Ch 7 Answers Vol 1 finacc

8/13/2019 Ch 7 Answers Vol 1 finacc

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CHAPTER 7INVESTMENTS IN EQUITY SECURITIES AND DEBT SECURITIES

PROBLEMS

7-1 (Dusit, Inc!C"#ssi$i%& #s #'#i"#"% $)* s#"% s%cu*iti%sa. Purchase price (10,000 shares x P33.50)P335,000

Brokers commission 1,980Total cost P33,980

!. Purchase price (",000 shares x P#.50)P185,500.00

Brokers commission $,910.00Trans%er taxes (& x 1' x 185,500) $3."5Total cost P190,8"3."5

c. Purchase priceP58,000

Trans%er %ees an other costs1,500

Total cost to !e allocate P59,500

arket *alues+ rinar- shares 150 x 100 P15,000 Pre%erence shares 300 x 150

$5,000 Total P0,000

llocation to+ rinar- shares 59,500 x 15/0

P1$,8"5 Pre%erence shares 59,500 x $5/0

P$$,#5

. arket *alue o% orinar- shares #,000 shares x P#00

P$00,000

C"#ssi$i%& #s T*#&in+ S%cu*iti%sa. Purchase price (10,000 shares x P33.50)P335,000

!. Purchase price (",000 shares x P#.50)

P185,500

c. llocation to rinar- hares58,000 x 15/0 P

1$,500llocation to Pre%erence hares

58,000 x $5/0 P$3,500


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Chapter 7 Investments in Equity Securities and Debt Securities

. arket *alue o% orinar- shares #,000 shares x P#00

P$00,000

7- (A C).#n/!

a. ash 18,000 2i*ien e*enue 18,000#,$00 shares x ".50

ost per share+B orp. rinar- (no chan4e) P100

!. emo entr-. ecei*e aitional 00 shares o% B orp. orinar-shares as stock i*iens.

e*ise cost per share+B orp. rinar- (3,000 shares) P 80

c. *aila!le %or ale ecuritiesB orp. Pre%erence 80,000*aila!le %or ale ecuritiesB orp. rinar-

80,000

arket *alues+ rinar- (#,$00 x 1#5) 300,000 Pre%erence (00 x #50) 150,000llocation+ rinar- #$0,000 x 300/$50 10,000

Pre%erence #$0,000 x 150/$5080,000

osts per share+B orp. rinar- (#,$00 shares) P "B orp. Pre%erence (00 shares) P133

. emo entr-. ecei*e aitional shares o% B orp. orinar- shares ona $%or1 stock split.

e*ise cost per share+B orp. rinar- 6 P#$0,000/9,00 shares P #5

e. *aila!le %or ale ecurities rinar- #0,000 2i*ien e*enue #0,000

#,$00/ 6 $00 shares x 50

osts per share+B orp. ommon (#,$00 shares) P100 orp. ommon ($00 shares) P 50

7-0 (Vict)*i# C)u*t!C"#ssi$i%& #s VPL

ash 1"0,000 7ain on ale o% Train4 ecurities

10,000 Train4 ecurities10,000

To recor sale o% o. ommon

nreali:e ;oss on Train4 ecurities "#,000 Train4 ecurities "#,000

To recor *aluation at en o% -ear.

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o. P330,000 P#88,000 P($#,000)? o. 350,000 3#0,000 (30,000)

Total P80,000 P08,000 P("#,000)

C"#ssi$i%& #s #'#i"#"% $)* s#"% s%cu*iti%sash 1"0,000;oss on ale o% *aila!le %or ale ecurities 30,000arket @ustmentA ecurities $0,000 *aila!le %or ale ecurities #00,000 et nreali:e 7ain/;oss on A ecurities

$0,000To recor sale o% o. ommon

et nreali:e 7ain/;oss on A ecurities "#,000 arket @ustmentA ecurities

"#,000To recor *aluation at en o% -ear.

ost arketnreali:e =olin4

7ains(;osses)> o. P330,000 P#88,000 P($#,000)? o. 300,000 3#0,000 #0,000

Total P30,000 P08,000eCuire !alance in arket @ustment ccount D

crP(##,000)

