1. Pretty Co. purchased 10,000 shares of Prettier Inc. on June 30, 2020.

Pretty received a
share dividend of 2,000 shares on August 15, 2020 when the carrying amount per share
was P400 and the market value was P350. Par value per share was P100. Prettier Inc.
declared and paid cash dividend of P15 per share on September 15, 2020. What amount
of dividend income will be reported in the income statement of Pretty Co. for the year
ended September 30, 2020? The correct answer is: 180,000
2. Irresistible Co. purchased marketable equity securities to be held for trading for
P5,000,000 and paid transaction cost amounting toP200,000 on March 1, 2020. The
securities had a market value of P5,500,000 on December 31, 2020. What amount of
unrealized gain or loss on these securities should be reported in the income statement?
The correct answer is: 500,000 gain
3. Investments in equity instruments are financial assets because they are.The correct
answer is: Equity instruments of another entity.
4. DfntlyLuvly Co. owned 30,000 shares of Alluring, Inc. at a cost of P2,000,000. On
October 31, the company received 30,000 stock rights from Alluring, entitling the holder
to acquire one share at P45. The market price of Alluring’s shares on this date was P50
and each right was quoted at P10. DfntlyLuvly sold the rights on December 8 for
P450,000 and the broker’s fee amounted to P10,000. What amount should be reported
as gain from the sale of rights? The correct answer is: 140,000
5. On January 1, 2019, Smart Co. purchased 100,000 equity securities for trading for P40
per share, excluding transaction cost which amounts to P1 per share. On December 28,
the company sold 80,000 shares for P50 a share. What amount should be reported as
gain on sale of trading securities? The correct answer is: 800,000
6. When an equity security is appropriately carried and reported as FA@FVOCI, a gain
should be reported in the income statement: The correct answer is: Never.
7. When a company has acquired a "passive interest" in another corporation, the acquiring
company should account for the investment. The correct answer is: By using the fair
value method.
8. Handsome Co. purchased 10,000 shares of equity securities at P80 per share on April 1.
On July 31, the company received 10,000 share warrants to purchase an additional
10,000 shares at 90 per share. The shares and the share warrants were quoted at P95
and P5, respectively on this date. The share warrants will expire on December 31. What
amount should be reported on July 31 for the investment in stock rights? The correct
answer is: 50,000
9. Inspired Co. carries the following marketable equity securities classified as FA@FVTOCI
on its books at December 31, 2019 and 2020. All the securities were purchased during
2019. Cost, P5,100,000; FV 12.31.19 P4,800,000; FV 12.31.20, P5,000,000. The net
amount to be recognized in 2020 comprehensive income is The correct answer is:
P200,000 gain
10. Dividends are recognized in profit or loss only when: The correct answer is: The
entity’s right to receive payment of the dividend is established.
11. An investment in equity instrument may not be classified as a financial asset
subsequently measured at The correct answer is: Amortized cost
12. During 2019, Confident Co. purchased trading securities at a cost of P4,2540,000. For
the year ended December 31, 2019, the company recognized an unrealized loss of
P230,000. There were no transactions in 2020. The securities were quoted at
P4,120,000 at year-end 2020. What amount of unrealized gain or loss should be
reported in the 2020 income statement? The correct answer is: Unrealized gain of
P100,000
13. On January 2, 2020, Happy Co. purchased 40,000 shares of Merry, Inc. stock at P100
per share. Brokerage fees amounted to P120,000. A P5 dividend per share of Merry, Inc.
shares had been declared on December 15, 2019, to be paid on March 31, 2020 to
shareholders of record on January 31, 2020. The shares are designated as FVTOCI. On
December 31, 2020 the investment has a fair value of P4,200,000. How much should be
recognized in the 2020 other comprehensive income related to these securities? The
correct answer is: P280,000
14. PFRS 9 permits an entity to make an irrevocable election to present in other
comprehensive income changes in the fair value of an investment in an equity
instrument. Amounts presented in other comprehensive income. The correct answer is:
Shall be subsequently transferred to retained earnings.
15. Inlove Co. acquired for P4,000,000 equity instruments classified as FAFVTOCI.
Transaction cost incurred in the acquisition amounted to P700,000. On December 31,
2020, the fair value of the instrument was P5,500,000 and the estimated transaction
costs that would be incurred if the instruments were sold amounts to P600,000. What
amount of gain should be recognized in other comprehensive income for the year ended
December 31, 2020? The correct answer is: 800,000
16. Glad Co. acquired an investment in equity instrument for P800,000 on 31 March 2020.
The direct acquisition costs incurred were P140,000. On 31 December 2020 the fair
