Saint Ferdinand College

College of Accountancy
FAR Review

Name:___________________________________________________________________ Score:________________
Course and Year:__________________________________________________________ Date:_________________

Assignment 3:

Problem 1

In June 2023, SANDIGING Company, transferred the amount of P59,300 to SB Bank current account of DBS Securities.
This pertains to purchase of 5,000 shares of William Lines to be held as trading securities. Based on quoted price as of
December 31, 2023, the market value per share is P8.20.

Also in 2023, SANDIGING Company purchased several non-trading equity securities. The company has elected
irrevocably to present changes in fair value in other comprehensive income. At December 31, 2023, the company had the
investments in equity securities listed below. None was held at the last reporting date.

No. of shares Cost Market value per share

San Miguel “A” 2,000 P150,000 P58.50
Seniority Bank 2,000 110,000 49.25
Multivit 5,000 54,600 9.10
Total 314,600

Your physical count of stock certificates disclosed that stock dividend of the following issues were not yet recorded.

Issue No. of shares

Seniority Bank 500
Multivit 200

1. What is the carrying value of the investment in William Lines on December 31, 2023? (3 points)
2. What amount of unrealized loss should be shown in the 2023 statement of comprehensive income as component of
other comprehensive income? (3 points)

Problem 2

STRAWBERRY COMPANY has the following non-trading equity securities on December 31, 2023:

Security Shares Cost Fair Value

Danica Co. ordinary shares 4,500 P220,500 P207,000
Rose Corp. ordinary shares 15,000 540,000 525,000
Asunta, Inc. preference 1,200 180,000 184,800
shares
Totals P940,500 P916,800

All of the above securities were bought in 2023. On initial recognition, Strawberry made an irrevocable election to present
such securities at fair value through other comprehensive income. In 2024, the company had the following transactions
relating to its investments:

April 1 Sold the 4,500 ordinary shares of Danica Co. for P65 per share.
May 1 Bought 2,100 ordinary shares of Rita Corp. at P75 plus broker’s fee of P5,200.

Strawberry’s portfolio of non-trading equity securities appeared as follows on December 31, 2024:
 Security Shares Cost Fair Value
Rose Corp. ordinary shares 15,000 540,000 525,000
Rita Corp. ordinary shares 2,100 157,500* 151,200
Assunta, Inc. preference 1,200 180,000 174,000
shares
Totals P877,500 P850,200

*The P5,200 broker’s fee was recorded as expense.

1. The amount of gain or loss on the sale of Danica Co. ordinary shares to be reported in the 2023 income statement of
Strawberry should be (3 points)
2. The 2,100 ordinary shares of Rita Corp. purchased on May 1, 2024, should be initially measured at (3 points)
3. Strawberry’s December 31, 2024, statement of financial position should report investments in non-trading equity
securities at (3 points)

Problem 3

DURIAN CORP. purchased 40% of Associate Company’s outstanding ordinary shares on January 2, 2023, for P270
million. The book value of Associate Company’s net assets (shareholder’s equity) at the purchase date totaled P450
million. Book values and fair values were the same for all financial statement items except for inventory and buildings, for
which fair values exceeded book valued by P12.5 million and P112.5 million, respectively All inventory on hand at the
purchase date was sold during 2023. The buildings have average remaining useful lives of 15 years.

Associate Company reported net income of P110 million for the year ended December 31, 2023, and paid cash dividends
of P40 million. The fair value of Durian’s investment in associate was P300 million at December 31, 2023.

1. Of the amount paid for the acquisition of Associate Company’s ordinary shares, how much is attributable to goodwill? (3
points)
2. What is the investment balance at December 31, 2023? (3 points)
At what amount will Durian Corp. report its investment income in its 2023 income statement? (3 points)

Problem 4

On January 1, 2023, RAMBUTAN CORP. purchased debt securities for cash of P765,540 to be held as financial assets at
amortized cost. The securities have a face value of P600,000, and they mature in 15 years. The securities carry fixed
interest of 10% that is receivable semiannually, on June 30 and December 31. The prevailing market interest rate on
these debt securities is 7% compounded semiannually.

1. The carrying value of debt securities on December 31, 2023, at amortized cost using the effective interest rate method
is (3 points)
2. The interest income to be reported for 2023 using the effective interest rate method is (3 points)