Review-4 - Lecture notes 4 PDF

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Summary

Inspiration Company had trading and nontrading investments held throughout 2016 and 2017. The nontrading investments are measured at fair value through other comprehensive income. The investments had a cost of P3,000,000 for trading and P3,000,000 for nontrading. The investments had the following fa...

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1. Inspiration Company had trading and nontrading investments held throughout 2016 and 2017. The nontrading investments are measured at fair value through other comprehensive income. The investments had a cost of P3,000,000 for trading and P3,000,000 for nontrading. The investments had the following fair value at year-end: December 31, 2016 December 31, 2017 Trading 4,000,000 3,800,000 Nontrading 3,200,000 3,700,000 What amount of unrealized gain or loss should be reported in the income statement for 2017? a. b. c. d.

200,000 gain 200,000 loss 300,000 gain 300,000 loss

Solution: Trading fair value – 12/31/2017 3,800,000 Trading fair value – 12/31/2016 (4,000,000) Unrealized loss for 2017 (200,000) 2. During 2020, Haggard Company purchased marketable equity securities for P1,850,000 to be held as trading investments. In 2020, the entity appropriately reported an unrealized loss of P200,000 in the income statement. There was no change during 2020 in the composition of the portfolio of trading securities. Pertinent data on December 31, 2021 are: Security A B C

Cost 600,000 450,000 800,000

Market value 700,000 400,000 900,000

What amount of unrealized gain on these securities should be included in the 2021 income statement? a. 350,000 b. 150,000 c. 550,000 Solution: Total market value – Dec 31, 2020 Total market value – Dec 31, 2019 Unrealized gain

2,000,000 1,650,000 350,000...