Reference no: EM132835841
Problem I - On January 1, 2018, Matatag Corporation acquired 20,000 shares of ABC Corp at P10 per share, the quoted price on this date. The entity incurred P4,000 brokerage commission on the acquisition. The investment is measured at fair value through profit or loss. The acquisition cost of P200,000 was charged to Financial Asset at FVPL.
On December 31, 2018, the quoted price was P8.00. The decline in fair value was recognized in Profit or Loss Statement as Unrealized Loss for the year ending December 31, 2018.
On January 2, 2019 half of the shares were sold at 15, and the commission paid on the sale amounted to 1,500. The net selling price was credited to Financial Asset at FVPL.
The quoted price on December 31, 2019 amounted to 12.00. No adjustment was recognized.
Required: What are the necessary adjusting journal entries?
Problem II - On January 1, 2018, Magaling Company acquired 1,000, 12%, P1000 bonds for 941,726. The bonds are classified at amortized cost. The principal matures on January 1, 2022, and interest is due annually every January 1. The effective yield is 14%.
The records show that only the acquisition cost was recognized in the investment account for the year 2018.
Required: Prepare the necessary adjusting journal entries as of December 31, 2018
Problem III - On January 1, 2018, Goal Company acquired 12% bonds with a face value of 2,000,000 for 2,131,200. The principal matures on January 1, 2021 but the interest is due annually every December 31. Goal Company incurred transaction cost of 20,000. The effective yield adjusted for the effect of the transaction cost is 9%.
The bonds are to be held under a "hold to collect and sell" business model. Information on fair values is as follows:
December 31, 2018 - 110
December 31, 2019 - 106
The records show that only the total acquisition cost including transaction cost was recognized as debit to Financial Assets at FVOCI and the annual interest payment was debited to interest expense.
Required: What are the necessary adjusting journal entries as of December 31, 2019?