Balance !e%ore a@ustment (10,000 E $0,000) D r 50,000eCuire a@ustment P "#,000

7-2 (Inn C)*.)*#ti)n!(1) ales price (15,000 x 0 )

P900,000ost o% shares sol+ 1#,000 shares P50,000 3,000 shares (1,300,000 x 3,000/#$,000) 1#,500

81#,5007ain on sale P 8",500

(#) ales price P900,000ost o% shares sol (1,800,000 x 15,000/3,000) "50,0007ain on sale P150,000

(3) ales price P900,000ost o% shares sol+

1#,000 shares P500,000 3,000 shares (1,300,000 x 3,000/#$,000) 1#,500

#,5007ain on sale P#3",500

7-4 (M%")&/ C)*.)*#ti)n!a. #00" ;ot ($ x "50) P 3,000

#008 ;ot ($ x 1,#50) 5,000Total cost o% stock ri4hts recei*e P 8,000

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!. ost o% stock ri4hts exercise+ #005 ;ot P 3,000 #00 ;ot ("50 x $) 3,000 P

,000ash pai (300 shares x P80) #$,000

Total cost o% neF shares acCuire thru stock ri4hts P30,000

ost per share (8,$00 / 300 shares) P 100c. ales price o% stock ri4hts (500 x $.50) P

#,#50ost o% stock ri4hts sol #008 ;ot (500 x $) #,0007ain on sale P #50

. *aila!le %or sale securities !alance at 2ecem!er 31, #009+ #00" ;ot (0,000 D 3,000) P 5",000 #008 ;ot (110,000 D 5,000) 105,000 #009 ;ot 30,000 P19#,900arket *alue at 2ecem!er 31, #009 (98 x #,300 shares)

##5,$00

Balance in unreali:e 4ain/loss account at 2ecem!er 31, #009 P3#,500

7-6 (Anti C)*.)*#ti)n!a. tock i4hts D Pro orp. rinar- 50,000

Train4 ecurities D Pro orp. rinar- 50,00010,000 x 5

!. ash 50,000 tock i4hts D Pro orp. rinar-

50,000

c. Train4 ecurities D Pro orp. rinar- 150,000 tock i4hts D Pro orp. rinar-

50,000 ash 100,000

10,000/5 6 #,000 shares#,000 x 50 6 100,000

Train4 ecurities D Pro orp. rinar- 1$0,000nreali:e 7ain on Train4 ecurities

1$0,000

arket *alue, 1#/31/0 (1#,000 shares x "5)900,000

arr-in4 *alue, 1#/31/0" (10,000 shares x ) 0,000 ost o% stock ri4hts recei*e ( 50,000) ost o% neF shares %rom exercise 150,000 "0,000nreali:e 4ain

1$0,000

7-7 (EDSA C).#n/!(a)

4


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6/18


arket< 2iana 1 ("50 sh)$,500 38,#50

2iana # (1#5 sh) ","50",#5

mith (1,000 x 115) 115,0001#1,#00 Total 19,#501",0"5

nreal8,#50

1#5(,#00)#,1"5

!. 7ain on sale o% A ecurities P1,500;oss on sale o% A ecurities( 500)2i*ien re*enue 8,000

Total income reco4ni:e in pro%it or loss in #00P9,000

7-5 (8 C)*.)*#ti)n!#008

Han. 1 *aila!le %or ale ecurities D o. rinar- 300,000 ash 300,000

2ec. 31 et nreali:e 7ains/;osses on Aecurities

#5,000

arket @ustment D A ecurities #5,000 5,000 x (0 D 55)

#009

2ec. 31 arket @ustment D A ecurities #5,000Impairment ;oss D A ecurities $0,000 et nreali:e 7ains/;osses on Aecurities

#5,000

*aila!le %or ale ecurities D o.

rinar-

$0,000

5,000 x (05#)

