QUIZ Chapter-9 Investments PDF

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Chapter 9InvestmentsNAME: Date: Professor: Section: Score:QUIZ 1: TRUE OR FALSE According to PFRS 9 Financial instruments , investments in stocks are initially recorded at cost and all commissions, taxes, and other fees are expensed as incurred. FALSE Unrealized holding gains and losses on investmen...

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Chapter 9 Investments NAME: Pr of es s or :

Sec t i on:

Dat e: Sc or e:

QUI Z1: TRUEORFALSE 1. Ac c or di ngt oPFRS9Fi na nc i a li ns t r ume nt s , i nve s t me nt si ns t oc ksar ei ni t i al l yr e c or de da tc os tand al lc ommi s s i ons ,t ax es , andot he rf e e sar ee xpens e dasi nc ur r ed.FALSE 2.Unr e al i z edhol di nggai nsandl os s e soni nve s t me nt si nhe l df ort r adi ngs e c ur i t i e sar er e c ogni ze di n pr ofitorl os s .TRUE 3. Unr e al i z ed gai ns and l os s e s on i nves t me nt si n equi t ys e c ur i t i e s me as ur e d atFVOCIar e r e c ogni z edi nt hei nc omes t a t e me nt .FALSE 4. A de bi tbal anc ei nt he“Fai rAdj us t me nt–FVOCI ”ac c ounti mpl i esac or r es pondi ngowne r s ' e qui t yac c ountwi t hac r edi tbal anc eoft hes ameamount .TRUE 5. Ac c or di ngt oPFRS9,t hec l as s i fic a t i onoffinanc i alas s e t sf ors ubs e que ntme as ur eme ntpur pos e s i sbas e donmanage ment ' si nt ent i ons .FALSE 6. Thene tr epor t e dbal anc ei nt he“i nve s t menti ne qui t ys e c ur i t i e s–FVOCI ”ac c ounti st heor i gi nal c os tpl usac r edi tba l anc ei nt hef ai rval ueadj us t me ntac c ountormi nusade bi tbal anc ei nt hef ai r val ueadj us t mentac c ount .FALSE 7.Whe ni nve s t me nt si nhe l df ort r adi ngs e c ur i t i esar es ol d,t her e al i ze dgai norl os si st hedi ffe r e nc ei n FALSE t hef ai rval ues i nc eac qui s i t i on. 8.Unr e al i z ed hol di ng gai nson i nve s t me nt sme as ur e da tf ai rval uet hr ough ot herc ompr ehe ns i ve i nc omear er e c ogni ze dasdi r e c ti nc r eas e st oowne r s 'e qui t y ,r a t he rt hant hr ought hes t a t e me ntof c ompr ehe ns i vei nc ome .FALSE 9. I nc r e as e si nt hef ai rval ueofhe l df ort r adi ngs e c ur i t i e sand i nves t ment si nequi t ys e c ur i t i e s me as ur e datFVOCIc aus et her e l a t edf ai rval ueadj us t me ntac c ountt odec r e as e .FALSE 10.I nve s t ment si nhe l df ort r adi ngs ec ur i t i esma ybec l as s i fie dasc ur r entorl ongt e r m.F ALSE

“Go ahead and be lazy; sleep on, but you will go hungry.”

- END – ANSWERS TO QUIZ 1: 1. FALSE 6. FALSE 2. TRUE 7. FALSE 3. FALSE 8. FALSE

(Proverbs 19:15)

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4. 5.

TRUE FALSE

9. 10.

FALSE FALSE

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NAME: Pr of es s or :

Sec t i on:

Dat e: Sc or e:

