SOL.-MAN._CHAPTER-9_INVESTMENTS PDF

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Chapter 9InvestmentsPROBLEM 1: TRUE OR FALSE1. FALSE2. TRUE3. FALSE4. FALSE5. FALSE – FVOCI only 6. FALSE – financial assets classified as FVPL are initially measured at fair value; the transaction costs are expensed. 7. TRUE 8. FALSE – OCI section of the statement of comprehensive income 9. FALSE –...

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Chapter 9 Investments PROBLEM 1: TRUE OR FALSE 1. F ALSE 2. TRUE 3. F ALSE 4. F ALSE 5. F ALSE–FVOCIonl y 6. F ALSE–financ i alas s e t sc l as s i fie dasFVPLar ei ni t i a l l y me as ur e da tf ai rva l ue ; t het r a ns ac t i onc os t sar ee xpe ns e d. 7. TRUE 8. F ALSE–OCIs e c t i onoft hes t a t e me ntofc ompr e he ns i ve i nc ome 9. F ALSE–110c ur r entf ai rval ue–100or i gi nalc os t=10 c umul at i vegai n,c r e di t 10.F ALSE–( 15–10=₱5)

PROBLEM 2: MULTIPLE CHOICE – THEORY 1. D 2. D 3. B 4. B 5. D–t hee qui t ys ec ur i t i e sar ei r r e voc abl ye l e c t e dt obe me as ur eda tFVOCI 6. B 7. D 8. D 9. D Choi c e( a)i si nc or r e c t . Theac c ounti sar e alac c ount . Choi c e( b)i si nc or r e c t . Theac c ounti spr es ent e di nequi t y . Choi c e( c )i si nc or r ec t .Onl yt hef ai rval uec hangedur i ngt he pe r i odi spr e s ent e di nOCI ;t hec umul a t i vebal anc ei spr e s e nt edi n e qui t y . Choi c e( d)i sc or r e c t .Re c l as s i fic a t i onadj us t me ntt opr ofitorl os si s pr ohi bi t e d.

Page|2 10.B

PROBLEM 3: EXERCISES 1. So l ut i o n: Ca s honhand Di vi de ndsf und Ac c ount sr e c e i vabl e Al l owa nc ef orbadde bt s I nve s t me nti nbonds I nve s t me nti nFVOCIs e c ur i t i e s I nve s t me nti ns ubs i di ar y Tot alfinanc i alas s e t s

26 , 00 0 30 , 00 0 30 , 00 0 ( 4 , 000 ) 24 , 00 0 2, 000 26 , 00 0 13 4, 00 0

2. So l ut i o n:( 120–35)=85 3. So l ut i o n: Themos tadvant a ge ousmar keti sde t e r mi ne dasf ol l ows : Ac t i vemar ke t Ac t i vemar ke t#2 # 1 Mar ke tpr i c e 1 00 1 20 Tr ans ac t i onc os t s ( 5 ) ( 5 ) Tr ans por tc os t s ( 1 0) ( 3 5) Sal epr oc e e ds 8 5 8 0

 Fa i rva l ue=( 100–10)=90 4. So l ut i o n: 1 2 / 3 / x 1

He l df ort r adi ngs e c ur i t i e s Tax e sandl i c ens e s( 4, 500+3, 800) Cas h

180, 0 00 8, 30 0 1 88, 300

1 2 / 3 1 / x 1

Unr e al i ze dl os s–P/L(150, 0 00-1 80, 00 0) He l df ort r adi ngs e c ur i t i es

30, 000 3 0, 000

1 2 / 3 1 / x 2

He l df ort r adi ngs e c ur i t i e s(200, 000-15 0, 000 ) Unr e al i ze dgai n–P/L 1 / 5 / x 3

50, 0 00 50, 000

Page|3 Ca s h(92, 0 00-3 , 000 ) Re al i zedl os s He l df ort r adi ngs ec ur i t i e s

