INTACCTG2

Instructions: Answer the following problems on yellow paper. Write your Section, Name and
Signature on each page of your answers. Show your solutions in good form. Upload the copy of your
solutions and answer the questions in Canvas.

Assignment: Statement of Comprehensive Income

Problem 1

On January 1, 2015, an entity purchased bonds with face amount of P5,000,000 for P4,760,000 including
transaction cost of P160,000. The business model is to collect contractual cash flows and sell the financial
assets. The bonds mature on December 31, 2017, and pay 10% annual interest on December 31 with 12%
effective yield. Assume that the market value of the bonds on December 31, 2016 is 105 and the bonds are
sold on June 30, 2017 at 119 plus accrued interest.

1.a What is the carrying amount of the bonds on date of sale?

1.b What is the amount of gain on sale of the bonds?

Problem 2

On January 1, 2018, Madali Company borrowed P5,000,000 from ABC Bank at variable rate of
interest for two years. The principal loan is payable on December 31, 2019. The interest is payable
on December of each year based on the prevailing interest rate at the beginning of the year.

To protect itself from fluctuation in interest rate, Madali Company entered into an agreement with
XYZ Bank as the speculator to receive variable interest and to pay a fixed interest based on an
underlying interest rate of 10% and notional amount of P5,000,000.

The interest rates on the loan are:

January 1, 2018 10%

January 1, 2019 12%

2. What is the amount of interest expense to be recognized in 2019?

Problem 3
On January 1, 2018, Uno Company acquired the following equity investments:

Purchase Transaction Cost Fair Value- Fair Value 12/31/2019

Price 12/31/2018
Trading Investment-A 1,000,000 100,000 1,200,000 800,000
Trading Investment B 2,000,000 200,000 1,500,000 1,300,000
Trading Investment C 3,000,000 300,000 3,100,000 3,200,000
Non-trading investment 1,000,000 100,000 1,200,000 1,000,000
A
Non-trading Investment 2,000,000 200,000 1,500,000 1,800,000
B
 Non-trading investment 3,000,000 300,000 3,100,000 -
C

The company elected to measure non-trading securities at fair value through other comprehensive income.

On July 1, 2019, the entity sold half of the Trading Investment A for 950,000. At the same date, it also sold the
all the Non-trading investment-C for 3,600,000.

3. What amount should be credited to retained earnings as a result of the sale of non-trading investment C?

Problem 4

On January 1, 2019, an entity showed land with carrying amount of P10,000,000 and building with
cost of P60,000,000 and accumulated depreciation of P18,000,000. The land and building were
revalued on same date and revealed the fair value of land at P15,000,000 and the building at
P70,000,000.

The original useful life of the building is 20 years and depreciation is computed on the straight line.

The income tax rate is 30%.

4.a. What is the revaluation surplus on December 31, 2019?

4.b. What is the amount of total charges to profit or loss in 2019?

Problem 5

Benefit Company provided the following information during the current year:

January 1 December 31
Fair value of plan assets 6,000,000 8,500,000
Projected benefit obligation 5,000,000 6,500,000
Prepaid/accrued benefit cost-surplus 1,000,000 2,000,000
Asset Ceiling 600,000 1,200,000
Effect of asset ceiling 400,000 800,000

During the year, the entity recognized current service cost of 1,000,000, actual return on plan asset
of 400,000 and contribution to the plan of 2,100,000. The discount rate is 10%.

5. What is the amount of other comprehensive income/(loss) to be reported in Statement of

Comprehensive Income for the current year?

Assignment: Statement of Financial Position (Chapter 2)

Problem 2-18 and Problem 2-22