INTERMEDIATE ACCOUNTING 1 - QUIZZES AND ANSWERS
PRELIMS COMPREHENSIVE QUIZ ON BA, FINANCIAL ASSETS AND INVESTMENTS IN EQUITY
FALSE 1. IAS 41 require separate disclosure of the physical change and price change of biological assets.
TRUE 2. Consumable animals are accounted for as biological assets.
FALSE 3. Bearer Plants are accounted for as biological assets.
TRUE 4. Biological Assets are measured at fair value less cost to sell.
5. Debt investment is classified at FVOCI when the business model is to "hold to collect" and the cash flow characterisitics is
FALSE
SPPI.
TRUE 6. The Accounting Standard for investment is PFRS 9.
7. Unrealized gains and losses under of Equity Security - FVOCI can be recycled to profit or loss once the equity security is
FALSE
realized or derecognized.
FALSE 8. Date of record is the date oon which dividends declared shall be paid.
9. Under " Accounted for separately", when share rights are exercised, the cost of the new investment includes the subscription
TRUE
price and the cost of the shares exercised.
TRUE 10. Share dividends whether of the same class or different are not income.
Problem 1. Alice Farmville, Inc. reported the following:
CLASSIFICATION
Bearer Plants ₱ 2,500,000.00 PPE
Consumable Plants ₱ 1,000,000.00 BA
Bearer Animals ₱ 1,500,000.00 BA
Consumable Animals ₱ 1,250,000.00 BA
Animals related to recreational activities ₱ 900,000.00 PPE
Agricultural produce growing on bearer plants ₱ 750,000.00 BA
Agricultural produce harvested ₱ 600,000.00 INV
Agricultural land ₱ 3,000,000.00 PPE
TOTAL BIOLOGICAL ASSETS ₱ 4,500,000.00
TOTAL PROPERTY, PLANT AND EQUIPMENT ₱ 6,400,000.00
1. What amount should be accounted as Biological Assets? ₱ 4,500,000.00
2. What amount should be accounted as Property, Plant and
₱ 6,400,000.00
Equipment?
Problem 2. On January 2, 2022, Madam Chair Company purchased 2,500 ordinary shares of Your Honor Corporation at P210 per
share plus transaction cost of P5,250. These shares represent nominal ownership interest and are not intended for trading
purposes. The company made an irrevocable decision to designate these non-trading securities at fair value through other
comprehensive income.
On December 31, 2022, the ordinary shares of Your Honor Corporation are quoted (fair value) at P244 per share.
On February 14, 2023, Madam Chair Company sold 750 shares of the Your Honor Corporation ordinary shares at P252 per share.
On December 31, 2023, the ordinary shares of Your Honor Corporation are quoted at P274 per share.
ANSWERS
1. What amount shall madam Chair Company initially recognize its investment in Your Honor Compaany ordinary shares on 530,250
January 2, 2022?
2. At what amount shall madam Chair Company initially recognize its investment in Your Honor Corporation ordinary shares on 610,000
December 31, 2022?
3. What amount of unrealized gain (loss) on fair value change shall be reported in profit or loss for 2022? 0
4. What amount of unrealized gain (loss) on fair value change shall be reported in other comprehensive income for 2022? 79,750
5. What amount of gain (loss) on sale shall be recognized on February 14, 2023? 6,000 gain
6. What amount shall be reclassified to retained earnings as a result of the sale of shares on February 14, 2023? 29,925
7. At what amount shall Madam Chair Company initially recognize its investment in Your Honor Corporation ordinary shares on 479,500
December 31, 2023?