7-1 (C#*") C).#n/!#009

pr. 1 ash (5,000 x #5) 1#5,000;oss on ale o% Train4 ecurities 1$,000

Train4 ecurities D *i rinar- 139,000

a- 15 *aila!le %or ale ecurities D 7hioPre%erence

30,550

ash 30,550

Hul- 10 emoranum entr-. ecei*e $,000

aitional 2arrel orinar- sharesrepresentin4 a #0' !onus issue. haresnoF hel are #$,000.

o*. 30 ash (1 x #$,000) #$,000 2i*ien e*enue #$,000

2ec. 31 nreali:e ;oss on Train4 ecurities 9,000 Train4 ecurities D *i rinar- 9,000 (5,000 x #) D 139,000

4


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31 arket @ustment D A ecurities 110,50 et nreali:e 7ains/;osses on Aecurities

110,50

11,50 D ,000 !alance

A< ostnreali:e 2arrel $80,000 3$,00011,000 7hio 31,#00 30,55050 Total 511,#00 39$,55011,50

7-11 (H)st%" C).#n/!(a) 1. In*estment in ssociates #,000,000

ash #,000,000

#. In*estment in ssociates 300,000 Income %rom ssociates 300,000

#0' x 1,500,000

3. emo. ecei*e #,000 aitionalshares o% tlanta orinar- as 10' !onusissue. hares noF hel are ##,000.

$. In*estment in ssociates 00,000 Income %rom ssociates 00,000 #0' x 3,000,000

5. ash #00,000 In*estment in ssociates #00,000 #0' x 1,000,000

(!) In*estment cost P#,000,000

hare in income D #009 300,000hare in income D #010 00,000hare in i*iens (#00,000)arr-in4 amount, 2ecem!er 31, #010 P#,"00,00

7-1 (B/*)n, Inc!#009

Han. 1 In*estment in ssociates D Piratesrinar-

5,10,000

ash 5,10,000

2ec. 31 In*estment in ssociates D Piratesrinar-

1,080,000

Income %rom ssociates (30' x3,00,000)

1,080,000

31 ash (30' x $00,000) 1#0,000 In*estment in ssociates D Piratesrinar-

1#0,000

40


8/18


9/18


00,000 hare in i*iens (10' x #)(#00,000) arr-in4 amount, 1#/31/051,300,000

1 In*estment in ssociates D Pen, Inc. #,00,000

ash #,00,000

2ec. 31 In*estment in ssociates D Pen, Inc. 1,950,000

Income %rom ssociates (30' x,500,000)

1,950,000

31 ash 900,000 In*estment in ssociates (30' x3,000,000)

900,000

(!) ost trans%erre %rom *aila!le %or ale ecurities 1,300,000

itional in*estment #,$00,000hare in income 1,950,000hare in i*iens (900,000)arr-in4 amount, 2ecem!er 31, #009 $,"50,000

7-14 (E C)*.)*#ti)n!(a)#008

Han. 1 In*estment in ssociates D A ompan- 8,#50,000

ash (50,000 x 15) 8,#50,000

u4. 1 ash #10,000 In*estment in ssociates D A ompan- #10,000

2ec. 31 In*estment in ssociates D A ompan- 1"0,000 Income %rom ssociates 1"0,000 #5' x 80,000

#009

2ec. 31 ash #10,000 In*estment in ssociates D A ompan- #10,000

31 In*estment in ssociates D A ompan- #50,000 Income %rom ssociates D A ompan- #50,000 #5' x 1,000,000

#010

Han. # ash (#0,000 x 1"0) 3,$00,000

In*estment in ssociates D A ompan- 3,300,000

7ain on ale o% In*estment in ssociates 100,000 cCuisition cost 8,#50,000 hare in income (#00) 1"0,000 hare in i*iens (#00) (#10,000)

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hare in i*iens (#00") (#10,000) hare income (#00") #50,000 In*estment carr-in4 amount 8,#50,000 Portion sol $0' ost o% in*estment sol 3,300,000

