Desie Mae P.

Pilongo

CHRISTIAN COLLEGES OF SOUTHEAST ASIA

Ma-a, Davao City

AUDIT QUIZ
Financial Asset and Investment in Equity Securities

PROBLEM 1
On January 1, 2018, Harap Corp. owns 15,000 ordinary shares representing 15% of the
shares outstanding of Lukas Corporation. The ordinary share were acquired on
November 17, 2017 at a cost of P1,500,000 and have a fair value of P1,600,000 on
December 31, 2017. On January 2, 2018, Harap Corp. sold half of its investment for P100
per share incurring a brokerage and commission expense of P20,000.

Questions:
Based on the above data, answer the following:
Case 1: Assume that the above securities are classified as fair value through profit or
loss

1. Unrealized gain )or loss) on December 31, 2017 to be presented in the statement of
financial position. (3pts.)

2. Gain (or loss) on sale on January 2, 2018 to be recognized in the profit or loss. (3 pts.)

Case 2: Assume that the above securities are designated as at fair value through other
comprehensive income

3. Unrealized gain (or loss) on December 31, 2017 to be presented in the statement of
financial position. (3 pts.)

Fair Value (Dec. 31, 2017) 1,600,000

Less: carrying amount 1,500,00
Unrealized gain or loss 100,000

4. Gain or loss on sale on January 2, 2018 to be recognized directly in the retained

earnings. (3 pts.)
Net process from sale (1,500,000/100)-20,000 730,000
Less: carrying amount (1600,000*50%) 800,000
FVOCI 70,000
5. Prepare all the necessary entries for the years 2017 and 2018 (for both FVTPL) and
FVTOCI). FVTPL – 5 pts; FVTOCI – 5 pts)