QUI Z2: 1. Changesi nf ai rval ueoft hi st ypeofs e c ur i t i e sar eac c umul a t edasas e par a t ec omponenti nt he s t oc khol de r s ' e qui t ys e c t i onoft hebal anc es he et . a . Fi nanc i alas s et sme as ur eda tamor t i ze dc os t b. FVOCIs e c ur i t i e s c . He l df ort r adi ngs e c ur i t i e s d. De s i gna t edfinanc i alas s e t s 2. Whi c hc a t e gor yi nc l udesonl yde bts ec ur i t i e s ? a . Fi nanc i alas s et sme as ur eda tamor t i ze dc os t b. FVPLas s e t s c . He l df ort r adi ngs e c ur i t i e s d. FVOCI( e l ec t i on) 3. Ac or r e c tval ua t i oni s a .i nve s t me nti nequi t ys ec ur i t i e sa tamor t i ze dc os t . b. he l df ort r adi ngs e c ur i t i e satamor t i ze dc os t . c . de bts ec ur i t i e s ,t obehe l dunt i lma t ur i t yt oc ol l e c tc as hflowsf r om pr i nc i palandi nt e r e s t s ,a t f ai rval ue . d. noneoft hes e . 4. Sec ur i t i e swhi c hc oul dbec l as s i fiedasfinanc i alas s e t sme as ur eda tamor t i zedc os tar e a .i nve s t me nti ns t oc ks . b. war r ant s . c . muni c i palbonds . d. t r e as ur ys t oc k. 5. Whi c hoft hef ol l owi ngi snotc or r ec tr e gar di nghe l df ort r adi ngs e c ur i t i es ? a . The yar ehe l dt obes ol di nas hor tpe r i odoft i me . b. Unr e al i z edhol di nggai nsandl os s e sar er epor t e daspar tofpr ofitorl os s . c . Anydi s c ountorpr emi um i snotamor t i ze d. d. Al loft hes ear ec or r ec t . 6. A debi tbal anc ei nt he“Fai rVal ueAdj us t me nt-FVOCISec ur i t i e s ”ac c ounta tt hee ndofayea r s houl dbei nt e r pr e t e das a . t hene tunr e al i z edhol di nggai nf ort ha tye ar . b. t hene tr e al i ze dhol di nggai nf ort ha tye ar . c . t hene tunr e al i z edhol di nggai nt oda t e . d. t henetr e al i ze dhol di nggai nt oda t e . 7. A de bi tbal anc ei nt he“Fa i rVal ueAdj us t ment-He l df orTr adi ngSec ur i t i e s ”ac c ounta tt heend ofaye ars houl dbei nt er pr et edas a . t hene tr e al i ze dhol di nggai nt oda t e . b. t hene tunr e al i z edhol di nggai nt oda t e . c . t hene tr e al i ze dhol di nggai nf ort ha tye ar . d. t henetunr ea l i ze dhol di nggai nf ort ha tye ar .

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8. Unr e al i ze d hol di nggai nsorl os s eswhi c har er e c ogni ze di npr ofitorl os sar ef r om s ec ur i t i es c l as s i fie das a . amor t i ze dc os t . b. FVOCI . c . he l df ort r adi ng. d. de s i gna t edandhe l df ort r adi ng. 9. Anunr e al i ze dhol di ngga i nonac ompany' sFVOCIs e c ur i t i e ss houl dber e fle c t edi nt hec ur r ent financ i als t a t ement sas a . anext r aor di nar yi t e ms hownasadi r ec ti nc r e as et or e t ai ne de ar ni ngs . b. ac ur r e ntgai nr e s ul t i ngf r om hol di ngs e c ur i t i e s . c . anot eorpar e nt het i c aldi s c l os ur eonl y . d. ot he rc ompr ehe ns i vei nc omeandi nc l ude di nt hee qui t ys ec t i onoft hebal anc es he et . 10.Change si nf ai rval ueofani nve s t me ntme as ur e da tf ai rval uet hr oughot herc ompr ehe ns i ve i nc ome a . mus tber ec ogni z edi npr ofitorl os s . b. mus tber ec ogni z eddi r ec t l yi ne qui t y . c . ma yber ec ogni ze di npr ofitorl os sordi r e c t l yi nequi t y . d. mus tber ec ogni ze di not he rc ompr e he ns i vei nc omeandac c umul a t edi nas e par a t ee qui t y ac c ount . 11.At i ni t i alr e c ogni t i on,an e nt i t y ma y make an i r r e voc abl ee l ec t i on t o pr e s e nt i n ot he r c ompr ehe ns i vei nc omes ubs e quentc hange si nt hef ai rval ueofani nve s t me nti nequi t ys ec ur i t i es wi t hi nt hes c ope ofPFRS 9 t ha ti snothe l df ort r adi ng.I n ac c ount i ng f ors uc h financ i al i ns t r ume nt s , al loft hef ol l owi ngar et r uee x c ept a . amount spr e s e nt e di not herc ompr e he ns i vei nc omear enotbes ubs eque nt l yt r ans f e r r edt o pr ofitorl os s . b. t hee nt i t yma yt r ans f e ranyc umul at i vef ai rval uegai nsorl os s eswi t hi ne qui t y . c . di vi de ndsr ec ei vedont hei nve s t ment sar er ec ogni ze di npr ofitorl os s . d. c umul a t i vef ai rval uegai nsorl os s esar et r ans f e r r edt opr ofitorl os swhent hefinanc i alas s e t i sder e c ogni ze d. 12.Ane nt i t ys e l l sani nve s t me ntt ha ti smea s ur e da tFVPLdur i ngt heye ar .Ther ea l i ze dgai norl os s ont hes al ei sc omput e das a .t hedi ffe r e nc ebe t we e nt hes al epr i c eandt hec ar r yi ngamountoft hei nves t me ntasatt he da t eofs al e . b. t hedi ffe r enc ebe t we e nt hes al epr i c eandt heor i gi nalac qui s i t i onc os toft hei nve s t ment . c .t hedi ffer e nc ebe t wee nt henetpr oc ee dsr e c ei vedf r om t hes al ea ndt hec ar r yi ngamountof t hei nve s t mentasa tt heda t eofs al e . d. t hedi ffer e nc ebe t wee nt henetpr oc ee dsr e c ei vedf r om t hes al ea ndt hec ar r yi ngamountof t hei nves t mentasa tt heda t eofs al eadj us t e df oranyac c umul a t edf ai rval uegai nsorl os s e s r e c ogni z eds i nc et hei nve s t me ntwasac qui r e d. 13.Forwhi c ht ypeofi nve s t me nt swoul dunr e al i ze df ai rval uegai nsandl os s e sbeac c umul a t edi nan e qui t yac c ount ? a . Equi t yme t hods e c ur i t i es b. FVOCIs ec ur i t i e s c . He l df orTr adi ngs ec ur i t i e s d. He l dt oma t ur i t ys ec ur i t i e s

