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8/12/2019 4) Audit of Investments
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Audit of Investments
L. R. Cabarles
8/12/2019 4) Audit of Investments
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Relevant Standards
Financial Instruments Standards PAS 32Presentation
PAS 39Recognition and Measurement
PFRS 7Disclosures
PFRS 9Financial Instruments
Other Standard
PAS 28Investments in Associates and
Joint Ventures
(Effective 01.01.13)
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PAS 39: Classification offinancial assets
Financial assets at fair valuethrough profit or loss(FA@FVTPL)
1) Held for trading
2) Designated
Held-to-maturity (HTM)
Loans and receivables (L&R)
Available-for-sale (AFS)
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PAS 39: Classification Based onCharacteristics of Instrument
Category Derivative?
Type ofInstrument Quoted?
FA @
FVTPL
YES or NO Debt or
equity
YES or NO
AFS NO Debt orequity
YES or NO
HTM NO Debt YES
L&R NO Debt NO
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PAS 39: Classification Based onIntention
Intention (Purpose) Classification
To be sold immediately Held for Trading
To be held to maturity HTM/L&R
To be held indefinitely AFS
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PAS 39: Financial AssetsMeasurement Summary
Category Initial Sub-sequent
Change inFV
FA @ FVTPL FV FV P/L
AFS FV + TC FV/Cost/AC OCI
(Equity)
HTM FV + TC AC Ignore
L&R FV + TC AC Ignore
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PFRS 9: Classification offinancial assets
Financial assets at fair valuethrough profit or loss(FA@FVTPL)
Financial assets at amortizedcost
Financial assets at fair valuethrough other comprehensiveincome (FA@FVTOCI)
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PFRS 9: Classification Based onCharacteristics of Instrument
Category Derivative?
Type ofInstrument
FA @ FVTPL YES or NO Debt or equity
FA @ AC NO Debt
FA @
FVTOCI
NO Equity
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PFRS 9: Financial AssetsMeasurement Summary
Category Initial Sub-sequent
Change inFV
FA @ FVTPL FV FV P/L
FA @ AC FV + TC AC Ignore
FA @
FVTOCI
FV + TC FV OCI
(Equity)
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PFRS 9:Classification of
Financial AssetsSummary
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Problem No. 1
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Requirement A (1)
FA@FVTPL
FA@FVTPL P874,164Commission expense 50,000
Cash P924,164
Available-for-saleAFS securities P924,164
Cash P924,164
Held-to-maturityHTM securities P924,164
Cash P924,164
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Requirement A (2)
FA@FVTPL
Interest receivable (P1M x .08) P80,000
Interest income P80,000
Available-for-sale
Same entry
Held-to-maturity
Same entry
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Requirement A (3)
FA@FVTPL
No entry
Available-for-sale
AFS securities P ?
Interest income P ?
Held-to-maturity
HTM securities P ?
Interest income P ?
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Effective interest rate (10%)
PV of Principal
(P1M x 0.6209) P620,900
PV of Interest
(P1M x .08 x 3.7908) 303,264
CA of financial asset P924,164
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Original Amortization Schedule
Date EI(10%)
NI(8%)
Disc.Amort.
A.C.
1/1/12 924,164
12/31/12 92,416 80,000 12,416 936,580
12/31/13 93,658 80,000 13,658 950,238
12/31/14 95,024 80,000 15,024 965,262
12/31/15 96,526 80,000 16,526 981,788
12/31/16 98,212 80,000 18,212 1,000,000
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Requirement A (3)
FA@FVTPL
No entry
Available-for-sale
AFS securities P12,416
Interest income P12,416
Held-to-maturity
HTM securities P12,416Interest income P12,416
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Requirement A (4)
FA@FVTPL
FV adj. (P980,000 P874,164) = P105,836
FA@FVTPL P105,836FV adj. gainFA@FVTPL (P/L) P105,836
Available-for-saleFV adj. (P980,000 P936,580) = P43,420
AFS securities P 43,420
FV adj. G/L
AFS (OCI) P 43,420
Held-to-maturityNo entry
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Requirement B
CategorySubsequentMeasuremen
t
CA,12/31/12
FA@FVTPL FV P980,000
AFS FV/Cost/AC P980,000
HTM AC P936,580
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Problem No. 2
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Sales proceeds P540,000CA of investment(P1.8M x 24/72) ( 600,000)
Loss on sale (P 60,000)
Requirement # 1-A
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Gain (Loss) on sale, 8/15
Total proceeds P1,176,000Dividends sold (4,800 x P30) ( 144,000)
Net proceeds 1,032,000CA of investment
(P1.32M x 48/66) ( 960,000)
P 72,000
Gain (Loss) on sale, 9/1
Sales proceeds P 276,000
CA of investment(P1.32M x 12/66) ( 240,000)
P 36,000
Total gain P 108,000
Requirement # 1-B
Total amount paid P1,440,000
Purchased dividend
(6,000 x P20) ( 120,000)Initial CA of 4WARD P1,320,000
No. of shares held (6,000 x 1.1) 6,600
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Declared, 1/2 P -Declared, 5/2 -Declared, 8/1
(6,600 x P30) 198,000
Dividend income P198,000
Requirement # 1-C
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FV of 4WARD shares
[(6,000 x 1.1)-4,800-1,200]
= 600 x P210 P 126,000FV of BACK shares
(7,200 2,400)
= 4,800 x P240 1,152,000Total fair value P1,278,000
Requirement # 1-D
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Requirement # 2
1/10
Dividend income P120,000Trading securities (P20 x 6,000) P120,000
2/20
No AJE
3/01
Loss on sale of TS P 60,000
Trading securities P 60,000
5/21
Retained earnings P132,000
Trading securities P132,000
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Requirement # 2
8/15
Trading securities P216,000Dividend income P144,000
Gain on sale of TS 72,000
9/01Trading securities P 36,000
Gain on sale of TS P 36,000
12/31, FV Adj.
