Reference no: EM132617421
Questions -
Q1. Phillips Corporation purchased 1,000,000 shares of Martin Corporation's common stock which constitutes 10% of Martin's voting stock on June 30, 2020 for P42 per share. Phillips' intent is to keep these shares beyond the current year. On December 20, 2020, Martin paid a previously declared P4,000,000 cash dividend. On December 31, Martin's stock was trading at P45 per share and their reported 2020 net income was P52 million. What investment value will be reflected on Phillips' Balance Sheet at December 31, 2020?
a. P47,200,000
b. P45,000,000
c. P46,800,000
d. P42,000,000
Q2. On January 1, 2020, Five Company acquired a non-trading equity investment for P5,000,000. On December 31, 2020, the market value of the investment was P4,000,000. On December 31, 2021, the issuer of the equity instrument was in severe financial difficulty and the fair value of the equity investment had fallen to P1,500,000. The decline is judged to be temporary. What cumulative loss should be reported in the Statement of Changes in Equity for 2021 as a component of OCI if the investment is measured at FVOCI?
a. 2,500,000
b. 1,000,000
c. 0
d. 3,500,000
Q4. On January 1, 2020, JOB COMPANY purchased 12% five-year bonds with face amount of P5,000,000 for P5,400,000 . Transaction cost of P100,000 is paid related to investment. The bonds provide an effective yield of 10%. The bonds are quoted at 115 on December 31, 2020 and 105 on December 31, 2021.
The entity classifies the investment as FVOCI. Interest is paid every December 31.
What should be reported as the value Financial Asset at FVOCI in the Statement of Financial Position on December 31, 2021?
a. 5,000,000
b. 5,750,000
c. 5,250,000
d. 5,500,000
Q5. On July 1, 2020, A COMPANY paid P1,198,000 for 10% bonds with a face amount of P1,000,000 to be held to maturity. Interest is paid on June 30 and December 31. The bonds were purchased to yield 8% (effective interest rate).
The entity used the effective interest method to recognize interest income from this investment. (Financial Asset at Amortized cost). What is the carrying amount of the bond investment on December 31, 2020?
a. 1,195,920
b. 1,198,000
c. 1,207,900
d. 1,193,050
Q6. On January 1, 2020, MJE Company acquired 300,000 ordinary shares (equivalent to 20% of the total ordinary shares ) of La Salle Company for P9,000,000. MJE holds a significant influence over the investee. The following events took place:
La Salle Company reported net income of P1,800,000 for the calendar year 2020.
MJE received from La Salle Company a dividend of P.50 per ordinary share.
The market value of La Salle Company shared had increased to P32 per share.
What is the dividend income that should be reported in the Profit or loss Statement?
a. 150,000
b. 600,000
c. Zero
d. 180,000