# *aila!le %or ale ecurities D A ompan- $,950,00

0 In*estment in ssociates D A ompan- $,950,00

0 8,#50,000 D 3,300,000

2ec. 31 ash 1#0,000 2i*ien e*enue 1#0,000

31 arket @ustmentA ecurities "50,000 et nreali:e 7ains/;osses on Aecurities

"50,000

(30,000 x 190) $,950,000 6 "50,000

(!). #008 #009 #010

ost/arr-in4


11/18


Lroune o%%.(!)#00"

Han. 1 =el to aturit- ecurities 8,#"$,$ ash 8,#"$,$

2ec. 31 ash 1,#00,000 =el to aturit- ecurities $1,550 Interest e*enue 1,158,$50

#008

2ec. 31 ash 1,#00,000 =el to aturit- ecurities $",3" Interest e*enue 1,15#,33

7-13 (S)ut9 C).#n/!# :)u*n#" %nt*i%s in 6 #n& 7(1! S%cu*iti%s #*% c"#ssi$i%& #s $in#nci#" #ss%ts #t $#i* '#"u% t9*)u+9

.*)$it #n& ")ss#008

Hune 1 Train4 ecurities D tate orp. Bons 3,91,500 ash 3,91,500

2ec. 1 ash 10,000 Interest e*enue ($ x 8' x M) 10,000

31 Interest ecei*a!le #," Interest e*enue ($ x 8' x 1/1#) #,"

31 Train4 ecurities D tate orp. Bons 188,500 nreali:e 7ain on Train4ecurities

188,500

$ x 0.9" 6 3,880,000 3,880,000 D 3,91,500 6 188,500

#009

Han. 1 Interest ecei*a!le #," Interest e*enue #,"

Hune 1 ash 10,000 Interest e*enue 10,000

2ec. 1 ash 10,000 Interest e*enue 10,000

31 Interest ecei*a!le #," Interest e*enue #,"

2ec. 31 Train4 ecurities D tate orp. Bons 80,000 nreali:e 7ain on Train4ecurities

80,000

$ x 0.99 6 3,90,000 3,90,000 D 3.880,000 6 80,000

(0! S%cu*iti%s #*% c"#ssi$i%& #s 9%"&-t)-#tu*it/ s%cu*iti%sTo %acilitate computation, a partial amorti:ation ta!le is presente !eloF.

2ateInterest

ecei*eIntereste*enue

morti:ationo% 2iscount

=Tarr-in4


12/18


Hune 1,#008

3,91,500

2ec 1, #008 10,000 18$,5"5 #$,5"5 3,"1,0"5Hune 1,#009

10,000 185,80$ #5,80$ 3,"$1,8"9

2ec. 1,#009

10,000 18",09$ #",09$ 3,"8,9"3

Hune 1,#010

10,000 188,$$9 #8,$$9 3,"9",$##

2ec. 1,#010

10,000 189,8"1 #9,8"1 3,8#",#93

Hune 1,#011

10,000 191,35 31,35 3,858,58

2ec. 1,#011

10,000 19#,933 3#,933 3,891,591

#008

Hune 1 =el to aturit- ecurities D tate orp.Bons

3,91,500

ash 3,91,500

2ec. 1 ash 10,000=el to aturit- ecurities D tate orp.Bons

#$,5"5

Interest e*enue (see a!o*e ta!le) 18$,5"5

31 Interest ecei*a!le #,"=el to aturit- ecurities D tate orp.Bons

$,301

Interest e*enue 30,98 10,000 x 1/ 6 #,"G #5,80$ x 1/ 6$,301

#009

Han. 1 Interest e*enue 30,98

Interest ecei*a!le #," =el to aturit- ecurities D tate orp.Bons

$,301

Hune 1 ash 10,000=el to aturit- ecurities D tate orp.Bons

#5,80$

Interest e*enue(see a!o*e ta!le) 185,80$

2ec. 1 ash 10,000=el to aturit- ecurities D tate orp.Bons

#",09$

Interest e*enue (see a!o*e ta!le) 18",09$

31 Interest ecei*a!le #,"=el to aturit- ecurities D tate orp.Bons

$,"$#

Interest e*enue 31,$09 10,000 x 1/ 6 #,"G #8,$$9 x 1/6$,"$#

(0! S%cu*iti%s #*% c"#ssi$i%& #s #'#i"#"% $)* s#"% s%cu*iti%sTo %acilitate computation, a partial amorti:ation ta!le is presente !eloF.