89, 000 1, 000 90, 000

5. So l ut i o n: 1 2 / 3 / x 1

He l df ort r adi ngs e c ur i t i e s Tax e sandl i c ens e s( 4, 500+3, 800) Cas h

180, 0 00 8, 30 0 1 88, 300

1 2 / 3 1 / x 1

Unr e al i ze dl os s–P/L(150, 0 00-1 80, 00 0) Ac c umul at edf ai rval uec hanges

30, 000 30, 000

1 2 / 3 1 / x 2

Ac c umul at edf ai rval uec hanges(200K–150K) 50, 000 Unr e al i ze dgai n–P/L

50, 000

1 / 5 / x 3

Ca s h(92, 0 00-3 , 000 ) 89, 000 Re al i zedl os s 1, 000 He l df ort r adi ngs ec ur i t i e s(ori gi na lc o s t ) Ac c umul at edf ai rval uec hanges *

80, 000 10, 000

*90, 000FV12/31/x2–80, 000or i gi nalc os t=10, 000

6. So l ut i o n: Re qui r e me nt( a) : 1 2 / 3 / x 1

FVOCIe qui t ys ec ur i t i e s Cas h

188, 3 00 1 88, 300

1 2 / 3 1 / x 1

Unr e al i ze dgai n( l os s )–OCI(150, 000-188 , 300 ) FVOCIequi t ys e c ur i t i e s

38, 300 38, 300

1 2 / 3 1 / x 2

FVOCIe qui t ys ec ur i t i e s(200, 000-150, 00 0)

50, 000

Page|4 Unr e al i ze dgai n( l os s )–OCI

50, 000

1 / 5 / x 3

Unr e al i ze dgai n( l os s )–OCI 1, 000 FVOCIequi t ys e c ur i t i e s[ ( 92 , 000-3 , 000 )–9 0, 000 ]

1, 000

Cas h(92, 000-3 , 000 ) 89, 000 FVOCIequi t ys e c ur i t i e s[ ( 92 , 000-3 , 000 )–9 0, 000 ]

89, 000

Unr e al i ze dgai n( l os s )–OCI(seerequi r e me nt‘ c ’b e l o w) 5 , 200 Re t ai ne de ar ni ngs

5, 200

Re qui r e me nt( b) : De c .31 , 20 x1 Fa i rval ue Or i gi nalc os t Cumul at i veg ai n( l os s )

1 50 , 00 0 1 88 , 30 0 ( 3 8, 30 0)

De c . 31 , 2 0x 2 20 0, 00 0 18 8, 30 0 1 1, 700

Re qui r e me nt( c ) : Ne ts e l l i ngpr i c eofSpandr e lCo. s ha r e s( 9 2K–3 K) Or i gi nalc os tofSpandr e lCo. s har e s( 8 0K+3. 8 K) Gai ni nOCIt r ans f e r r e dwi t hi ne qui t y

8 9, 0 00 8 3, 8 00 5 , 20 0

PROBLEM 4: MULTIPLE CHOICE – COMPUTATIONAL 1. B( 105pr i c ei nMar ke tB*x30, 000s har es )=3, 150, 000 *I nt heabs enc eofe vi denc et ot hec ont r ar y , i ti spr e s ume dt ha tt he ma r k e twhe r et hee nt i t ywo ul dno r ma l l ys e l lt hea s s e to rt r a ns f e rt he l i a b i l i t yi st hepr i nc i palmar ke t . 2. C So l ut i o n: Mar ke t Quot e dPr i c e Tr ans ac t i onCos t s Ne tpr i c e

