Question 1

Santo, Inc. acquired 30% of Nino Corp.'s voting stock on January 1, 2019 for
P360,000. During 2019, Nino earned P150,000 and paid dividends of P90,000. Santo's
30% interest in Nino gives Santo the ability to exercise significant influence over Nino's
operating and financial policies. During 2020, Nino earned P180,000 and paid dividends
of P60,000 on April 1 and P60,000 on October 1.

On July 1, 2020, Santo sold half of its stock in Nino for its fair value of
P237,000. Thereafter, Santo, Inc. designated the investment as FVTOCI. The remaining
shares of Nino Corp. held by Santo, Inc. have a fair value of P220,000 at December 31,
2020.

The gain on remeasurement of the retained investment is

Nil
P57,000
P43,500
P48,000

Question 2
On January 2, 2020, Tuao Company purchased 10% of Abulug Company’s outstanding
ordinary shares for P20,000,000. Tuao is the largest single shareholder in Abulug
and this gives Tuao the power to participate in the financial and operating policy
decisions of the Abulug but is not control or joint control over those policies. Abulug
reported profit of P10,000,000 and paid dividend of P4,000,000.

What should be the balance in Tuao’s investment in Abulug Company at the end of
2020?
Group of answer choices
P21,000,000
P21,400,000
P20,000,000
P20,600,000
Question 3
Allapacan Company bought 20% of Amulung Corporation’s ordinary shares on January 1,
2020 for P20,000,000. Carrying amount of Amulung’s net assets at purchase date
totaled P60,000,000. Fair value and carrying amounts were the same for all items
except for plant and inventory, for which fair values exceed their carrying amounts by
P15,000,000 and P5,000,000 respectively. The plant has a 5-year life. All inventory was
sold during 2020. Goodwill, if any, has an indefinite life. During 2020, Amulung
reported profit of P40,000,000 and paid P15,000,000 cash dividends.
What amount should Allapacan report as investment income for 2020?
Group of answer choices
P6,200,000
P3,400,000
P7,600,000
Commented [YG1]: SURE
P6,400,000
Question 4
On April 1, 2020, Purefoods Company purchased a P1,000,000 face value 8% bond for
P910,000 including accrued interest and commission. The commission to acquire the
bonds was P5,000. The bonds are dated January 1, 2020 and mature on January 1,
2025, and pay interest semi-annually on January 1 and July 1. On December 31, 2020,
the bonds had a fair value of P920,000. On April 1, 2021, Purefoods sold the bonds for
a total consideration of P950,000.

What amount should Purefoods report as unrealized gain in its 2020 profit or loss?
Group of answer choices
Commented [YG2]: SURE
P35,000
P0
P15,000
P30,000

Question 5
On January 1, 2020, Alaska Corporation purchased P1,000,000 10% bonds for
P1,051,510 (including broker’s commission of P20,000). Interest is payable annually
every December 31. The bonds mature on December 31, 2022. The prevailing market
rate for the bonds is 9% at December 31, 2020.

If the bonds are classified as FA@AC, the amount to be reported on the entity’s
December 31, 2020 statement of financial position is
Group of answer choices
P1,025,330
P1,034,340
P1,017,610
Commented [YG3]: SURE
P1,035,630
Question 6
On January 1, 2020, Alaska Corporation purchased P1,000,000 10% bonds for
P1,051,510 (including broker’s commission of P20,000). Interest is payable annually
every December 31. The bonds mature on December 31, 2022. The prevailing market
rate for the bonds is 9% at December 31, 2020.

If the bonds are classified as FA@FVTPL, the amount to be recognized as fair value
adjustment loss in its 2020 profit or loss is
Group of answer choices
P6,180
Commented [YG4]: SURE
P13,900
P33,900
P26,180

Question 7
On June 1, 2020, Ping Corp. purchased 10,000 of Pong’s 50,000 outstanding shares at a
price of P6.00 per share. Pong had earnings of P3,000 per month during 2020 and paid
dividends of P10,000 on March 1, 2020 and P12,500 on December 1, 2020. The fair
value of Pong’s shares was P6.50 per share on December 31, 2020.
Which statement is correct?
Group of answer choices
Assuming that the investment is an associate, the total effect on Ping’s profit or loss
for the year ended December 31, 2020 is P3,600.
Assuming that the investment is FVTOCI, the total effect on Ping’s profit or loss for
the year ended December 31, 2020 is P7,500.
After all closing entries for 2020 are completed, the effect of the increase in fair
value on total shareholders' equity would be the same amount under the FVTOCI and
FVTPL approaches. Commented [YG5]: 3 file check

Assuming that the investment is FVTPL, the total effect on Ping’s profit or loss for
the year ended December 31, 2020 is P2,500.
Question 81 pts
On January 1, 2019, Lallo Company purchased 15% of Vintar Company’s ordinary shares
for P20,000,000. The following data concerning Vintar Company are available:

2019 2020

Net income P6,000,000 P7,000,000

Cash dividend paid None 15,000,000

In its income statement for the year ended December 31, 2020, how much should Lallo
report as income from this investment?
Group of answer choices
P1,950,000
P700,000
P600,000
P2,250,000

Question 91 pts
An entity 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 is designated as FA@FVTOCI, what gain would be recognized in the
financial statements for the year ended 31 December 2020?
Group of answer choices
P40,000
P160,000
P420,000
Nil
Question 101 pts
On July 1, 2015, Cleopatra Corporation acquired 25% of the shares of Marcus, Inc. for
P1,000,000. At that date, the equity of Marcus was P4,000,000, with all the identifiable
assets and liabilities being measured at amounts equal to fair value. The table below
shows the profits and losses made by Marcus during 2015 to 2019:
Year Profit (Loss)
2015 200,000
2016 2,000,000
2017 2,500,000
2018 160,000
2019 300,000

How much will the Investment in Associate account be debited/credited in 2018?

