INVESTMENTS
FINANCIAL ASSETS at FAIR VALUE
EXERCISES
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PROBLEM 1
The Stipend Company has the following transactions relating to its investments during 2024:
January 5: Acquired 10,000 shares of Hoax Co. for P1,000,000 paying additional P20,000
for brokerage and another P5,000 for commission.
February 14: Received dividends from Hoax Co. declared January 10, 2024 to the
stockholders of record January 31, 2024, P20,000.
Required: Prepare all the necessary entries assuming the investments are
1. Financial Assets at Fair Value through Profit or Loss
2. Investment in equity designated as at Fair Value through Other Comprehensive Income.
PROBLEM 2
The Lurid Company has the following transactions relating to its investments during 2024:
January 5: Acquired 10,000 shares of Defray Co. for P1,000,000 paying additional P20,000
for brokerage and another P5,000 for commission.
February 14: Received dividends from Defray Co. declared January 2, 2024 to the stockholder
of record January 31, 2021, P20,000.
On December 31, 2024 and 2025, the market value per share of the Defray stock is P95 and P120,
respectively.
Required: Prepare all the necessary entries assuming the investment is
1. Financial Assets at Fair Value through profit or loss
2. Investment in equity designated as at Fair Value through Other Comprehensive Income
PROBLEM 3
On January 1, 2024, Haphazard Corp. owns 15,000 ordinary shares representing 15% of the shares
outstanding of Luke Corporation. The ordinary shares were acquired on November 12, 2023 at a cost of
P1,500,000 and have a fair value of P1,600,000 on December 31, 2020. On January 2, 2024, Haphazard
sold half its investment for P100 per share incurring a brokerage and commission expense of P20,000.
Based on the above data, answer the following:
Case No. 1: Assume that the above securities are classified as fair value through profit or loss.
1. Unrealized gain (or loss) on December 31, 2023 to be presented in the statement of financial
position.
2. Gain (or loss) on sale on January 2, 2023 to be recognized in the profit or loss.
Case No. 2: Assume that the above securities are designated as at fair value through other
comprehensive income.
3. Unrealized gain (or loss) on December 31, 2023 to be presented in the statement of financial
position.
4. Gain or loss on sale on January 2, 2024 to be recognized directly in the retained earnings.
5. Prepare all the necessary entries for the years 2023 and 2024 (for both FVTPL and FVOCI).
PROBLEM 4
On December 1, 2024, Synthetic Corp. owns 15,000 ordinary shares representing 15% of the shares
outstanding of Prowess Corporation. During the same date, Prowess declared P2 per share dividends on
ordinary shares to the shareholders of record on December 15 payable on December 31.
Questions:
1. How much is the dividend income to be recognized in 2024?
2. Prepare all the necessary entries at the
a. Date of Declaration
b. Date of Record
c. Date of Payment
PROBLEM 5
Doused Company owns 15% of the outstanding ordinary shares of Albeit Corp. On November 1, 2024.
Albeit declared its inventory as property dividends. Data relating to the fair values of the inventory
follow:
Date Total Fair Values of
property dividends
November 1, 2024 P250,000
December 31, 2024 P450,000
February 15, 2025 P410,000
Based on the above data, answer the following:
1. How much is the dividend income to be recognized in 2024?
2. Prepare all the necessary entries on
a. November 1, 2024
b. December 31, 2024
c. February 15, 2025
PROBLEM 6
On June 15, 2024, Mars Company owns 10,000 shares with a cost of P700,000 of Moon Company’s
stocks. During the same period, Moon Company issued stock rights to existing shareholders. Mars
received 10,000 stock rights entitling him to purchase 5,000 new shares at P80. The ordinary share was
trading ex-rights at P80 a share and the rights had a market value of P20 per right.
On July 15, 2024, Mars exercise all the stock rights. The share is quoted right-on at P90.
Based on the above data, answer the following:
1. Assuming that the above securities are FVTPL, the stock rights should be initially recognized at?
2. Assuming that the above securities are FVTOCI, the stock rights should be initially recognized at?
3. Assuming that the above securities are FVTPL, the cost of investment acquired through the
exercise of stock rights should be?
4. Assuming that the above securities are FVTOCI, the cost of investment acquired through
exercise of stock rights should be?
PROBLEM 7
On January 2, 2024, Jupiter Company purchased 10,000 shares of P200 par value ordinary shares at
P240 per share of Saturn Company. On March 2, 2024, Saturn Company issued stock rights to its
shareholders. The holder needs five rights to purchase one share of ordinary stock at par. The market
value of the stock on that date was P320 per share. There was no quoted price for the rights.
Based on the above data, answer the following:
1. Compute for the theoretical value of the rights assuming, the stock is selling right-on.
2. Compute for the theoretical value of the rights assuming the stock is selling ex-right.
(1) Shares are selling right-on
(2) Shares are selling ex-right
