CASE 1

James Company invested in the following transactions:

Jan. 3,2020 Purchased 12,000 shares of Woody Company P3 share. James paid P1,800 brokerage fee.
Jan 5,2020 Woody Company declared cash dividend of P1/share
Jan. 20,2020 James Company received the cash dividends
Dec. 31,2020 Woody Company’s shares have a quoted price of P5 per share
Dec. 31,2021 Woody Company’s shares have a quoted price of P4 per share
Jan. 16,2022 James Company sold all the shares at P8 per share

FAFVPL : 5 X 12,000 = 60,000 – 36,000 = 24,000 UG ( 5 – 3 ) p 2 X 12,000 = 24,000 UG

FAFVOCI : 5 X 12,000 = 60,000 – 37,800 = 22,200 UG 5 x 12,000 sh – 37,800
DEC. 31 , 2021 : FAFVPL 4 * 12,000 48,000 12,000
DEC. 31, 2021 : FAFVOCI 4* 12,000 48,000 12,000
Instruction: Journalize the Entries assuming that
12,000 shares * P 3/share
12,000 shares * 3/share + 1,800
Case 1 – Investment is held for trading
Case 2 – Investment is irrevocably elected at FAFVOCI

FAFVPL FAFVOCI
Jan. 3,2020 FAFVPL 36,000 FAFVOCI 37,800
Expense 1,800 Cash 37,800
Cash 37,800
Jan. 5,2020 Dividends Receivable 12,000 Dividends Receivable 12,000
Dividend Income 12,000 Dividend Income 12,000
Jan. 20,2020 Cash 12,000 Cash 12,000
Dividend Receivable 12,000 Dividend Receivable 12,000
Dec. 31, FAFVPL 24,000 FAFVOCI 22,200
2020 Unrealized gain – P/L 24,000 Unrealized gain – OCI 22,200
Dec. 31, Unrealized loss -P/L 12,000 Unrealized loss - OCI 12,000
2021 FAFVPL 12,000 FAFVOCI 12,000
January Cash 96,000 ( 8 * 12,000 SH ) FAFVOCI 48,000
16,2022 Gain on sale 48,000 Unrealized Gain-OCI 48,000
FAFVPL 48,000
DEC. 31, 2021 = ( 8 – 4 ) * 12,000 Cash 96,000
FAFVOCI 96,000
P 8 – P4 * 12,000 SHARES = 48,000 GAIN ON SALE
Unrealized gain – OCI 58,200
Retained Earnings 58,200
CASE 2

* The shares were purchased on July 1, 2019. Transitory paid transaction cost of 1% of the purchase
price.
CASE 1 : ASSUMING THAT THE SECURITIES WERE CLASSIFIED AS HELD FOR TRADING (
1. How much is the unrealized gain to be presented in the income statement for the year 2019 ? 150,000
UNREALIZED LOSS
2. How much is the unrealized gain to be presented in the income statement for the year 2020 ? 50,000
UNREALIZED GAIN
CASE 2 : ASSUMING THAT EQUITY SECURITIES DO NOT QUALIFY AS HELD FOR TRADING. THE ENTITY
HAS ELECTED IRREVOCABLY TO PRESENT CHANGES IN FAIR VALUE IN OTHER COMPREHENSIVE
INCOME
1. How much is the unrealized gain to be presented in the income statement for the year 2019 ? 0
2. How much is the unrealized gain to be presented in the statement of other comprehensive income for
the year 2019 ? 172,000 unrealized loss
3. How much is the cumulative OCI to be presented in the Balance sheet as of December 31, 2019 ?
172,000 unrealized loss
4. How much is the unrealized gain to be presented in the statement of other comprehensive income for
the year 2020 ? 50,000 unrealized gain
5. How much is the cumulative OCI to be presented in the Balance sheet as of December 31, 2020 ?
122,000 unrealized loss