Reference no: EM133190124
Problem 1 - Bergs Co. purchased the following equity securities on January 1, 2021 for a total amount of P360,000.
Nowl Co. preference shares P200,000
Knowie Co. ordinary shares 160,000
The shares did not qualify for recognition as held for trading, thus they were classified as investment in equity securities measured at fair value through other comprehensive income.
On December 31, 2021, the portfolio of Bergs Co. comprised the following: Nowl Co. preference shares- P240,000; Knowie Co. ordinary shares- P60,000
On December 31, 2022, the portfolio of Bergs Co. comprised the following: Nowl Co. preference shares- P220,000;Knowie Co. ordinary shares- P180,000
On February 2, 2023, all of the Nowl Co. preference shares were sold for P160,000 net of transaction costs.
How much is the unrealized gain (loss) recognized in other comprehensive income on December 31, 2021?
a. P(60,000)
b. P100,000
c. P60,000
d. P0
Question 2 - On January 1 of the current year, Bergs Company acquired 10,000 shares of Fair value through other comprehensive income securities of Knowie Company at P200,000 plus brokerage expense of P10,000. On March 1, of the current year, Knowie Company ordinary share was split on a 5-for-2 basis. On October 1, Knowie Company made a special assessment of P1.60 per share on all ordinary shareholders. Bergs Company accordingly paid the assessment. The fair value amounted to P15 per share.
The necessary entries on October 1, will include a
a. Debit to Financial Asset at FVOCI, P210,000
b. Credit to Cash, P150,000
c. Debit to Financial Asset at FVOCI, P40,000
d. Credit to Unrealized gain, P25,000
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