Midterm Quiz Solutions

Problem 1

Shares
3-Jan
8
5-Apr
8
15-Jul
8-Dec
Bal.

A Corporation
Per Share
Amount
1,000
64.00
(1,000)

64.00

B Corporation
Per Share

Shares

Amount

64,000.00
1,000

50.00

50,000.00

1,000

50.00

50,000.00

(64,000.00)

Year end Adj

5,000.00

Per audit
-

1,000

55

55,000.00

Entry Made
3-Jan Correct
8-Jan Correct
2-Apr Cash Dividend

1,000

Financial Assets at FV through P&L

5-Apr Cash

1,000
28,000

Financial Assets at FV through P&L

28,000

Assumed no gain on sale recorded

NOTE: I changed the question in number five ( I thought the question is entry on Aril 5) because there's no information on gain on sale presented on

8-Apr Correct
Correct
15-Jul Correct

its either recorded or not, but the best assumption is NO RECORDED GAIN ON SALE)
C Corporation
D Corporation
E Corporation

15-Jul Financial Assets at FV through P&L

Cash

15-Aug Cash

33,000
33,000

20,000

Financial Assets at FV through P&L

20,000

Note: The question (what is the correcting entry) must have not been changed.
8-Dec Financial Assets at FV through P&L
Dividend Income
Note: Correction - 4,000 should be in Debit Column
Note: No effect in Arriving at Correct Answers
10-Dec Cash

4,000

2,200

Financial Assets at FV through P&L

15-Dec no entry made

Answers:
1) 145,900
2) (36,000)
3) (1,000+2,200+5,000)
4) (100)

4,000

8,200.00

2,200

5)

Cash

20,000
Treasury Shares
Paid in Capital From TS

16,500
3,500

Problem 2 Creamy Company

Creamy Corporation
Shares
Per Share
Amount
2-Jan-08
3,000
35.00
105,000.00
11-Oct-09
9,000
60.00
540,000.00
Total
12,000
645,000.00
Fair value Adjusment to OCI
135,000.00

1-Jan-10
5-Mar
Bal
1-Jul
Bal
29-Dec
Bal.
Adj to OCI
FVOCI@FV

12,000
3,000
15,000
(5,000)
10,000
(1,000)
9,000

65.00
69.00

9,000.00

95.00

Coffee Corp
Shares
10-Aug-15

1,000

Total

1,000

Adj to OCI
FVOCI@FV

780,000.00
207,000.00
987,000.00
(281,250.00)
705,750
(71,250)
634,500

Unrealized gain
beg
realized 2010
realized 2010

220,500.00
855,000.00

Entry Made
2-Jan Cash

12,000.00
Dividend Income

5-Mar Financial Assets at FV through OCI

Cash

1-Apr Cash

1,000

12,000

210,000.00
210,000

15,000.00

56,250
11,250

Dividend Income
1-Jul Cash

15,000
360,000.00

Financial Assets at FV through OCI

10-Aug Financial Assets at FV through OCI (Coffee)

Dividend Income
20-Dec Cash

360,000

1,000.00
1,000
10,000.00

Dividend Income
29-Dec Miscellaneous Receivable
90,000.00
Financial Assets at FV through OCI
note: Correcteion should be reflected in credit balance of Creamy Company
Note: No effect in Arriving at Correct Answers

10,000

90,000

Answers
1)
2)
3)
4)
5)

858,500.00
97,500.00
25,000.00
221,000.00
67,500.00

Problem 3

Interest Date 9%Interest Paid

10%Effective
Interest

Discount
Amortization

Amortized Cost,
End

Jan. 1, 2008

P3,760,000

30-Jun-08
P180,000
Dec. 31, 2008 P180,000

188,000.00
188,400.00

30-Jun-09
P180,000
Dec. 31, 2009 P180,000
30-Jun-10
P180,000
Dec. 31, 2010 P180,000
P180,000
New schedule
Nov 30, 2010
Dec 31 2010

16500

8,400.00

3,768,000.00
3,776,400.00

188,820.00
189,261.00

8,820.00
9,261.00

3,785,220.00
3,794,481.00

189,724.00
190,210.00

9,724.00
10,210.00

3,804,205.00
3,814,415.00

190,210.00

10,210.00

17,435.92

P8,000

935.92

2,096,992.75
2,097,928.67 Continue to measure at Amortized Cost, No change

Answers
1)
2)
3)
4)

376,400.00
3,776,400.00
48,278.75
Selling Price
Carrying Value

(1.8million x98%)
June 30 2010
(3,804,205*1.8/4)
Amortization
June 30 to Nov 30
(10,210*5/6)*(1.8/4)
Gain on sale on Nov 30

1,764,000.00
1,711,892.25

3,829.00

1,715,721
48,279

5)

2,097,928.67
Remaining Bond Investment:
Carrying Value
June 30 2010
(3,804,205*2.2/4)
Amortization
June 30 to Nov 30
(10,210*5/6)*(2.2/4)

6) January to June
July 1 to November 30
(190,210*5/6)
Nov 30 to December
Total interest revenue 2010

