Chapter 4 Solman PDF

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INVESTMENTS IN EQUITY SECURITIESPROBLEMS(a) Equity Investments –FVPL 150,(b) Equity Investments – FVPL 30,####### 180,000-150,(a) Cash 94,####### Equity Investments – FVPL 90,####### 500 x 190 = 95,####### 95,000 – 1,000 = 94,####### 94,000 – (1/2 180,000) = 4,(b) Equity Investments – FVPL 6,500 x 1...

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CHAPTER 4 I NVESTMENTSI N EQUI TY SECURI TI ES PROBLEMS 41. ( Vi ct or i aCor por at i on) Year1 ( a)

( b)

Equi t yI nv e s t ment s– FVPL Ot herExpense s Cas h

150, 000 3, 750

Equi t yI nv e s t ment s–FVPL Unr eal i z e dGai nsonEqui t y I nv es t ment s–Pr ofitorLoss 180, 000150, 000

153, 750 30, 000 30, 000

Year2 ( a)

( b)

42.

Cas h

94, 000 Gai nonSal eofEqui t y I nv es t me nt s–FVPL Equi t yI nv e s t ment s–FVPL 500x 190=95, 000 95, 000–1, 000=94, 000 94, 000–( 1/2180, 000)=4, 000

Equi t yI nv e s t ment s–FVPL 6, 000 Unr eal i z e dGai nsonEqui t y I nv es t ment s–Pr ofitorLoss 500x192=96, 000 96, 000–90, 000=6, 000

4, 000 90, 000

6, 000

( Vi ct or yCompany) Year1 ( a)

( b)

Equi t yI nv e s t ment satFV t hr oughOCI 153, 750 Cas h ( 1, 000x150)+3, 750 Equi t yI nv e s t ment satFV t hr oughOCI 26, 250 Unr eal i z e dGai nsandLoss eson Equi t yI nv e s t ment s-OCI 180, 000–153, 750

153, 750

26, 250

Year2 ( a)

Equi t yI nv e s t ment satFV t hr oughOCI 10, 000 Unr eal i z e dGai nsandLoss eson Equi t yI nv e s t ment s-OCI 190, 000–180, 000 Cas h LossonSal eofEqui t yI nv e st ment s Equi t yI nv e s t ment satFV t hr oughOCI

( b)

Equi t yI nv e s t ment satFV t hr oughOCI Unr eal i z e dGai nsandLoss eson Equi t yI nv e s t ment s-OCI 96, 000–95, 000

10, 000

94, 000 1, 000 95, 000 1, 000 1, 000

Chapt er4 –I nves t ment si n Equi t ySecuri t i es

43.

( A Company) a.

Cash

18, 000 Di vi dendRev enue 2, 400shar e sx7. 50

44.

18, 000

b.

Me moent r y . Rec ei v edaddi t i onal600s har e sofB Cor p.or di nar yshar e sasbonusi ss ue on2, 400shar e spr e vi ousl yhe l d.

c .

Equi t yI nv e s t ment s-APr e f e r e nc e Di vi dendRe v enue 600x250 = 150, 000

150, 000 150, 000

d.

Me moent r y . Rec e i v edaddi t i onalshar esofB Cor p.or di nar yshar e son a4f or 1s t oc k s pl i toft he2, 400s har e spr e vi ous l yhe l d.Tot als har e snow he l d:9, 600.

e .

Equi t yI nv e s t ment s-C Or di nar y Di vi dendRe v enue 2, 400/6=400s har e sx50

20, 000 20, 000

( I nnCor por at i on) ( a)

Dec embe r31,Year2l edg erbal anc e( 30, 000shar esx65)

P1, 950, 000

Year3 Me mo:Rec ei v ed6, 000shar e sofNPACo.or di nar yas20% bonus i s sueont he30, 000s har e spr e vi ousl yhe l d. Cas h( 15, 000x70) 1, 050, 000 Equi t yI nv e s t ment s–FVPL Gai nonSal eofEqui t yI nv e s t ment s 1, 950, 000x15, 000/36, 000=812, 500 1, 050, 000–812, 500=237, 500 Equi t yI nv e s t ment s–FVPL 374, 500 Unr eal i z e dGai nonEqui t yI nv e s t ment s atFVPL 21, 000x72 1, 512, 000 1, 950, 000–812, 500 1, 137, 500 Unr eal i z edg ai n 374, 500

45.