Ne w Yor k 103 ( 1) 102

London 106 ( 5) 101

Page|5 The“mos tadvant a ge ousmar ke t ”i sNe w Yor kSt oc kExc hangeand t hequot e dpr i c ei nt hi smar ke ti s103. 3. B–₱2. 00Le ve l2i nputx1, 00 0s har e s=₱2, 00 0 4. A  ( 6 , 00 0x5)f a i rval ue–50 , 00 0i ni t i alc ar r yi ngamt . =( 20 , 00 0)l os s  [ ( 3, 0 00x7. 5)–1 , 50 0]ne tpr oc e e ds–( 3 0, 00 0x½)c ar r yi ngamt . = 6 , 00 0g ai n 5. D So l ut i o n:  Dec .31, 20x1: ( 2 4, 0 00s h. x₱2 0)–2 00 , 0 00=2 80, 000g ai n  J an. 3,20x2: [ ( 2 4, 000s h. x₱3 0)–1 2, 0 00 ]–48 0, 0 00=2 2 8, 000gai n 6. A So l ut i o n:  Dec .31, 20x1: ( 180, 000–240, 000)=( 60, 000)  Dec .31, 20x2: ( 210, 000–180, 000)=30, 000  Fe b. 2, 20x3:( 41, 200–1, 200)–110 , 000=( 70, 000) 7. C–t hef ai rval ueonDe c .31, 2003 8. A So l ut i o n:  200, 000x101% =20 2, 000  202, 000–( 200, 000x98%)=6, 000g ai n  ( 200, 000x110%)–202, 000=18, 00 0gai n 9. C So l ut i o n: PV Pr e s e nt Fut ur ec as hflows PV@1 0%, n=3 f ac t or s val ue 2 00 , 00 15 0, 26 3 Pr i nc i pa l 0 PVof₱1 0 . 7 5 1 3 1 5 5 9, 68 4 I nt e r e s t( 2 00Kx12%) 2 4, 0 00 PVofor d.a nn. 2 . 4 8 6 8 5 2 Fa i rva l ueo nDe c . 31 , 20 x1 20 9, 94 7 ( 1 96 , 00 0 Ca r r yi ngamountbe f or eadj us t me nt ) Gai nr e c ogni ze di npr ofitorl os s 1 3, 9 47

Page|6 10.D So l ut i o n: He l df ort r adi ng-20x 1 Ac qui s i t i onsdur i ngt heye a r To t a l He l df ort r adi ng-20x 2 Ne tpr oc e e dsf r om s a l e To t a l Tot alne tl os sf r om f ai rval uec hang eands al e

9 76 , 20 3 1 24 , 45 0 1 , 10 0, 6 53 8 36 , 23 4 2 23 , 76 9 1 , 06 0, 0 03 ( 4 0, 65 0)

11.B So l ut i o n: Fa i rval ueon12 /31 /x1( 10 , 000x25 ) Ca r r yi ngamount( 1 0, 000x5 0 ) ; [ ( 1 0, 0 00x50)+ 2 5, 000 ]

Los s

FVPL FVOCI 2 50 , 00 0 2 50 , 00 0 5 00 , 00 0

52 5, 00 0 ( 2 75 , 00 0 ( 2 50 , 00 0) )

12.C So l ut i o n: Fa i rval ueon12 /31 /x1 Fa i rval ueon12 /31 /x2 Unr e al i ze dl os sr e c og ni ze di nOCI-20 x2

I ni t i a lc ar r yi ngamount( 12 , 00 0x20 )+10 , 00 0 Fa i rval ueon12 /31 /x2 Cumul at i veg ai nr e c og ni ze di ne qui t y-12 / 31 / x 2

13.D So l ut i o n:  ( 6, 000x5)–( 50, 00 0+2, 5 00)=( 22, 500)  [ ( 6, 000x7. 5)–3, 000]–( 50, 000+2, 500)=( 10, 500) 14.B( 155, 0 00–100, 000)=55, 000

28 0, 00 0 27 0, 00 0 ( 1 0, 0 00 ) 25 0, 00 0 27 0, 00 0 20 , 00 0

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15.D130, 000FV12/31/03–150, 000c os t=20, 000

PROBLEM 5: CLASSROOM ACTIVITIES

ACTI VI TY# 1 : I nve s t me nti nPLDTs har e s( FVPL) Unr e a l i ze dgai n–P/L

47 , 28 0 4 7, 2 80

( 1 0 0s h. x2 , 3 6 4c l os i ngpr i c e )=2 3 6 , 4 0 0-1 8 9 , 1 2 0=4 7 , 2 8 0