Group of answer choices
P40,000 Dr.
P1,060,000 Cr.
P1,035,000 Cr.
No entry
Question 111 pts
Pompey Inc. carries the following marketable equity securities on its books at December
31, 2019 and 2020. All securities were purchased during 2019.

Trading Securities:
Cost Fair Value
12/31/19 12/31/20
P Company 500,000 260,000 400,000
R Company 260,000 400,000 400,000
T Company 700,000 600,000 500,000
Total 1,460,000 1,260,000 1,300,000

Financial asset @ FVOCI:

Cost Fair Value
12/31/19 12/31/20
C Company 4,100,000 3,600,000 3,600,000
I Company 1,000,000 1,200,000 1,400,000
Total 5,100,000 4,800,000 5,000,000

The net unrealized gain/loss at December 31, 2020 in accumulated other comprehensive
income in shareholders' equity is
Group of answer choices
Commented [YG6]: SURE
P100,000 loss
P200,000 gain
P 40,000 gain
P260,000 loss
Question 121 pts
Allapacan Company bought 20% of Amulung Corporation’s ordinary shares on July 1,
2019 for P20,000,000. Carrying amount of Amulung’s net assets at purchase date totaled
P60,000,000. Fair value and carrying amounts were the same for all items except for plant
and inventory, for which fair values exceed their carrying amounts by P15,000,000 and
P5,000,000 respectively. The plant has a 5-year life. All inventory was sold during
2019. Goodwill, if any, has an indefinite life. During 2019, Amulung reported profit of
P40,000,000 and paid a P15,000,000 cash dividend.

Using the same information, except that the purchase price is only P15 million, what
amount should Allapacan report as investment income for 2019?
Group of answer choices
P6,200,000
P3,400,000
Commented [YG7]: SURE
P7,400,000
P3,700,000
Question 131 pts
Which statement is incorrect regarding reclassification of financial assets?
Group of answer choices
All reclassifications out of FVTOCI measurement category result in ‘reclassification
adjustment’. Commented [YG8]: SURE

The effective interest rate and the measurement of expected credit losses are not
adjusted as a result of the reclassification from AC measurement category to FVTOCI
and vice versa.
Reclassifications to FVTPL measurement category result to amounts recognized in
profit or loss.
The effective interest rate is determined on the basis of the fair value of the asset at
the reclassification date when an entity reclassifies a financial asset out of FVTPL
measurement category.

Question 141 pts

Investment in debt instruments classified as FA@FVTOCI recognizes which of the
following in OCI?
Group of answer choices
Commented [YG9]: SURE
Changes in fair value
Impairment gains and losses
All of these
Interest calculated using the effective interest method.
Question 151 pts
Which of the following returns is consistent with contractual cash flows that are SPPI?

I. Return for passage of time.

II. Return for the risk that one party to a financial instrument will cause a
financial loss for the other party by failing to discharge an obligation.
III. Return for the risk that an entity will encounter difficulty in meeting
obligations associated with financial liabilities that are settled by delivering
cash or another financial asset.
IV. Return for amounts to cover expenses and a profit margin.

Group of answer choices

I and IV only
Commented [YG10]: SURE
I, II, III and IV
II and III only
I, II and III only

Question 161 pts

Under what circumstances under PFRS 9 can an entity classify financial assets that meet
the amortized cost criteria as at FVTPL?
Group of answer choices
Commented [YG11]: SURE
If doing so eliminates or reduces an accounting mismatch.
Where the instrument is held to maturity.
Where the financial asset passes the contractual cash flow characteristics test.
Where the business model approach is adopted.
Question 171 pts
Dividends are recognized in profit or loss only when:
Group of answer choices
It is probable that the economic benefits associated with the dividend will flow to
the entity.
The amount of the dividend can be measured reliably.
The entity’s right to receive payment of the dividend is established.
Commented [YG12]: SURE
All of these.

Question 181 pts

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

1. May be subsequently transferred to profit or loss.

2. Shall be subsequently transferred to retained earnings.

Group of answer choices

2 only
1 only
Either 1 or 2
Neither 1 nor 2

Question 191 pts

At initial recognition, an entity may make an irrevocable election to present in other
comprehensive income subsequent changes in the fair value of an investment in an
equity instrument that is
Group of answer choices
Acquired principally for the purpose of selling it in the near term.
A derivative.
On initial recognition is part of a portfolio of identified financial instruments that are
managed together and for which there is evidence of a recent actual pattern of short-
term profit-taking.
Commented [YG13]: DE SURE
None of these.
Question 201 pts
What is the principle for recognition of a financial asset in PFRS 9?
Group of answer choices
A financial asset is recognized when, and only when, the entity obtains the risks and
rewards of ownership of the financial asset and has the ability to dispose of the financial
asset. Commented [YG14]: Pwede to. Asa scribd

A financial asset is recognized when, and only when, the entity obtains control of the
instrument and has the ability to dispose of the financial asset independent of the
actions of others.
A financial asset is recognized when, and only when, it is probable that future
economic benefits will flow to the entity and the cost or value of the instrument can be
measured reliably.
A financial asset is recognized when, and only when, the entity becomes a party to
the contractual provisions of the instrument.