( b)

Gai nonsal e Unr eal i z e dg ai none qui t yi nv e s t me nt satFVPL Tot alamountr epor t edi npr ofitorl os s

( c )

Equi t yI nv e s t ment satFai rVal ue

812, 500 237, 500

374, 500

P237, 500 374, 500 P612, 000 P1, 512, 000

( I nnCor por at i on) ( a)

Dec embe r31,Year2l edg erbal anc e( 30, 000xP65) Cos t Unr eal i z e dGai norLos sonEqui t yI nv es t me nt s-OCI

P1, 950, 000 1, 800, 000 P 150, 000

Year3 Me mo:Rec ei v ed6, 000shar e sofNPACo.or di nar yas20% bonus

47

Chapt er4 –I nves t ment si n Equi t ySecuri t i es

i s sueont he30, 000s har e spr e vi ousl yhe l d.

Equi t yI nv e s t ment satFai rVal uet hr oughOCI 237, 500 Unr eal i z e dGai norLos sonEqui t y I nv es t ment s–OCI 15, 000s hx70 1, 050, 000 1, 950, 00x15/36 812, 500 Unr eal i z e dg ai n 237, 500 Cas h( 15, 000x70) 1, 050, 000 Equi t yI nv e s t ment satFV t hr oughOCI Unr eal i z e dGai norLos sonEqui t y I nv es t ment s–OCI Re t ai nedEar ni ngs 237, 500+( 150, 000x15/36) Equi t yI nv e s t ment satFV t hr oughOCI Unr eal i z e dGai nonEqui t yI nv e s t ment s atFVt hr oughOCI 21, 000x 72= 1, 512, 000 1, 950, 000x21/36 1, 137, 500 Changei nFV 374, 500

237, 500

1, 050, 000

300, 000 300, 000

374, 500 374, 500

ALTERNATI VE ENTRI ESFOR YEAR 3 Me mo:Rec ei v ed6, 000shar e sofNPACo.or di nar yas20% bonus i s sueont he30, 000s har e spr e vi ousl yhe l d. Equi t yI nve st ment satFai rVal uet hr oughOCI 570, 000 Unr eal i z edGai norLos sonEqui t y I nve st ment s–OCI 36, 000shx70 2, 520, 000 Pr ev i ousFV 1, 950, 000 Unr eal i z edgai n( 100%) 570, 000 Cas h( 15, 000x70) 1, 050, 000 Equi t yI nv e s t ment satFV t hr oughOCI Unr eal i z e dGai norLos sonEqui t y I nv es t ment s–OCI Re t ai nedEar ni ngs ( 570, 000+150, 000)x15/36 Equi t yI nve st ment satFVt hr oughOCI Unr eal i z edGai nonEqui t yI nve st ment s atFVt hr oughOCI 21, 000x ( 72–70)

570, 000

1, 050, 000

300, 000 300, 000

42, 000 42, 000

( b)

None

( c )

Equi t yI nv e s t ment satFai rVal uet hr oughOCI

P1, 512, 000

( d)

Unr eal i z e dGai norLos si nEqui t y,12/31/Ye ar3 ( 150, 000+570, 000–300, 000+42, 000) or( 150, 000+237, 500–300, 000+374, 500)

P 462, 000

48

Chapt er4 –I nves t ment si n Equi t ySecuri t i es

Fai rval ue ,De ce mbe r31,Ye ar3 Cos t( 1, 800, 000x21, 000/36, 000) Unr eal i z e dGai n( Loss )i nEqui t y

46.

( Gyps yCor por at i on) ( a)

P0.Nogai norl ossi sr epor t e di npr ofitorl os s .