ACTI VI TY# 2 : Re qui r e me nt( a) : FVPL–be c aus eABC’ sbus i nes smode li sne i t her“hol dt oc ol l ec t ” nor“hol dt oc ol l e c tands e l l . ” Re qui r e me nt( b) : SYMBOL GLO

SHARES

ACQUI SI TI ON COST

2 , 3 5 0 . 0 0

5 8 7 , 5 0 0 . 0 0

1 , 0 0 0

2 08 . 8 0

2 0 8 , 8 00 . 0 0

1 0

1 , 5 5 4 . 6 7

1 5 , 5 4 6 . 7 0

ABS

1 0 , 0 0 0

6 5 . 2 0

6 5 2 , 0 00 . 0 0

S NLFMNY: PM

1 0 , 0 0 0

1 . 2 2 8

1 2 , 2 8 0 . 0 0

J FC BDOPBF: PM

2 5 0

PRI CE P AI D

1 , 4 7 6 , 1 2 6 . 7 0

Re qui r e me nt( c ) : 1, 478, 036. 80( gi venont hepr i nts c r e en, “VALUE”c ol umn) Re qui r e me nt( d) : He l df ort r adi ngs e c ur i t i e s 1, 91 0. 10 * Unr e a l i z e dgai n–P/L *Gi ve nont hepr i nts c r e e noft hepor t f ol i o .

Re qui r e me nt( e ) :

1 , 91 0. 1 0

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SYMBOL

TYPE

GLO

EQUI TY

J FC

EQUI TY

BDOPBF ABS

DEBT EQUI TY

S NLFMNY

DEBT

Re qui r e me nt( f ) : Ca s h( 2 50s h. x2, 40 0x95 %) 5 70 , 00 0 Los sons al e 2 3, 00 0 He l df ort r adi ngs e c ur i t i e s *

5 93 , 00 0

*Gi ve nont hepr i nts c r e e noft hepor t f ol i o .

PROBLEM 6: FOR CLASSROOM DISCUSSION 1. So l ut i o n: Pe t t yc as hf und Ca s hi nbank Not e sr e c e i vabl e Di s c ountonnot er e c e i vabl e Loansr e c e i vabl e Los sal l owanc eonl oansr e c e i vabl e He l df ort r adi ngs e c ur i t i e s I nve s t me nti nas s oc i a t e Pl ante xpans i onf und Tot alfinanc i alas s e t s

10 , 00 0 40 , 00 0 1 30, 00 0 ( 7 , 00 0) 80 , 00 0 ( 4 , 00 0) 60 , 00 0 40 , 00 0 75 , 00 0 42 4, 00 0

2. So l ut i o ns : Re qui r e me nt( a) : Mar ke tpr i c ei nMa r k e t# 2 Le s s : Tr a ns por tc os t s Fai rval ue

2 6 5 ( 1 5) 25 0

Re qui r e me nt( b) : The‘ mo s ta d v a nt a g e o usma r k e t ’i sde t er mi nedasf ol l ows :

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Mar ke tpr i c e Tr ans ac t i onc os t s Tr ans por tc os t s Sal epr oc e e ds

Mar ke t# 1 2 70 ( 6 ) ( 1 0) 25 4

Mar ke t#2 2 65 ( 5 ) ( 1 5) 24 5

 Ma r k e t#1i st he‘ mo s ta d va nt a g e o usma r k e t ’be c aus et hes al e pr oc e e dsi shi ghe r . Thef ai rva l uei sme as ur edasf ol l ows : Mar ke tpr i c ei nMa r k e t# 1 Le s s : Tr a ns por tc os t s Fai rval ue

