PROBLEM#1

Supporting records of Mayon Corporation tradig securities portfolio show the following debt & equity securities:

SECURITY COST FAIRVALUE

200 ordinary shares Concave Co. P127,250 P121,500
P400,0000 Tipo Co 7% bonds 398,250 387,000
P600,000 Turkey Co. 71/2 bonds 603,750 609,450
Totals P1,129250 P1,117,950

Interest dates on bonds are January 1 and July 1. Mayon Corporation uses the income approavh to record the
purchases of bonds with accrued interest. During 2014 and 2015, Mayon completed the following transactions
related to trading securities:
2014
Jan-01 Received semiannual interest on bonds. Assume that the appropriate adjusting entry was made
on December 31, 2013
Apr-01 Sold P300,000 of 7 1/2% Turkey bonds at 102 plus accrued interest. Brokerage Fees were P1,000
May-21 Received dividends of P1.25 per share on the Concave ordinary share capital. The dividend had not
been recorded on the declaration date
Jul-01 Received semi annual interest on bonds and then sold the 7% Tipo bonds at 97 1/2. Brokerage Fees
were P1,250
Aug-15 Purchased 100 shares of Newman Inc. ordinary share capital at P580 per share plus brokerage fees of
P250
Nov-01 Purchased P250,000 of 8% Toll Co. bonds at 101 plus accrued interest. Brokerage Fees were P625. Interest
dates are January 1 and July1
Dec-31 Market prices of securities were:
Concave ordinary shares P550
7 1/2 Turkey bonds 101 3/4
8% Toll bonds 101
Newman ordinary shares P583.75

2015
Jan-02 Recorded the recipt of semiannual interest on bonds
Feb-01 sold the remaining 7 1/2% Turkey bonds at 101 plus accrued interest. Brokerage Fees were P1,500

REQUIREMENTS
1. What is the total interest and dividend income for 2014?
2. What amount should be reported as gain on sale of trading securities in 2014?
3. What amount of unrealized gain or loss should be reported in the invome statement for the year ended
December 31, 2014?
4. What is the carrying amount of the remaining trading securities on December 31, 2014?
5. What is the loss on the sale of the remaining Turkey bonds on February 1, 2015?
PROBLEM#2
On January 2, 2014, Plum Company purchased as a financial asset to be held at amortized
a debt instrument with a five year term for its fair value
of P1,386,275. The instrument has a principal amount of P1,500,000 and carries fixed interest
of 8% annually. The effective interest is determined to be 10%.

During 2016, the issuer of the instrument is in financial difficulties and it becomes probable
that the issuer will be put into administration by a receiver. The fair value of the instrument
is estimated to be P750,000 at the end of 2016, calculated by discounting the expected future
cash flows at 10%. No cash flows are received during 2017. At the end of 2017, the issuer
is released from administration and Plum receives a letter from the receiver stating that the
issuer will be able to meet its remaining obligations, including interest and repayment
of principal.

REQUIREMENTS
1. What is the book value of the investment at the end of 2015?
2. What amount of impairment loss should be recognized in 2016?
3. How much interest income should be recognized in 2017?
4. What amount of impairment loss reversal should be recognized in 2017?
5. Howmuch discount amortization should be recognized in 2018?
1. The purchase price of the bonds on June 1, 2005 is
2. The interest income for the year 2005 is
3. The carrying value of the investment in bonds as of December 31, 2005
4. The interest income for the year 2006 is
5. The gain on sale of investment in bonds on November 1, 2006 is