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14.I ft hec ombi nedf ai rval ueofhe l df ort r adi ngs e c ur i t i e sa tt heendoft heyeari sl e s st hant hef ai r val ueoft hes amepor t f ol i o ofhe l df ort r adi ng s e c ur i t i e sa tt hebegi nni ngoft heye ar ,t he di ffe r enc es houl dbeac c ount e df orby a . r e por t i nganunr e al i z edl os si ns e c ur i t yi nve s t me nt si nt hes t oc khol de r s 'equi t ys e c t i on oft hebal anc es he e t . b. r e por t i nganunr ea l i ze dl os si ns e c ur i t yi nve s t ment si npr ofitorl os s . c . af oot not et ot hefinanc i als t a t ement s . d. ade bi tt oI nve s t menti nHe l df orTr adi ngSec ur i t i es . 15.I nf or mat i onr e gar di ngSt oneCo. ’ spor t f ol i oofFVOCIs e c ur i t i e si sasf ol l ows : Aggr e gat ec os tasof12/31/03 170 , 000 Unr e al i z edgai nsasof12/31/03 4, 000 Unr e al i z edl os s e sasof12/31/03 26, 000 Netr ea l i ze dgai nsdur i ng2003 30, 000 AtDe c ember31, 2002 ,St oner e por t edanunr ea l i ze dl os sof₱1, 500i not he rc ompr e he ns i vei nc omet o r e duc et hes es e c ur i t i es t o mar ke t .Under t he a c c umul a t e d ot her c ompr ehe ns i ve i nc ome i n s t oc khol de r s ’e qui t ys e c t i on ofi t sDe c e mbe r31,2003bal anc es he et ,wha tamounts houl d St one r e por t ? a . 26, 000 c . 20, 500 b. 22, 000 d. 0 16.Cal oyCo. bought1, 000s har e sf r om Ba yanCo.Thes har esha venoac t i vemar ket ,butani de nt i c al ors i mi l aras s e thasanac t i vemar ket .Thei de nt i c alas s e t ,howe ver ,hasmul t i pl emar ket s .Cal oy de t er mi ne st ha tt hei de nt i c alas s e thast hef ol l owi ngmar ketval ue s : Mar ke t Mar ke t A B Quot e dpr i c e Re l a t e dt r ans ac t i onc os t

500

600

25

150

How muc hi sf ai rval uat i onoft hei nves t me nt ? a . 500 , 000 c . 450, 000 b. 475 , 000

d. borc

17.OnJ anuar y1,2 0x1,Al l anCo.pur c has ed ₱40 0, 000bondsf or₱39 2, 000.Thebondsma t ur eon J anuar y1,20x5andpa y12% annuali nt e r e s tbe gi nni ngJ anuar y1,20x2 .Tr ans ac t i onc os t sa r e ne gl i gi bl e .Thebondswer ec l as s i fie da she l df ort r adi ngs ec ur i t i e s .OnDe c ember31,20x1,t he bondsar es e l l i nga tayi el dr a t eof10%.How muc hi st heunr e al i z edgai n( l os s )r e c ogni zedon De c embe r31, 20x1? a .27, 98 6 b. 31, 298 c . 28, 964 d. 33, 359 18.OnJ anuar y1,20x1,Ri zziCo.pur c has ed12 , 000s har e sofAndr e ,I nc .f or₱400, 000.Commi s s i on pai dt obr oke ramount edt o₱20, 000.Mana geme ntmadeani r r e voc abl ec hoi c et os ubs e que nt l y