2 7 0 ( 1 0) 26 0

3. So l ut i o n: Ac q ui s i t i o He l df ort r adi ngs e c ur i t i e s n Tax e sandl i c e ns e s Cas h Sa l e

Cas h[ ( 3 , 000x8 2)–12, 300 ] Los s He l df ort r adi ngs e c .( 3, 000x80) De c . 31, He l df ort r adi ngs e c ur i t i e s 2 0x1 Ga i n(a)

3 90 , 00 0 1 8, 5 00 4 08 , 50 0 2 33 , 70 0 6 , 30 0 2 40 , 00 0 2 2, 0 00 2 2, 0 00

( a )

Fa i rval ueon12 /31 /x1( 10 , 000s h. +5, 0 00s h. –3 , 000s h. )x 97 2, 00 0

₱8 1

Ca r r yi ngamount( 1 0, 000s h. x₱80)be g. +3 90, 00 0Dr . –240, 0 00 Cr .

Ga i n Re a l i ze dl os sons a l e Unr e al i ze dgai nonf a i rval uec hange Ne tg ai n

9 50 , 00 0 2 2, 0 00 ( 6 , 30 0) 2 2, 00 0 1 5, 7 00

 Re c onc i l i at i on: He l df ort r adi ng-be g.

8 00 , 00 0

Ac qui s i t i onsdur i ngt heye a r

3 90 , 00 0

To t a l

1 , 19 0, 0 00

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He l df ort r adi ng-e nd.

9 72 , 00 0

Ne tpr oc e e dsf r om s a l e

2 33 , 70 0

To t a l

1 , 20 5, 7 00

Tot alne tg ai nf r om f ai rval uec hang eands al e

1 5, 7 00

4. So l ut i o n: 1 2 / 3 / x 1

He l df ort r adi ngs e c ur i t i e s(12, 000x₱3 ) Commi s s i one xpens e Cas h

36, 00 0 1, 80 0 37, 800

1 2 / 3 1 / x 1

He l df ort r adi ngs e c ur i t i e s[(12, 00 0x₱5)–₱36, 00 0]2 4, 000 Unr e al i ze dgai n–P/L

24, 000

1 / 1 6 / x 2

Cas h[(12, 000x₱8 )–₱4 , 8 00] 91, 200 He l df ort r adi ngs ec ur i t i e s(12, 0 00x₱5) Re al i ze dgai n

60, 000 31, 200

5. So l ut i o n: 1 2 / 3 / x 1

He l df ort r adi ngs e c ur i t i e s(12, 000x₱3 ) Commi s s i one xpens e Cas h

36, 00 0 1, 80 0 37, 800

1 2 / 3 1 / x 1

Fai rval ueadj us t ment[( 12, 00 0x₱5)–₱36, 00 0] Unr e al i ze dgai n–P/L

24, 00 0 24, 000

1 / 1 6 / x 2

Cas h[(12, 000x₱8 )–₱4 , 8 00] He l df ort r adi ngs e c ur i t i e s Fai rval ueadj us t ment Re al i ze dgai n 6. So l ut i o n: 1 2 / 3 / x 1

91, 200 36, 000 24, 000 31, 200

Page|11 I nve s t menti ne qui t ys e c ur i t i e s–FVOCI

37, 800

[ ( 12, 00 0x₱3)+₱1, 800 ]

Cas h

37, 800

1 2 / 3 1 / x 1

I nve s t menti ne qui t ys e c ur i t i e s-FVOCI 22, 2 00 Unr e al i ze dgai n–OCI[( 12, 00 0x₱5)–37, 80 0]

22, 200

1 / 1 6 / x 2

I nve s t menti ne qui t ys e c ur i t i e s-FVOCI 3 1, 200 Unr e al i ze dgai n–OCI[( 12, 00 0x₱8)–4, 800 ]–60 , 000

31, 200

Cas h[(12, 000x₱8 )–4 , 80 0] I nve s t me nti ne qui t ys ec ur i t i e s–FVOCI

9 1, 200 91 , 200

Unr e al i ze dgai n–OCI(22, 20 0+3 1, 200 ) Re t ai ne de ar ni ngs

5 3, 400 53, 400...