Reference no: EM132787959

San Francisco Marketing Company made investments in trading securities. An analysis of these investments on December 31, 2019 showed the following:

Securities                                                         Cost                Fair value

Manila Bottlers shares 6,000 shares          P307,500            P270,000

Baguio Inc. shares 2,250 shares                  76,500               90,000

Valenzuela Co. 12% bonds P300,000            269,500           280,600

Total                                                        P653,500           P640,600

On April 1, 2020, the company purchased as a temporary investment, P200,000 face value, 9% Philippine treasury notes for P198,500, which includes accrued interest. The notes mature on July 1, 2020 and pay interest semiannually on January 1 and July 1. The notes were sold on December 1, 2021 for P206,500, which includes accrued interest.

On July 1, 2020, the shares of Baguio were sold for P70,000. On December 31, 2020, Manila Bottlers shares were quoted at P44 per share, Valenzuela bonds were quoted at P950 per P1,000 bond.

Problem 1. The gain on sale of Philippine Treasury Notes on December 1, 2020 is

a. P500 b. P8,000 c. P5,000 d. P12,500

Problem 2. The realized loss on sale of Baguio shares on July 1, 2020 is

a. P0 b. P18,650 c. P20,000 d. P6,500

Problem 3. The interest income for the year 2020 is

a. P36,000 b. PP48,000 c. P37,500 d. P24,000

Problem 4. The carrying amount of the trading securities on December 31, 2020 is

a. P533,500 b. P577,000 c. P520,025 d. P549,000

Problem 5. The net unrealized loss that will be recognized in the 2020 profit or loss is

a. P2,800 b. P1,600 c. P15,100 d. P0