8. What cumulative amount of unrealized gain (loss) on fair value change shall be reported on December 31, 2023? 108,325
PROBLEM 2 SOLUTION
Subsequent − Intial to solve
Refer to color correspondence
for change in fair value
Classification FVOCI 2,500*210 = 525,000 FV Dec-22 2,500 shs * 244 = 610,000 (2) - 530,250 = 79,750 (4) UG 1-12/22
5,250 TS 2/14/23 Selling Price 750*252 = 189,000 79,750x 750/2,500 RE SALE OF
SHARES
530, 250 (1) Cost 750*244 = (183,000) = 23,925
Gain on Sale 6,000 (5)
SALE OF
SHARES GAIN ON SALE
RETAINED
JOURNAL ENTRIES 23,925 + 6,000 = 29,925 (6)
EARNINGS
ORDINARY
SHARES - 2,500 - 750 = 1,750 shares
SOLD SHARES
Jan-22 FA - FVOCI 530, 250
CASH 530, 250 ordinary
RECYCLED shares
1,750*244 = (427,000) iminus ni
sya to OS ng 12/31/23
12/31/22
ordinary
Dec-22 shares 1,750*274 = 479,500 (7)
FA - FVOCI 79,750 2/14/23 UG - OCI 23,925 12/31/23
UG 22-23 52,500
79,750 RE
UG - OCI 23,925
2/14/23 CASH 189,000 12/31/23 FA - FVOCI 52,500
79,750-23,925+52,500
FA-FVOCI 183,000 UG - OCI 52,500
Cumulative amount of
RE 6,000 UG 108, 325 (8)
Problem 3. Accounting for Stock Rights
Moon Company held 40,000 shares purchased for P100 per share as noncurrent asset investment. The following transactions pertain to such
investment in chronological order.
1. Received share rights to purchase one new share at P50. Two rights are required to acquire one share. The market value of the share is P80 per share
2. Exercised 30,000 rights
3. Sold 6,000 rights at P18 per right
4. The remaining rights expired
Requirement: Fill in the table below using each independent assumptions.
Assumption 1. If the market value of the right at issuance date is P12. Compute for the following:
Question Accounted Separately Not Accounted Separately
a. Cost of New Investment 4,000,000
b. Gain (loss) on the sale of rights -36,000 0
c. Gain (loss) on the rights expired -48,000 0
Assumption 2. If the right has no known market value and the share is selling right-on. Compute for the following:
Question Accounted Separately Not Accounted Separately
a. Cost of New Investment 1,050,000 1,050,000
b. Gain (loss) on the sale of rights 48,000 0
c. Gain (loss) on the rights expired -40,000 0
Assumption 3. If the right has no known market value and the share is selling ex-right. Compute for the following:
Question Accounted Separately Not Accounted Separately
a. Cost of New Investment 1,200,000 1,200,000
b. Gain (loss) on the sale of rights 18,000 0
c. Gain (loss) on the rights expired -60,000 0
Problem 3. Accounting for Stock Rights Solution
40,000 shs x 100/share = 4,000,000 Selling Price
Given: 40,000 - 30,000 (exercised) = 10,000 - 6,000 (sold) = 4,000 (expired)
P50 per share for share rights Assumption 1.
P80 at market value 30,000 / 2 (share rights) = 15,000 shs
Exercised 30,000 share rights x 18 = 108,000 selling price
6,000 sold shs
Sold 6,000 share rights at P18/right x 12 = 72,000 market value
Remaining rights expired 36,000 gain on the sale of rights
2 rights = 1 share 4,000 (expired shares) * 12 (market value) = (48,000) loss on the rights expired
greater than exercised share rights
40,000*12 (market value) = 480,000 (stock rights)
15,000*50 = 750,000 SP
30,000*12 = 360,000 SR
Date on Declaration Date of Record Date on Record Date of Expiration
Right on Ex-right
MV - SP MV - SP
# OF RIGHTS/SHARE + 1 # OF RIGHTS/SHARE
Assumption 2. Assumption 3.
80 - 50 80 - 50
= 10 = 15
2+1 2
40,000*10 (market value) = 400,000 (stock rights) 40,000*15 (market value) = 600,000 (stock rights)
15,000*50 = 750,000 SP 15,000*50 = 750,000 SP
30,000*10 = 300,000 SR 30,000*15 = 450,000 SR
Investment in Shares 1,050,000 Investment in Shares 1,200,000
x 18 = 108,000 selling price x 18 = 108,000 selling price
6,000 sold shs 6,000 sold shs
x 10 = 60,000 market value x 15 = 90,000 market value
48,000 gain on the sale of rights 18,000 gain on the sale of rights
4,000 (expired shares) * 10 (market value) 4,000 (expired shares) * 15 (market value)
= (40,000) loss on the rights expired = (60,000) loss on the rights expired
Journal Entries.
