Reference no: EM132979103
Questions -
Q1. Carmela Company acquired a financial instrument for P4,000,000 on March 31, 2021. The financial instrument is classified as financial asset at fair value through other comprehensive income. The direct acquisition costs incurred amounted to P700,000. On December 31, 2021, the fair value of the instrument was P5,500,000. What gain would be recognized in profit or loss for the year ended December 31, 2021?
a. 200,000
b. 900,000
c. 800,000
c. 0
Q2. On January 1, 2021, Dell Company paid P18,000,000 for 50,000 ordinary shares of Case Company which represent a 25% interest in the net assets of Case. The acquisition cost is equal to the book value of the net assets acquired. Dell has the ability to exercise significant influence over Case. Dell received a dividend of P35 per share from Case in 2021. Case reported net income of P9,600,000 for the year ended December 31, 2021. In the December 31, 2021 statement of financial position, what should be reported as investment in Case Company?
a. 22,150,000
b. 20,400,000
c. 18,650,000
d. 18,000,000
Q3. Green Company owns 30% of the outstanding ordinary shares and 100% of the outstanding noncumulative nonvoting preference shares of Axel Company. In 2021, Axel declared dividend of P1,000,000 on its ordinary share capital and P600,000 on its preference share capital. What amount of dividend revenue should Green report in its income statement for the year ended December 31, 2021?
a. 600,000
b. 0
c. 900,000
d. 300,000
Q4. On January 1, 2021, Tagbilaran Company purchased bonds with face value of P2,000,000. The bonds are dated January 1, 2021 and mature on January 1, 2025. The interest on the bonds is 10% payable semiannually every June 30 and December 31. The prevailing market rate of interest on the bonds is 12%. The present value of 1 at 6% for 8 periods is .63, and the present value of an ordinary annuity of 1 at 6% for 8 periods is 6.21.
I. What is the present value of the bonds on January 1, 2021?
a. 1,881,000
b. 1,360,000
c. 1,888,000
d. 1,480,000
II. What is the present value of the bonds on January 1, 2022?
a. 1,935,527
b. 1,906,720
c. 1,893,860
d. 1,907,492
Q5. Tenedero Company purchased 15,000 shares (10% interest) of ABC Corporation for P2,000,000 on January 1, 2020. During the year, ABC reported a net income of P5,000,000 and paid a P3,000,000 dividend to its shareholders. Tenedero Company designates the financial asset at FVTOCI.
On January 1, 2021, Tenedero Company acquired an additional 10% interest in ABC Corporation for P2,100,000. At this point, Tenedero Company gained significant influence over the operations of ABC Corporation. For 2021, ABC Corporation reported a net income of P6,000,000 and declared and paid a P3,000,000 dividend. The fair value of ABC Corporation shares on December 31, 2020, and 2021, respectively, is P154 and 162
a. What is the carrying amount of the investment on December 31, 2020?
b. How much is the total income to be recognized in profit or loss for 2020?
c. What is the carrying amount of the investment on December 31, 2021?
d. How much is the total income to be recognized in profit or loss for 2021?