( b)

Cumul at i v ebal anc eofUnr e al i z e dGai nsandLos s es ( i ne qui t y) -s eebe l ow

Mont er e yPr e f e r ence Gar ci aOr di nar y Bar ne yCor por at i on

47.

P1, 512, 000 1, 050, 000 P 462, 000

#of s har e s 3, 500 1, 000 3, 000

Cos t P133, 000 180, 000 177, 000 P490, 000

P 35, 000 FV,12/31/ Unr eal 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)

Unr eal i z e dGai nsorLoss e sonEqui t yI nv e s t ment st hr oughOCI Fai rval ue( 1, 250x85) P106, 250 Cos t 110, 000 Unr eal i z e dLoss ,endofYear1 P 3, 750 Tot alFV,Dec .31,Year2( 2, 000x90) Tot alcos t( 110, 000+60, 000) Cumul at i v ebal anc e ,e ndofYe ar2

( b)

P180, 000 170, 000 P 10, 000

Amountt akent oOCI Fai rval ue( 1, 250x85) Cos t Unr eal i z e dLossf orYe ar1

P106, 250 110, 000 P 3, 750

Fai rval ue( 2, 000x90) Car r yi ngv al ue/Cos t( 106, 250+60, 000) Unr eal i z e dg ai nf orYear2 ( c )

P180, 000 166, 250 P 13, 750

Memo:Rec e i v ed2, 000s t oc kr i ght sf r om Mus i c ,I nc .f ort hepur c has eofoneshar ef or e v er yfiv er i ght ssubmi t t edatP80pers har e . Equi t yI nv e s t ment satFV t hr oughOCI Cas h I nv es t mentI nc ome 300x100=30, 000 300x80=24, 000 Cas h

30, 000 24, 000 6, 000

2, 250 I nv es t mentI nc ome 500x4. 50

2, 250

Equi t yI nv e s t ment satFV t hr oughOCI 15, 400 Unr eal i z e dGai nsandLoss e son Equi t yI nv e s t ment s–OCI 2, 300x98=225, 400 225, 400–( 180, 000+30, 000) =15, 400

49

15, 400

Chapt er4 –I nves t ment si n Equi t ySecuri t i es

48.

( Ant iCor por at i on) ( a)

Cas h

50, 000 I nv es t mentI nc ome( 10, 000x 5)

( b)

Equi t yI nv e s t ment satFVPL( 2, 000x75) Cas h( 2, 000x50) I nv es t mentI nc ome Equi t yI nv e s t ment satFVPL Unr eal i z e dGai nonEqui t y I nv es t ment satFVPL Mar ke tval ue( 12, 000shar e sx78) Car r yi ngv al uebe f or et hi s adj us t ment( 660, 000+150, 000) Unr eal i z e dg ai n

49.

50, 000 150, 000 100, 000 50, 000 90, 000 90, 000 936, 000 810, 000 126, 000

( Tol i t sCor por at i on) ( a) Year2 a.

Equi t yI nv es t me nt satFV t hr oughOCI – Di ana Or di nar y Cas h

b.

Memor andum ent r y . Re c ei v ed500addi t i onal s har e sofDi anaor di nar yshar e sasar e sul tof2f or 1spl i t .

c .

Equi t yI nv es t me nt satFV t hr oughOCI–Smi t h Pr e f er e nc e Cas h ( 1, 000x120)+1, 200

d.

Equi t yI nv es t me nt satFV t hr oughOCI-Di ana Or di nar y Unr e al i z e dGai nsandLos s esonEqui t y I nv e st ment satFV-OCI 15, 000/250=60;54, 000/1, 000=54 ( 60–54)x1, 000shar e s=6, 000 Cas h Equi t yI nv es t me nt satFVt hr oughOCI–Di ana Or di nar y

e .

Memor andum e nt r y .Rec ei v ed750s t oc kr i ght s f r om Di anaf ort hepur c has eofoneshar ef orev er y t wor i ght ssubmi t t edatP55pershar e .

f .