43


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2ateInterest

ecei*e Intereste*enue


=Tarr-in4


14/18


15/18


ales price3,"91," ;oss on sale9$,$35

(c! S%cu*iti%s #*% c"#ssi$i%& #s #'#i"#"% $)* s#"% s%cu*iti%s#011

o*. 1 *aila!le %or ale ecurities D tateorp.Bons

#",$$$

Interest e*enue #",$$$

1 ash 3,9#5,000

;oss on ale o% *aila!le %or ale ecurities 9$,$35 et nreali:e 7ain/;oss on A ecurities 8",$"9

Interest e*enue 133,333 *aila!le %or ale ecuritiesDtateorpBons

3,88,10#

arket @ustment D A ecurities 8",$"9 ales price (3,9#5,000D133,333)

3,"91,"morti:e ost

3,88,10# ;oss9$,$35

morti:e ost 1#/1/08P3,8#",#93 2iscount mort. 1#/1/08 D 1#/31/08 31,35 x 1/5,##8 morti:e ost 1#/31/08

P3,83#,5#1 < 1#/31/08 $ x 98'3,9#0,000 nreali:e 7ain on 1#/31/08 P8",$"9

715 R#$$/ C).#n/!To %acilitate computation, a partial amorti:ation ta!le is presente !eloF.

2ateInterest

ecei*eIntereste*enue


=Tarr-in4


16/18


ash 5,03,150

2ec. 31 ash 00,000 Interest e*enue 5#,#" =el to aturit- ecurities D Blessie 3","33

#008

2ec. 31 ash 00,000 Interest e*enue 531,5$# =el to aturit- ecurities D Blessie 8,$58

#009

2ec. 31 ash 00,000 Interest e*enue 5#$,9 =el to aturit- ecurities D Blessie "5,30$

#010

ept. 1 Interest ecei*a!le (3 x 1#' x 8/1#) #$0,000 =el to aturit- ecurities D Blessie 33,13$ Interest e*enue (51",1 x 3/5 x 8/1#) #0,8

1 ash (3,090,000 E #$0,000) 3,330,000

7ain on sale o% =T ecurities #0,1$1 Interest ecei*a!le #$0,000 =el to aturit- ecurities D Blessie 3,09,85

9 < o% =T securities sol+ s o% 1#/31/0" (5,1"1,55 x 3/5)3,10#,993 mort %rom 1/1/089/1/0833,13$ < as o% 9/1/083,09,859 ales price3,090,000 7ain on sale

#0,1$1

1 *aila!le %or ale ecurities D Blessie #,08,#

=el to aturit- ecurities #,08,#

5,1"1,55 D 3,10#,993 6 #,08,#

2ec. 31 ash #$0,000 Interest e*enue #0,8 *aila!le %or ale ecurities D Blessie 33,13$ # x 1#' 6 #$0,000 5,1"1,55 D 3,10#,993 6 #,08,# #,08,# x 10' 6 #0,8

#$0,000 D #0,8 6 33,13$

2ec 31 arket @ustment D A 3$,$"# nreali:e 7ain or ;oss on A 3$,$"# morti:e cost

#,08,# D 33,13$ 6 P#,035,5#8L arket *alue # x 103.5' #,0"0,000 arket @ustment P 3$,$"#

Lor 5,088,8#1 x #/5 6 P#,035,5#8

ote+ Instea o% reco4ni:in4 the unreali:e 4ain or loss at the ate o%

6


17/18


reclassi%ication on eptem!er 1, #010 (the compan- emonstratin4 no a!ilit-to hol the securities until maturit-, hence the securities Fere reclassi%ie asA), an a@ustin4 the account a4ain at -earen, a sin4le a@ustment at-earen is mae in the a!o*e entries. Both methos Foul achie*e the samee%%ect o% re%lectin4 the A to market at !alance sheet ate throu4h theeCuit- account nreali:e 7ain or ;oss on A.