value of the instrument was P1,100,000 and the transaction costs that would be incurred
on sale were estimated at P120,000. If the investment were designated as FA@FVTOCI,
what gain would be recognized in the financial statements for the year ended 31
December 2020? The correct answer is: P160,000
17. Uplifted Co carries the following marketable equity securities on its books at December
31, 2019 and 2020. All the securities were purchased during 2019. FA@FVTOCI Cost,
P5,100,000; FV 12.31.19 P4,800,000; FV 12.31.20, P5,000,000. The net unrealized
gain/loss at December 31, 2020 in accumulated other comprehensive income in
shareholders' equity is. The correct answer is: P100,000 loss
18. What is the principle for recognition of a financial asset in PFRS 9? The correct answer
is: A financial asset is recognized when, and only when, the entity becomes a
party to the contractual provisions of the instrument.
19. On January 2, 2020, Cheers Company purchased 40,000 shares of Jeers, Inc. stock at
P100 per share. Brokerage fees amounted to P120,000. The shares are designated as
FVTOCI. On December 31, 2020 the investment has a fair value of P4,200,000. How
much should be recognized in the 2020 other comprehensive income related to these
securities? The correct answer is: P 80,000
20. When an investor classifies an investment in common stock as trading securities, cash
dividends are classified by the investor as: The correct answer is: Dividend income.
21. Financial assets include. The correct answer is: Deposit of cash
22. A financial asset is any asset that is (choose the incorrect one) The correct answer is:
A contractual right to exchange financial instruments with another entity under
conditions that are potentially unfavorable.
23. What is the effect of stock dividend of the same class? The correct answer is: No
effect on investment account but decrease in cost per share.
24. Which of the following statements is correct regarding unrealized gains or losses? The
correct answer is: All statements are correct.
25. iCare Co. acquired an equity investment for P1,500,000 and classified it as FVTOCI. On
December 31, 2018, the cumulative loss recognized in other comprehensive income was
P200,000 and the carrying amount of the investment was P1,300,000. On December 31,
2019 the investee was in financial difficulty and the fair value of the investment had fallen
to P600,000. What cumulative amount of unrealized should be reported as component of
other comprehensive income in the statement of changes in equity for the year ended
December 31, 2019? The correct answer is: 900,000
26. Stock rights as a form of a financial assets are measured initially at The correct answer
is: Fair value
27. On January 2, 2020, Happy Co. purchased 40,000 shares of Merry, Inc. stock at P100
per share to be held for trading. Brokerage fees amounted to P120,000. A P5 dividend
per share of Merry, Inc. shares had been declared on December 15, 2019, to be paid on
March 31, 2020 to shareholders of record on January 31, 2020. What is the initial
measurement of the investment? The correct answer is: P3,800,000
28. In 2017, Irresistible Co. purchased 10,000 equity securities at P45 per share designated
as a financial asset at fair value through profit or loss. It sold 2,000 shares for P51 per
share in 2018 and another 2,500 shares for P33 per share in 2019. The shares were
quoted per share at P47, P39, and P31 at December 31, 2017, 2018 and 2019,
respectively. How much should be recognized in 2019 profit or loss as a result of the fair
value changes? The correct answer is: 44,000
29. What is the effect of share split up?. The correct answer is: Increase in number of shares
and decrease in cost per share.
30. An equity instrument is any contract t evidencing a residual interest in the assets of an
entity after deducting all of its liabilities. It include all of the following, except The correct
answer is: Preference shares capital with mandatory redemption date or
redeemable at the option of the holder.
31. When stock dividends of different class are received, which is incorrect? The correct
answer is: The procedure is to allocate the cost of the original investment between
the original shares and the “different” stock dividends on the basis of fair value.
32. On derecognition of nonmarketable equity securities, the difference between the
consideration received and the carrying amount of the investment. The correct answer
is: Shall be recognized in profit or loss
33. At which of the following dates has the shareholder theoretically realized income from
dividend? The correct answer is: The date the dividend is declared
34. In 2018, Upbeat Co. purchased 20,000 shares of Downcast Co. for P100 per share on
May 15. An additional 30,000 shares were bought in July 19 for P120 each. Upbeat
 received cash dividends at P10 per share on August 18 and a 20% stock dividend on
September 8. On December 11, Upbeat sold 30,000 shares of its investment at P125 per
share. What is the gain on the sale of the shares (use FIFO method)? 550,000 The