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me as ur et hes har e satf ai rval uet hr oughot herc ompr ehe ns i vei nc ome .OnDec e mbe r31,20x1, t hes har e swer equot eda t₱40pers har e .OnJ anuar y3,20 x2,al loft hes har eswer es ol dat₱60 pe rs har e .Commi s s i onpai dont hes al eamount e dt o₱24, 00 0.How muc hi st heunr e al i ze dgai n ( l os s )r ec ogni ze di npr ofitorl os sonDe c ember31, 20x1? a .( 60, 000) b. 60, 000 c . ( 80, 000) d. 0 Us et hef o l l o wi ngi nf o r ma t i o nf o rt hene xtt woq ue s t i o ns : Kar e n Co.pur c has e dt hef ol l owi ng equi t ys e c ur i t i e son J anuar y 1,20x1f orat ot alamountof ₱360 , 000. Cos t Al as kaCo.pr e f er enc es har e s ₱200, 000 Val de zCo. or di nar ys har e s 160, 000 To t a l s ₱360, 000 Thes har e sdi dnotqual i f yf orr ec ogni t i onashe l df ort r adi ng.Ac c or di ngl y ,t he ywe r ec l as s i fie das i nve s t me nti nequi t ys ec ur i t i e sme as ur e da tf ai rval uet hr oughot herc ompr e he ns i vei nc ome . OnDe c embe r31, 20x1, t hepor t f ol i oofKar enCo. c ompr i s edt hef ol l owi ng. Fai rval ue–12/ 31/ x1 Al as kaCo.pr e f er enc es har e s ₱240, 000 Val de zCo. or di nar ys har e s 60, 000 To t a l ₱300, 000 OnDe c embe r31, 20x2, t hepor t f ol i oofKar enCo. c ompr i s edt hef ol l owi ng: Fai rval ue–12/ 31/ x2 Al as kaCo.pr e f er enc es har e s ₱220, 000 Val de zCo. or di nar ys har e s 180, 000 To t a l ₱400, 00 0 OnFe br uar y2, 20x3, al loft heAl as kaCo. pr e f er e nc es har e swe r es ol df or₱160, 000ne toft r ans ac t i on c os t s . 19.How muc hi st heunr ea l i ze dgai n( l os s )r ec ogni ze di not he rc ompr e he ns i vei nc omeonDec embe r 31, 20x1? a .60, 00 0 b. ( 60, 000) c . 100, 000 d. 0 20.How muc hi st hec umul a t i veunr e al i ze dgai n( l os s )t ha ti spr e s e nt edasas e par a t ec ompone nti n e qui t yasofDe c ember31, 20x2? a .40, 00 0 b. ( 40, 000) c . 100, 000 d. 0

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“From the fruit of his mouth a man’s stomach is filled; with the harvest from his lips he is satisfied.” (Proverbs 18:20) - END –

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SOLUTI ONSTO QUI Z2: 1. B 2. A 3. D 4. C 5. D 6. C 7. B 8. D 9. D 10.D 11.D 12.C 13.B 14.B 15.B So l ut i o n: Unr e al i ze dgai nsasof12/31/03 Unr e al i ze dl os s e sasof12/31/03 Ac c umul at e dne tunr e al i ze dl os s e si ne qui t yasof 12/ 31/ 03

4, 000 ( 26, 000) ( 22, 000)

16.A So l ut i o n: Mar ke t A

Mar ke t B

Quot e dpr i c e

500

600

Re l a t edt r ans ac t i onc os t

( 25)

( 150 )

Ne ts e l l i ngpr i c e

475

450

Themor eadvant age ousmar keti sMar ke tAandt hequot edpr i c ei nt hi smar keti s₱500 . 17.D [ ( 400, 000xPV of1@10%,n=4)+( 40 0, 000x12% xPV or di nar yannui t yof1@10%,n=4)= 425 , 359–392, 000=33, 359 Thef ai rval ueoft hebondsonDec . 31, 20x1i sc omput e dasf ol l ows : Fut ur ec as hflows

PV@10%, n=3

PVf ac t or s

Pr e s e nt val ue

Pr i nc i pal

400 , 000

PVofP1

0. 7513 15

300 , 526

I nt er e s t( 400Kx12%)

48, 000

PVofor di nar yannui t y

2. 4868 52

119 , 369

Fai rval ueasofDe c e mbe r31, 20x1

( 419, 895–392 , 000)=27, 895

419 , 895

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18.D –Thei nve s t me nti sFVOCI . Anyunr e al i ze dgai n( l os s )i sr ec ogni ze di nOCIandnotP/L. 19.B( 300 , 000–360, 000 )=( 60, 000) 20.A ( 400, 000FV12/31/x2–360, 000c os t )=40, 000unr e al i ze dgai n...