, 542

Revi sedamor t i zat i on t abl e–New modi fiedt er ms Nomi nal Pr emi um Amor t i z edCos t , I nt er est Effe ct i veI nt er est Amor t i z at i on End 91, 671 5, 400 4, 584 816 90, 855 5, 400 4, 542 855* 90, 000

* Adj ust ed;P2di ffer enc ei sduet or oundi ngoff

310. Cl assi ficat i onofI nvest ment si n DebtSecur i t i es 1. 2. 3. 4. 5.

B andC A B andC A B andC

6. 7. 8. 9. 10.

B andC A A B andC B andC

11. 12. 13. 14. 15.

C B andC A A B

311. ( RaymondCompany) 1.

Bui l di ngConst r uc t i onFundCash Cash

2.

Bui l di ngExpansi onFundSecur i t i es Bui l di ngExpansi onFundCash