correct answer is: 1,150,000
35. Property dividends The correct answer is: Dividend income at fair value of the
property.
36. Under the PFRS 9, which one is not a category of financial assets? The correct answer
is: Financial assets held for sale.
37. An entity shall derecognized a financial asset when either one of the following conditions
is met, except The correct answer is: The entity has retained substantially all risk
and rewards.
38. The following categories may be composed of both equity and debt securities, except
The correct answer is: Financial assets at amortized cost.
39. An entity has preference shares which are redeemable on 12/31/23. Such preference
shares & its related preference dividend are presented in the 2020 financial statements
as The correct answer is: Noncurrent liability and finance cost, respectively
40. Smilelang Co. owns 20,000 shares of Frowning Co.’s 200,000 shares of P100 par, 6%
noncumulative, nonparticipating preference share capital and 10,000 ordinary shares,
representing 2% ownership of Frowning Co.. During 2019, Frowning declared and paid
preference dividends. No dividends had been declared or paid during 2018. In addition,
Smilelang, received a 5% share dividend on ordinary shares from Frowning when the
quoted market price of Frowning’s ordinary share was P10. What amount of dividend
income should be reported in 2019? The correct answer is: 120,000
41. Transactions costs incurred in connections with financial assets at fair value through
profit or loss are The correct answer is: Expensed outright
42. In 2018, Upbeat Co. purchased 20,000 shares of Downcast Co. for P100 per share on
May 15. An additional 30,000 shares were bought in July 19 for P120 each. Upbeat
received cash dividends at P10 per share on August 18 and a 20% stock dividend on
September 8. On December 11, Upbeat sold 30,000 shares of its investment at P125 per
share. What is the gain on the sale of the shares (use average method)? The correct
answer is: 950,000
43. It is any contract gives rise to both a financial asset of the one entity and a financial
liability or equity instrument of another entity. The correct answer is: Financial
instrument
44. Joyful Co. owns 50,000 shares of Gloom Co. at a cost of P5,000,000. Subsequently,
Joyful received stock share rights entitling it to purchase 12,500 shares at P100 per
share. The share is quoted right-on at P125. What is the cost of the new investment if all
of the stock rights are exercised (stock right accounted for separately)? The correct
answer is: 1,500,000
45. Smilelang Co. owns 20,000 shares of Frowning Co.’s, P100 par, 6% cumulative,
nonparticipating preference share capital and 10,000 ordinary shares. During 2019,
Frowning declared and paid preference dividends. No dividends had been declared or
paid during 2018. In addition, Smilelang, received a 5% share dividend on ordinary
shares from Frowning when the quoted market price of Frowning’s ordinary share was
 P10. What amount of dividend income should be reported in 2019? The correct answer
is: 240,000
46. It is a transaction whereby the outstanding shares are called in and replaced by a larger
number, accompanied by a reduction in the par or stated value. The correct answer is:
Share split up
47. Liquidating dividends (choose the incorrect statement) The correct answer is: Are
credited to income
48. The IAS term for stock dividend is The correct answer is: Bonus issue
49. Fighting co. has 20,000 shares of Undefeated Co. classified as trading securities with a
cost of P3,300,000 as of March 1, 2021. The company received 2,000 shares as
dividend on June 1 when the shares were selling at P125, On June 15, the company
sold 2,000 shares for P500,000. What amount should be reported as gain on sale of
investment? The correct answer is: 200,000
50. Joyful Co. owns 30,000 shares of Gloom Co. at a cost of P5,000,000. Subsequently,
Joyful received stock share rights entitling it to purchase 12,500 shares at P100 per
share. The share is quoted right on at P125. What is the cost of the new investment if all
of the stock rights are exercised (stock right NOT accounted separately) The correct
answer is: 1,250,000
51. Sophisticated Co. reported a P50,000 unrealized loss on June 30, 2020. There was no
change during the fiscal year 2021 in the composition of the portfolio of nontrading
securities held at fair value through other comprehensive income

Fair Value
@ 6.30.21
Security Cost

SMC 600,000 650,000

BPI 450,000 250,000

ALI 800,000 750,000

1,850,000 1,650,000

1. What is the market value of the investment on June 30, 2020? The correct answer is:
1,800,000
2. What amount of loss on these securities should be included in the statement of
comprehensive income for the year ended June 30, 2021 as component of other
comprehensive income? The correct answer is: 150,000
3. What cumulative amount of loss on these securities should be3 reported in the statement of
changes in equity for the year ended June 30, 2021 as a component of other comprehensive
income? The correct answer is: 200,000