ReSA

The R.eview School of Accountancy

tTel. No. 735-98o7 & 734-3989
AUDITING PROBLEMS IRENEO/ESPEN ILLA/JAM ES
QUIZZER 6 - IIJVESTMENTS

PROBUE!0!j
Given below is a list of securities and cther assets that may qualify as investment:

Equity securities of another corrrpany where no control nor significant

influence exist. The company elected to report gains or losses in the
profits/losses P100,000
Equity securities of another company where no control nor significant
influence exist. The company elected to report gains or losses in the
other comprehensive inconre/losses 150,000
ZAa/o Equity securities of another company quoted in an active market 500,000
5lo/o Equity securities of another company qucted in an active market 1,400,000
Equity securities of the company quoted in an active market reacquired with
an intention of reissuance in latter period for short-term profit 500,00o
Debt security of anothef company quoteC in an active market. Business
model of the company has an crbjegtive to hold debt securities.for short-
term profits 100,000
Debt security of another company quoted in an active market. Business
model of the company has an objective of collecting contractual cash-
flows from the bonds which are primarily in the form of interests and 500,000
principal.
Real property held for resale in the ordinary course of busrness 500,000
Real property held for speculation p'urposes /LIU,UU-'
Real property held as a current factory srte -a,Le-.iL'- n^^
^^,^
Real propefi of a manufactunng busrness berng leased oui to alroiher party
under operatrng lease oa,1 :.,-,
Land hetd for undetermrneo iuture use 800.030
Land held to be used as a future plant site 400,000
Real property being developed as an investment property 300,000

Requirements:
1 nors n:uch f:-cnr the list abci'e,s:c:e c:t:co-':ed 3s f;:.3.::l esse: e: 13 - ,3r-: tr-:-:-
rosses?
a.0 b. 1c0.000 c 2OO,0C0 c. 543,c03
2- How much from the list above is to be categonzed asfinancial asset at farr val,-le t''l-eugr 31:=-
comprehensive income?
a. 150,000 b. l8O,O00 c. 200,000 d.350,000
3. How much from the list abo'.'e is to be categorized as investment at amortized cost?
a.0 b. 500,000 c. 600,000 d. 750,000
4. How much from the list above is to Lre categorized as investment in associate?
a.0 b. 500,000 c. 600,000 d. 700,000
5. How much from the list above is to be categorized as investrnent in subsidiary?
a.0 b. 1,000,000 c. 1,200,000 d. 1,400,000
6. How,much from the list above is to be categorized as investment property?
a.2,4OO,AAO b. 2,70c,000 c. 2,800,000 d. 3,100,000

.EBOE!E$ 2:
Pinay Corp. had the following portfolio of financial instruments of the December 31, 2013. Al.l securities were
acquired at the beginning of 2013:
Dersnuallonl &eeo-rde-d
' Sesurtlv l-eEe-Vsl!!-c Acqulsltiq!_Cest
Alpha shares 100,000 shares P5,250,000
Beta,shares 40,000 shares 2,35o,ooo
10olo, Delta bonds, 3 years P2,000,000 par 1,951,126

Audit notes:
a. Alpha shares were acquired and were designated as financial asset at fair value through
profitllosses. The shares were acquired at P52.50 per share which included a P2.50 per share
transaction cost. Half of the Alpha :,hares were sold at P58 per share on July 1, 2014.