Equi t yI nv es t me nt satFV t hr oughOCI–Di ana

50

54, 000 54, 000

121, 200 121, 200

6, 000 6, 000

15, 000 15, 000

Chapt er4 –I nves t ment si n Equi t ySecuri t i es

Or di nar y Cas h I nv e s t mentI nc ome 60% x750=450;450/2=225shar e s 225x61=13, 725;225x55=12, 375 225x( 61–55)=1, 350 Cas h I nv e s t mentI nc ome g .

h.

i .

12, 375 1, 350

900 900

Equi t yI nv es t me nt satFV t hr oughOCI–Di ana Or di nar y Unr e al i z e dGai nsandLos s esonEqui t y I nv e st ment satFV-OCI 225x( 64–61)=675 Cas h( 100x64) Equi t yI nv e st ment satFVt hr oughOCI– Di anaOr di nar y Cas h( 1, 000x100x8%) Di vi dendRev enue

675 675 6, 400 6, 400 8, 000 8, 000

Unr eal i z e dGai nsandLos s esonEqui t y I nv e st ment s-OCI Equi t yI nv es t me nt satFV t hr oughOCI–Di ana or di nar y Equi t yI nv es t me nt satFVt hr oughOCI-Smi t h Mar ke t CV Di ana 1( 875s h) 54, 250 53, 000* Smi t h( 1, 000x115) 115, 000 121, 200 Tot al 169, 250 174, 200 * Or i gi nalDi anashar e s 500shar e satP108 2f or 1s pl i t 500shar e s 1, 000shar e satP54 Adj us tpr i ort os al e Bal anc e 1, 000shar e satP60 Sal e ( 250shar es Bal anc e 750s har e satP60 Exer ci s eofr i ght s 225shar e satP61 Adj us tpr i ort os al e Sal e ( 100shar esatP64 Bal anc e 875shar e s

( b)

13, 725

I nv es t menti nc omef r om s t oc kr i ght s ( 1, 350+900) Di vi dendsr ev enue Tot ali nc ome

4, 950 1, 250 6, 200 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

410. ( Car l oCompany) Year2

Apr .1

May15

Cas h( 5, 000x25) LossonSal eofEqui t yI nv es t me nt s Equi t yI nv es t me nt satFVPL–AviOr di nar y Equi t yI nv es t me nt satFV t hr oughOCI–Ghi o Pr e f er e nc e Cas h( 600x50)+550

51

125, 000 14, 000 139, 000

30, 550 30, 550

Chapt er4 –I nves t ment si n Equi t ySecuri t i es

Jul y10

Memor andum ent r y . Re c ei v e d 4, 000 addi t i onal s har e s of Dar r e l or di nar y r e pr es e nt i ng a 20% bonusi ss ue .Shar e snow he l dar e24, 000.

No v .30

Cas h( 1x24, 000) Di vi dendRev enue

Dec .31

31

24, 000 24, 000

Unr eal i z edLossonEqui t yI nv es t me nt 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 me nt satFV t hr oughOCI-Dar r e l Equi t yI nv es t me nt satFV t hr oughOCI-Ghi o Unr eal i z e dGai nsandLos s esonEqui t y I nv e st ment s–OCI FV Dar r e l 480, 000 Ghi o 31, 200 Tot al 511, 200

9, 000 9, 000

110, 000 650 110, 650

CV Changei nFV 370, 000 110, 000 30, 550 650 400, 550 110, 650

411. ( Hos t elCompany) ( a)

1.

2.

2, 000, 000 2, 000, 000

I nv e s t menti nAs soci at es ( 20% x1. 5M) Shar ei nPr ofitofAss oci at e s

300, 000 300, 000

3.

Memo. Rec ei v ed 2, 000 addi t i onalshar es of At l ant aor di nar yas10% bonusi ss ue . Shar e s now he l dar e22, 000.

4.

