AUDITING AND ASSURANCE CO

PROBLEM 4

The following are transactions of Angat Company:

Jan. 2 Purchased 20,000 shares of Bulacan Auto Co. for P40 per share plus brokerage costs of P4,500. These shares were c

Feb. 1 Purchased 20,000 shares of Malolos Company common stock at P125 per share plus brokerage fees of P19,000. An

Apr. 1 Purchased P2,000,000 of RP Treasury 7% bonds, paying 102.5 plus accrued interest of P35,000. In addition, the com

Jul. 1 Received semiannual interest on the RP Treasury Bonds.

Aug. 1 Sold P500,000 of RP Treasury 7% bonds at 103 plus accrued interest.

Oct. 1 Sold 3,000 shares of Malolos at P132 per share.

The market values at the end of the year are:

Bulacan Auto Co. P45 per share

Malolos Company P130 per share
RP Treasury 7% bonds 102
NG AND ASSURANCE CONCEPTS AND APPLICATION

of P4,500. These shares were classified as trading securities.

brokerage fees of P19,000. Angat classifies this stock as and available-for-sale security.

f P35,000. In addition, the company paid brokerage fees of P18,000. Angat classified these bonds as a trading security.
1. Gain or loss on sale of P500,000 RP Treasury Bonds on August 1?

Sales proceeds (P500,000 x 1.03) ₱515,000.00

Less cost of RP Treasury bonds sold (P500,000 x 1.025) ₱512,500.00
Gain on sale of P500,000 RP Treasury Bonds ₱2,500.00

Based on PAS 39 par 43

2. Gain or loss on sale of 3,000 Malolos shares on October 1?

Sales proceeds (3,000 shares x P132) ₱396,000.00

Less cost of shares sold [(20,000 x P125) + P19,000] x 3/20) ₱377,850.00
Gain on sale of 3,000 Malolos shares ₱18,150.00
3. What amount of unrealized gain should be shown as component of income?

Cost of Bulacan Auto Co. shares (20,000 x P40) ₱800,000.00

Cost of RP Treasury 7% bonds (P2,000,000 x 1.025) ₱2,050,000.00
Cost of P500,000 RP Treasury bonds sold (inc. in Q1) -₱512,500.00
Trading securities, 12/31/06 before mark-to-market ₱2,337,500.00
Fair value of trading securities, 12/31/06 (see below) ₱2,430,000.00
Unrealized gain on TS to be reported on the IS ₱92,500.00

Bulacan Auto Co. (20,000 x P45) ₱900,000.00

RP Treasury 7% bonds (P1,500,000 x 1.02) ₱1,530,200.00
Fair value of trading securities, 12/31/06 ₱2,430,200.00
4. What amount of unrealized gain should be shown as component of equity as of December 31?

Cost of Malolos Company shares [(20,000 x P125) + P19,000]

Cost of 3,000 shares sold (see no. 2)
AFS, 12/31/06 before mark-to-market
Fair value of AFS, 12/31/06 [(20,000 3,000) x P130]
Unrealized gain-AFS, 12/31/06 to be reported under SHE
cember 31?

₱2,519,000.00
-₱377,850.00
₱2,141,150.00
₱2,210,000.00
₱68,850.00