Reference no: EM133039041

Questions -

Q1. On January 1, 2019, Lallo Company purchased 15% of Vintar Company's ordinary shares for P20,000,000.

The following data concerning Vintar Company are available:

2019 2020

Net income P6,000,000 P7,000,000

Cash dividend paid None 15,000,000

In its income statement for the year ended December 31, 2020, how much should Lallo report as income from this investment?

Q2. Lasam Company received dividends from its investments in ordinary shares during the current period as follows:

a. A share dividend of 20,000 shares from A Company when the market price of A's shares was P30 per share.

b. A cash dividend of P2,000,000 from B Company in which Lasam owns a 20% interest.

c. A cash dividend of P1,500,000 from C Company in which Lasam owns a 10% interest.

d. 10,000 ordinary shares of D Company in lieu of cash dividend of P20 per share. The market price of D Company's shares was P180. Lasam holds originally 100,000 ordinary shares of D Company. Lasam owns 5% interest in D Company.

e. A liquidating dividend of P2,000,000 from E Company. Lasam owns a 5% interest in E Company.

f. A dividend in kind of one ordinary share of X Company for every 5 ordinary shares of F Company held. Lasam holds 200,000 F Company shares which have a market price of P50 per share.

The market price of X Company's ordinary share is P30 per share. What amount of dividend income should Lasam report in its current period income statement?

Use the following information for the next three questions.

Pamplona Company owns 1,000,000 shares of Penablanca Company's 5,000,000 shares of P50 par, 10% cumulative, nonparticipating preference shares. During 2020 Penablanca declared and paid dividends of P40,000,000 on preference shares. No dividends had been declared or paid during 2019.

Q3. Dividends are recognized in profit or loss only when:

a. The entity's right to receive payment of the dividend is established.

b. It is probable that the economic benefits associated with the dividend will flow to the entity.

c. The amount of the dividend can be measured reliably.

d. All of the above.

Q4. What amount should Pamplona report as dividend income in its 2020 income statement?

Q5. How should Pamplona report the 2019 dividend in arrears that was received in 2020?

a. As a reduction in cumulative preferred dividends receivable.

b. As a retroactive change of the prior period financial statements.

c. Include, net of income taxes, after 2020 income from continuing operations.

d. Include in 2020 income from continuing operations.

Q6. On January 2, 2020, Theodora Company purchased 40,000 shares of Byzantine, Inc. stock at P100 per share. Brokerage fees amounted to P120,000. A P5 dividend per share of Byzantine, Inc. shares had been declared on December 15, 2019, to be paid on March 31, 2020 to shareholders of record on January 31, 2020. The shares are designated as FVTOCI. On December 31, 2020 the investment has a fair value of P4,200,000. How much should be recognized in the 2020 other comprehensive income related to these securities?

Q7. On January 2, 2020, Gamu Company purchased as a long term investment 10,000 ordinary shares of Ilagan Corporation for P70 per share, which represents a 1% interest. On July 1, Ilagan Corporation declared its annual dividend on its ordinary shares of P5 per share payable on August 1 to shareholder's of record at July 25, 2020. On July 20, 2020 Gamu needed additional cash for operations and sold all 10,000 shares Ilagan for P100 per share. For the year ended December 31, 2020, Gamu should report on its income statement a gain on disposal of 8 What is the principle for recognition of a financial asset in PFRS 9?

a. A financial asset is recognized when, and only when, it is probable that future economic benefits will flow to the entity and the cost or value of the instrument can be measured reliably.

b. A financial asset is recognized when, and only when, the entity obtains control of the instrument and has the ability to dispose of the financial asset independent of the actions of others.

c. A financial asset is recognized when, and only when, the entity obtains the risks and rewards of ownership of the financial asset and has the ability to dispose of the financial asset.

d. A financial asset is recognized when, and only when, the entity becomes a party to the contractual provisions of the instrument.

Q9. A regular way purchase or sale is a purchase or sale of a financial asset under a contract whose terms require delivery of the asset within the time frame established generally by regulation or convention in the marketplace concerned. Which statement is incorrect regarding regular way purchase or sale of a financial asset?

a. A regular way purchase or sale of financial assets is recognized and derecognized using either trade date or settlement date accounting. The choice of method is an accounting policy.

b. Under trade date accounting, the financial asset is recognized and derecognized on the date the entity commits to the purchase or sale.

c. Under settlement date accounting, the financial asset is recognized and derecognized on the date it is delivered.

d. For purposes of regular way accounting, assets held for trading and designated at fair value through profit or loss form one category.

Q10. On June 29, 2020, an entity commits itself to purchase a financial asset to be classified as FVTPL for P100,000, its fair value on commitment (trade) date. This financial asset has a fair value of P101,000 and P101,500 on June 30, 2020 (the entity's financial yearend), and July 2, 2020 (settlement date), respectively.

In the marketplace concerned, the time frame for delivery of the asset or payment of liability is transaction date plus 3 days ("T+3"). Which statement is correct?

a. The transaction is not a regular way purchase.

b. If the entity applies the trade date accounting method, the entity will recognize a gain of P1,500 on July 2, 2020.

c. If the entity applies the settlement date accounting method, the entity will recognize the financial asset at P100,000 on July 2, 2020.

d. If the entity applies the settlement date accounting method, the entity will recognize a gain of P500 on July 2, 2020.