I nv e s t menti nAs soci at es( 20% x3M) Shar ei nPr ofitofAss oci at e s

600, 000

Cas h( 20% x1M) I nv e s t me nti nAs soci at e s

200, 000

5. ( b)

I nv es t menti nAss oci at es Cas h

600, 000

200, 000

I nv e s t mentc os t Shar ei npr ofit–2019 Shar ei npr ofit–2020 Shar ei ndi vi de nds Car r yi ngamount ,Dec ember31,2020

P2, 000, 000 300, 000 600, 000 ( 200, 000) P2, 700, 000

412. ( Byr on,I nc. ) 2019

Jan. 1

Dec .31

I nv e s t me nti nAs soci at e s–Pi r at e sOr di nar y Cas h

5, 160, 000

I nve st menti nAss oci at e s–Pi r at esOr di nar y

1, 080, 000

52

5, 160, 000

Chapt er4 –I nves t ment si n Equi t ySecuri t i es

Shar ei nPr ofitofAss oc i at e s 30% x3, 600, 000 31

Cas h( 30% x400, 000) I nv e s t me nti nAs soci at e s–Pi r at e sOr di nar y

1, 080, 000

120, 000 120, 000

413. ( Bar bi e,I nc. ) ( a) 2019

Mar .1

Dec .31

31

31

( b)

I nv e s t me nti nAss oc i at e s–Ki t c hi e Cas h

1, 365, 000 1, 365, 000

Cas h( 30% x800, 000) I nv e s t me nti nAs soci at e s–Ki t chi e

240, 000

I nv e st menti nAs soci at e s–Ki t c hi e Shar ei nPr ofitofAss oci at e s ( 1. 2M x10/12)x30%

300, 000

240, 000

300, 000

Shar ei nPr ofitofAss oci at es–Ki t c hi e I nv e s t me nti nAs soci at e s–Ki t chi e Amor t i z at i onofunder val uat i onofas 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

52, 500 52, 500

Ac qui s i t i onc os t ,Mar c h1,2019 Cas hdi vi dendsr ec e i v ed Shar ei nr e por t edpr ofitofas soc i at e Adj us t menti nr e por t edpr ofit I nv es t mentcar r yi ngv al ue ,Dec e mbe r31,2019

P1, 365, 000 (240, 000) 300, 000 ( 52, 500) P1, 372, 500

I nc omer e por t edbyBar bi ef r om i t si nv es t me nti nas soc i at e s: ( 300, 000–52, 500)

P 247, 500

414. ( Ri chmondeCor por at i on) ( a) Year1

Jan. 1

Dec .31

31

Equi t yI nv e s t ment satFV t hr oughOCI–Pe n Cas h

900, 000

Cas h Di vi dendRev enue 10% x2, 000, 000

200, 000

Equi t yI nv e s t ment satFV t hr oughOCI–Pe n Unr eal i z e dGai nsandLos s esonEqui t y I nv es t ment s–OCI 1, 380, 000–900, 000

480, 000

900, 000

200, 000

480, 000

Year2

Jan. 1

I nv es t menti nAss oci at es–Pen,I nc .( atFV) Equi t yI nv e st ment satFVt hr oughOCI–Pe n Unr eal i z e dGai nsandLoss e sonEqui t y

53

1, 380, 000 1, 380, 000

Chapt er4 –I nves t ment si n Equi t ySecuri t i es

I nv es t ment satFV -OCI Re t ai nedEar ni ng s 1

Dec .31

31

( b)

480, 000 480, 000

I nv es t menti nAss oci at es–Pe n,I nc . Cas h

2, 600, 000 2, 600, 000

I nv e s t menti nAs soci at es–Pen,I nc . 1, 950, 000 Shar ei nPr ofitofAss oci at es( 30% x6, 500, 000)

1, 950, 000

Cas h I nv es t menti nAss oci at e s( 30% x3, 000, 000)

900, 000

900, 000

Costt r ans f er r e df r om Equi t yI nv e s t ment satFV Addi t i onali nv e s t me nt Shar ei npr ofit Cas hdi vi dendsr ec e i v ed Car r yi ngamount ,Dec ember31,Year2

1, 380, 000 2, 600, 000 1, 950, 000 ( 900, 000) 5, 030, 000

415. ( E Cor por at i on) ( a) Year1

Jan. 1

Aug .1

Dec .31

I nv e st menti nAss oci at e s–FCompany Cas h( 50, 000x165)