7-11. B an #. 3. B an $. 5. B an . ". 8. 9. B10. B an 11. 1#. B an 13. 1$. 15. B

MULTIPLE CHOICE QUESTIONST9%)*/1 B 5 2 9 2# B 2 10 B3 " 11 $ 8 2

P*)"%s1# B 535,000 D 5#5,000 6 10,00013 2 30",500 E #9,500 6 5"",000G (00 x $$0) E (#,000 x 138) 6 5$0,000

5"",000 D 5$0,000 6 3",000G 1#,900 E 13,5006#,$00G 3",000D#,$00610,001$ 10,000 x 150 6 1,500,000G #0' x 3 6 00,000

10,000 x 50 6 500,000G 1,500,000 E 00,000 D 500,000 6 1,00,00015 1,000 x 50 6 150,000 E #,#50 6 15#,#50G 15#,#50 D (1,000 x 10) 6 1$#,#501 3,000 x 1#0 6 30,000G 50,000 x 3,000/,000 6 #80,000

30,000 D #80,000 6 80,0001" 2 30,000 x 00/300 6 0,000G #00,000 E 0,000 6 #0,000

30,000 D #0,000 6 100,00018 B 500 x #5 6 1#,500 D 500 6 1#,000

500 x #0 6 10,000G 1#,000 D 10,000 6 #,000 4ain19 2 90500 6 $0 E 00 6 1,00G 1,00/10 6 10 shares

#0 B 88 N 1.10 6 80#1 35#,000 D ($,$00 x $) 6 33$,$00G 33$,$00 / $,$00 sh 6 "## 2 ee o. #1#3 B 1,#00,000 D (3 x $0,000) E (#5' x $0,000) 6 1,#$0,000#$ B $0' x $50,000 6 180,000

150,000 N 1# 6 1#,500G 180,000 D 1#,500 6 1",500#5 #5,000 x 180 6 $,500,000G #5' x (#,$00,000 D $80,000) 6 $80,000

$,500,000 E $80,000 D 0,000 D 0,000 6 $,80,000# 2 $,80,000 x 15/#5 6 #,91,000

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#" B 10,000 x #00 6 #,000,000G $,80,000 x 10/#5 6 1,9$$,000#,000,000 D 1,9$$,000 6 5,000

#8 #9 500,000 E 1,500,000 E (10' x 3) 6 #,300,00030 B $0' x 1,#00,000 6 $80,000G ($0' x 900,000) N 18 6 #0,000

$0' x 100,000 6 $0,000G $80,000 D #0,000 D $0,000 6 $#0,00031 $,000,000 E $#0,000 D ($0' x #00,000) 6 $,3$0,000

3# B (1,000 x 1$0) E (900 x 1"0) E (800 x #00) 6 $53,000(1,000 x 150) E (900 x 180) E (800 x ##0) 6 $88,000$88,000 D $53,000 6 35,000G 35,000 D #0,000 6 15,000

33 ee o. 333$ 35 8,"50,000 x 5' 6 $3",5003 3,9#,000 x 5' 6 18$,00G $ x $' 6 10,000

18$,00 D 10,000 6 #$,00G 3,9#,000 E #$,00 6 3,"1,003" ee o. 338 B 91#,$00 x 10' 6 91,#$0G 1,000,000 x8' 6 80,000

91,#$080,000 6 11,#$0G 91#,$00 E 11,#$0 6 9#3,$039 2 ",850,000 D (8 x .08 x /1#) 6 ",530,000G ",383,000 x 5' 6 39,150

8 x $' 6 3#0,000G 39,150 D 3#0,000 6 $9,150",383,000 E $9,150 6 ",$3#,150G ",$3#,150 x 5' 6 3"1,08

3"1,08 D 3#0,000 6 51,08G ",3$#,150 E 51,08 6 ",$83,"58",530,000 D ",$83,"58 6 $,#$#

$0 2$1 B 500,000 x $' 6 #0,000$# 2 $0,000 D $"#,500 6 1#,500

62

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Ch 7 Answers Vol 1 finacc