Accounted Separately Not Accounted Separately
Investment in Shares 4,000,000 Investment in Shares 4,000,000
Cash 4,000,000 Cash 4,000,000
Stock Rights 480,000
Investment in Shares 480,000
Investment in Shares 1,100,000 Investment in Shares 750,000
Cash 750,000 Cash 750,000
Share Rights 360,000
Cash 108,000 Cash 108,000
Selling Price 72,000 Investment in Shares 108,000
Gain on sale 36,000
Stock Rights 400,000
Investment in Shares 400,000
Investment in Shares 1,050,000 Investment in Shares 750,000
Cash 750,000 Cash 750,000
Share Rights 300,000
Cash 108,000 Cash 108,000
Selling Price 60,000 Investment in Shares 108,000
Gain on sale 48,000
Stock Rights 600,000
Investment in Shares 600,000
Investment in Shares 1,200,000 Investment in Shares 750,000
Cash 750,000 Cash 750,000
Share Rights 630,000
Cash 108,000 Cash 108,000
Selling Price 90,000 Investment in Shares 108,000
Gain on sale 18,000
Problem 4. On January 1, 2019, an investor/shareholder purchased 10,000 shares of X corporation 100,000 outstanding shares for
During 2019, the investor/shareholder receives a notice of dividend declaration of P5 per share.
During 2020, X Corporation distributes its holding of 50,000 shares in T Company as property dividend.
The shares of T Company have a market value of P50 per share. The investor/shareholder receives 1,000 shares of T Company as property
dividend from X Corporation.
On June 30, 2021, investor receives 20% share dividend. On December 31, 2021, investor receives a notice of dividend declaration of
P10/share.
In June 30, 2022, the investor receives a notice of share split-up 5-for-1. On December 31, 2022. investor receives a notice dividend
declaration of P5/share.
On June 30, 2023, the investor receives notice of share split -down 2-for-1. On December 31, 2023, the investor receives a notice of dividend
declaration of P8/share.
During 2024, investor receives P100,000 cash in lieu of 1,000 shares originally declared as share dividends.
During 2025, investor receives 1,000 shares in lieu of cash dividend of P10/share. The market value per share is P100.
1. What amount should be reported as Dividend Income on December 31, 2019? 50,000
2.What amount should be reported as Dividend Income on December 31, 2020? 50,000
3. What amount should be reported as Dividend Income on December 31, 2021? 120,000 or 132,000
4. What amount should be reported as Dividend Income on December 31, 2022? 300,000 or 330,000
5. What amount should be reported as Dividend Income on December 31, 2023? 240,00 or 264,000
6. What amount should be reported as Dividend Income on December 31, 2024? 0 (cash in lieu of shares is not a Dividend income)
7. What amount should be reported as gain on investment on December 31, 2024? 45,489
8. What amount should be reported as Dividend Income on December 31, 2025? 100,000 (shares in lieu of cash is Dividend Income)
Problem 4.
01/01/2019 10,000 shs - X Corp for 1,800,000 cost
2019 10,000 shs * 5 = 50,000 DI
2020 1,000 shs * 50 = 50,000 DI
X Corporation T Company
6/30/21 10,000 shs *20% = 2,000 1,000 shs *20% = 200
+ 2,000 + 200
12,000 shs * 10 = 120,000 DI 1,200 shs * 10 = 12,000 DI = 132,000 DI X corp + T company
6/30/22 *5 (split up) *5 (split up)
60,000 * 5(Dividend declaration) = 300,000 DI 6,000 * 5 = 30,000 = 330,000 DI X corp + T company
6/30/23 /2 (split down) /2 (split down)
30,000 shs * 8 = 240,000 DI 3,000 shs * 8 = 24,000 = 264,000 DI X corp + T company
2024 Received Shares Sale
30,000 + 1,000 shs = 31,000 Selling Price 100,000 100,000 1,800,000/31,000 = 58.06 * 1,000= 58,060 COST
33,000 + 1,000 shs = 34,000 Cost 58,060 54,411 1,800,000 + 50,000/34,000 * 1,000= 54.41 * 1,000 = 54,411
41,940 45,589
2025 1,000 * 100 = 100,000 DI