8, 250, 000 8, 250, 000

Cas h I nv e s t me nti nAs soci at e s–FCompany

210, 000

I nv es t me nti nAs soci at e s–FCompany Shar ei nPr ofitofAss oci at e s 25% x 680, 000

170, 000

Cas h I nv e s t menti nAss oci at es–FCompany

240, 000

I nv e st menti nAs soci at e s–FCompany Shar ei nPr ofitofAss oc i at e s–FCompany 25% x1, 000, 000

250, 000

210, 000

170, 000

Year2

Dec .31

31

240, 000

250, 000

Year3

Jan.2

Cas h( 20, 000x175) I nv e s t menti nAss oci at es–FCompany Gai nonSal eofI nv e s t me nti nAss oc i at es Acqui si t i onc ost Shar ei npr ofit( Ye ar 1) Cas hdi vi de ndsr ec e i v ed( Year 1) Cas hdi vi de ndsr ec e i v ed( Year 2) Shar ei npr ofit( Year2) I nv e s t mentc ar r yi ngamount Por t i ons ol d CV ofi nv e s t ments ol d

2

3, 288, 000 212, 000

8, 250, 000 170, 000 ( 210, 000) ( 240, 000) 250, 000 8, 220, 000 20/50 3, 288, 000

Equi t yI nv es t me nt satFV t hr oughOCI I nv e s t menti nAss oci at es–FCompany

54

3, 500, 000

5, 250, 000 4, 932, 000

Chapt er4 –I nves t ment si n Equi t ySecuri t i es

I nv e s t mentI nc ome 30, 000x175=5, 250, 000 8, 220, 000–3, 288, 000=4, 932, 000 5, 250, 000–4, 932, 000=318, 000 Dec .31

31

318, 000

Cas h Di vi dendRev enue

120, 000

Equi t yI nv es t me nt satFV t hr oughOCI Unr eal i z e dGai nsandLos s esonEqui t y I nv e s t me nt s–OCI 30, 000x( 190-175)

450, 000

120, 000

( b)

450, 000

Year1 Ye ar2 Year3 P8, 250, 000 P8, 210, 000 170, 000 250, 000 ( 210, 000 ( 240, 000) P8, 210, 000 P8, 220, 000 P5, 700, 000

Cos t /Car r yi ngVal ue ,be gofy ear I nc omef r om as soc i at e s Cas hdi vi dendsr ec e i v ed Car r yi ngv al ue ,endofye ar Mar ke tval ue30, 000x190

416. 1. 2. 3. 4. 5. 6.

AandB A B andC A C C

6. 7. 8. 9. 10.

C A A,B,andC C B

11. 12. 13. 14. 15.

A B AandB A,B andC B

MULTI PLE CHOI CE QUESTI ONS Theor y MC1 MC2 MC3 MC4 MC5

B B A A D

MC6 MC7 MC8 MC9 MC10

A B A A B

MC11 MC12 MC13 MC14

D C C C

Pr obl ems MC15

B

Tot almar ke t ,Dec e mber31,2020 Tot almar ke t ,Dec embe r31,2019 Gai nr epor t edi n 2020pr ofitorl oss

MC16

C

Mar ke tv al ue ,Dec e mbe r31,2020 Mar ke tval ue ,Dec ember31,2019 Unr eal i zedl os st akent o 2020pr ofitorl oss

P2, 100, 000 1, 750, 000 P350, 000

MC17

C

Mar ke tv al ue ,Dec e mbe r31,2020 I nv es t mentc os tonJanuar y1,2019( 2. 0M +50, 000) Unr eal i zedgai n( cumul at i ve)r epor t edi nst at ementoffinanci al pos i t i on,December31,2020

P2, 100, 000 2, 050, 000

55

P535, 000 525, 000 P10, 000

P 50, 000

Chapt er4 –I nves t ment si n Equi t ySecuri t i es

MC18

D

Asi aTe xt i l e( 600x440) RJCompany( 2, 000x138) Tot alf ai rv al ue ,Dec e mbe r31,Ye ar2 Tot alf ai rv al ue ,Dec e mbe r31,Ye ar1( 270...