189,724.00
158,508.33
17,435.92
365,668.25

2,092,312.75

4,680.00

2,096,993

C Corporation
Per Share
Amount

Shares

1,000

20.00

1,000

20.00

D Corporation
Per Share

Shares

20,000.00

20,000.00

1,000

1,000

36.00

36.00

16,000.00

1,000

36

36,000.00

Amount

Shares

36,000.00

36,000.00

500
50
550

80.00

550

38

72.73

(2,000.00)

1,000

34

34,000.00

Audit Adjusting Entries:

Should be
----------------Cash Dividend

Financial Assets at FV through P&

1,000

Dividend Income
Cash
Loss on Sale

ain on sale presented on the problem,

E Corporation
Per Share

1,000
28,000
36,000

Financial Assets at FV through P&L

Loss on Sale
64,000

Treasury Shares

Treasury Shares

33,000
Cash

33,000

(200x165)
Cash

Financial Assets at FV through P&

20,000
Treasury Shares
Paid in Capital From TS

16,500
3,500

Dividend Income

No entry required

Cash

Financial Assets at FV through P&

2,200
Cash Dividend Income

Dividend Receivable
Dividend Income
(1,000x5)

2,200

Dividend Receivable

5,000
5,000

Unrealized Loss on FVPL

Coffee Corporation
Per Share
Amount
3.00
3,000.00
3,000.00

500.00
3,500.00

3.50

Unrealized gain
135,000.00

221,000.00 market adjustment 2010 to OCI

288,500.00 SHE

Audit Adjusting Entries:

Should be
Cash

12,000
Retained Earnings
(Credit to RE since no record on date of declaration)

Financial Assets at FV through OCI

Dividend Receivables
Cash
(peso value of dividend =P1.00) see apr 1
Cash

Dividend Income
12,000

207,000
3,000

Dividend Receivable
210,000

12,000

Dividend Income

Dividend Income
Cash

12,000
360,000

Financial Assets at FV through OCI

Gain on sale
Unrealized Gain FVOCI
Retained Earnings

281,250
78,750
56,250

Financial Assets at FV through OCI (Coffee)

Dividend Income
Cash

Unrealized Gain FVOCI

56,250

Assuming First in First out

Cost of FA@FVOCI
3000 shares
(3,000x35)
2000 shares
(2,000x60)
Total Cost of Investment Sold
Part of Fair Value adjustment sold
3000 shares
(135,000x3/12)
(135,000x9/12)
2000 shares
(2/9x101,250)
Total FV adjustment related to Investment Sold

Financial Assets at FV through OCI

105,000
120,000
225,000

33,750
101,250
22,500

22,500
56,250

3,000

Financial Assets at FV through OCI (

3,000

10,000
Dividend Income

Miscellaneous Receivable
Financial Assets at FV through OCI
Gain on sale

Correct
10,000

90,000

Financial Assets at FV through OCI

71,250
18,750
Financial Assets at FV through OCI

Unrealized Gain FVOCI

11,250

Retained Earnings

11,250

Cost of FA@FVOCI
(1000x60)
Part of Fair Value adjustment sold
Unrealized gain
Realized gain
Balance
(1000*1/7)

60,000

135,000.00
56,250.00
78,750.00
11,250.00

11,250

Creamy
Coffee
FVOCI @ FV
Carrying amount
Unrealized gain 2010

mortized Cost, No change in Business Model

Cash

1,899,000.00
Investment at amortized cost
interest receivable
Gain on sale

1,715,721.25
135,000.00
48,278.75

Corporation
Amount

40,000.00
40,000.00
(19,100.00)
-100.00

20,900.00

145,900.00

dit Adjusting Entries:

ancial Assets at FV through P&L

Dividend Income

1,000
1,000
36,000

Financial Assets at FV through P&L

36,000

asury Shares
Financial Assets at FV through P&L

33,000

ancial Assets at FV through P&L

Treasury Shares
Paid in Capital from Treasury Shares

20,000

idend Income
Financial Assets at FV through P&L

2,000

ancial Assets at FV through P&L

Cash Dividend Income

2,200

idend Receivable
Dividend Income

5,000

ealized Loss on FVPL

Financial Assets at FV through P&L

33,000

16,500
3,500

2,000

2,200

5,000

100
100

dit Adjusting Entries:

idend Income
Retained Earnings

12,000
12,000

idend Receivable
Financial Assets at FV through OCI

3,000

idend Income

3,000

3,000

Cash

3,000

ancial Assets at FV through OCI

Gain on sale

78,750

ealized Gain FVOCI

Retained Earnings

56,250

ancial Assets at FV through OCI (Coffee)

Dividend Income

78,750

56,250

2,000
2,000

ancial Assets at FV through OCI

Gain on sale

18,750

ancial Assets at FV through OCI

Unrealized gain OCI

221,000

18,750

221,000

Shares

ying amount
ealized gain 2010

9,000 *95
1,000 *3.5

855,000
3,500.0
858,500.0
637,500.00
221,000.00