Reference no: EM133039784
Questions -
Q1. When settlement date accounting is applied, how should an entity account for any change in the fair value of the asset to be received during the period between the trade date and the settlement date?
a. The change in value is recognized for all financial assets.
b. The change in value is not recognized for all financial assets.
c. The change in value is not recognized for investments in equity instruments measured at fair value through other comprehensive income.
d. In the same way as it accounts for the acquired asset.
Use the following information for the next two questions.
On December 28, 2020 (trade date), Francis Corp. enters into a contract to sell an equity security classified as FVTOCI for its current fair value of P303,000. The asset was acquired a year ago and its cost was P300,000. On December 31, 2020 (financial year-end), the fair value of the asset is P303,600. On January 5, 2021 (settlement date), the asset's fair value is P303,900.
Q2. If Francis uses the trade date method to account for regular way sales of its securities, the net amount to be recognized in 2020 comprehensive income is?
Q3. If Francis uses the settlement date method to account for regular way sales of its securities, the net amount to be recognized in 2021 comprehensive income is?
Q4. Marcus Company made the following transactions in the ordinary shares of Cato Company designated as a financial asset at fair value through profit or loss: July 16, 2018 - Purchased 10,000 shares at P45 per share.
June 28, 2019 - Sold 2,000 shares for P51 per share.
May 18, 2020 - Sold 2,500 shares for P33 per share.
The end-of-year market prices for the shares were as follows:
December 31, 2018 - P47 per share
December 31, 2019 - P39 per share
December 31, 2020 - P31 per share
How much should be recognized in 2020 profit or loss as a result of the fair value changes?
Q5. On Feb. 2, 2019, I AM DETERMINED CO. purchased 10,000 shares of CPA CO. at P56 plus broker's commission of P4 per share. The investment is FVTOCI. During 2018 and 2020, the following events occurred regarding the investment:
12/15/19 CPA CO. declares and pays a P2.20 per share dividend
12/31/19 The market price of CPA CO. stock is P52 per share at year-end
12/01/20 CPA CO. declares and pays a dividend of P2 per share
12/31/20 The market price of CPA CO. stock is P55 per share at year-end
The net unrealized loss at December 31, 2020 in accumulated OCI in shareholders' equity is?
Q6. On December 31, 2018, Zenobia Co. purchased equity securities as classified as FVTOCI. Pertinent data are as follows:
Fair value
Cost 12/31/19 12/31/20
C Company P 900,000 P 880,000 P780,000
P Company 1,100,000 1,120,000 1,240,000
A Company 2,000,000 1,920,000 1,720,000
On December 31, 2020, Zenobia transferred its investment in security P from FVTOCI to FVTPL. How much should be recognized as component of equity as of December 31, 2020 related to these securities?
Use the following information for the next two questions.
On December 28, 2020, Anne Company commits itself to purchase a financial asset to be classified as FVTPL for P800,000, its fair value on commitment (trade) date. This security has a fair value of P801,000 and P802,500 on December 31, 2020 (Anne's financial year-end), and January 5, 2021 (settlement date), respectively.
Q7. If Anne applies the trade date accounting method to account for regular way purchases of its securities, how much gain should be recognized on January 5, 2021?
Q8. If Anne applies the settlement date accounting method to account for regular way purchases of its securities, how much gain should be recognized on January 5, 2021?
Q9. On December 28, 2020, Bakeks Company commits itself to purchase equity securities to be classified as held for trading for P1,000,000, its fair value on commitment (trade) date. These securities have a fair value of P1,002,000 and P1,005,000 on December 31, 2020 (Bakeks' financial year-end), and January 5, 2021 (settlement date), respectively. If Bakeks applies the settlement date accounting method to account for regular-way purchases, how much should be recognized in its 2020 profit or loss related to these securities?
Q10. On December 28, 2020 (trade date), Charming Corp. enters into a contract to sell an equity security classified as FA@FVTOCI for its current fair value of P505,000. The asset was acquired a year ago and its cost was P500,000. On December 31, 2020 (financial year-end), the fair value of the asset is P506,000. On January 5, 2021 (settlement date), the asset's fair value is P507,500. If Charming uses the trade date method to account for regular-way sales of its securities, how much should be reported as reclassification adjustment in its 2020 financial statements?