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Trading securities
FV Adjustment, 12/31/12
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Trading securities1/10 1,320,000
FV Adjustment, 12/31/12
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Trading securities1/10 1,320,000
2/20 1,800,000
FV Adjustment, 12/31/12
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Trading securities1/10 1,320,000 600,000 3/1
2/20 1,800,000
FV Adjustment, 12/31/12
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Trading securities1/10 1,320,000 600,000 3/1
2/20 1,800,000 960,000 8/15
FV Adjustment, 12/31/12
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Trading securities1/10 1,320,000 600,000 3/1
2/20 1,800,000 960,000 8/15
240,000 9/1
FV Adjustment, 12/31/12
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Trading securities1/10 1,320,000 600,000 3/1
2/20 1,800,000 960,000 8/15
240,000 9/1
FV Adjustment, 12/31/12
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Trading securities1/10 1,320,000 600,000 3/1
2/20 1,800,000 960,000 8/15
240,000 9/1
Balance 1,320,000
FV Adjustment, 12/31/12
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Trading securities1/10 1,320,000 600,000 3/1
2/20 1,800,000 960,000 8/15
240,000 9/1
Balance 1,320,000
FV 1,278,000
FV Adjustment, 12/31/12
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Trading securities1/10 1,320,000 600,000 3/1
2/20 1,800,000 960,000 8/15
240,000 9/1
Balance 1,320,000 ? FV adj.
FV 1,278,000
FV Adjustment, 12/31/12
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Trading securities1/10 1,320,000 600,000 3/1
2/20 1,800,000 960,000 8/15
240,000 9/1
Balance 1,320,000 42,000 FV adj.
FV 1,278,000
FV Adjustment, 12/31/12
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Requirement # 2
8/15
Trading securities P216,000Dividend income P144,000
Gain on sale of TS 72,000
9/01Trading securities P 36,000
Gain on sale of TS P 36,000
12/31, FV Adj.FV adjustment loss (P/L) P 42,000
Trading securities P 42,000
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Problem No. 3
Req i ement # 1 A
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Gain (Loss) on sale, 5/20
Proceeds, net P125,000Cost of investment(P390,000 x 5/15) ( 130,000)
( 5,000)
Gain (Loss) on sale, 12/10
Total proceeds P 120,000
Dividend sold (2,000 x P50 x 20%) ( 20,000)
Proceeds, net 100,000
Cost of investment(P390,000 x 2/15) ( 52,000)
48,000
Dividend income 150,000
Net amount in P/L P 193,000
Requirement # 1-A
Dividend income 2012:
Share div., 3/15 P -Cash div., 11/01 (10,000 x P5) 50,000
Cash div., 12/01 (10,000 x P50 x .2) 100,000
Total P150,000
Requirement # 1B
CA, 12/31/12 (FV)
(8,000 x P13.75) P110,000
Requirement # 2 A
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Gain (Loss) on sale, 5/20
Proceeds, net P125,000Cost of investment(P390,000 x 5/15) ( 130,000)
( 5,000)
Gain (Loss) on sale, 12/10
Total proceeds P 120,000
Dividend sold (2,000 x P50 x 20%) ( 20,000)
Proceeds, net 100,000
Cost of investment(P390,000 x 2/15) ( 52,000)
48,000
Dividend income 150,000
Net amount in P/L P 193,000
Requirement # 2-A
Requirement # 2 A
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Amount in P/L 2012:
Dividend income P 150,000
Requirement # 2-A
Requirement # 2B
CA, 12/31/12 (FV)
(8,000 x P13.75) P110,000
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Problem No. 5
Date Shares Unit Cost Total cost
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o o o
1/2/10 30,000 @35 1,050,000
7/2/11 90,000 @60 5,400,000
3/2/12 30,000 @70 2,100,000
AJE 1
Dividend income P120,000Retained earnings P120,000
Date Shares Unit Cost Total cost
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1/2/10 30,000 @35 1,050,000
7/2/11 90,000 @60 5,400,000
3/2/12 30,000 @70 2,100,000
P.D.
Date Shares Unit Cost Total cost
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1/2/10 30,000 @35 1,050,000
7/2/11 90,000 @60 5,400,000
3/2/12 30,000 @70 2,100,000
P.D. ( 30,000)
Date Shares Unit Cost Total cost
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1/2/10 30,000 @35 1,050,000
7/2/11 90,000 @60 5,400,000
3/2/12 30,000 @70 2,100,000
P.D. . ( 30,000)
30,000 2,070,000
AJE 2
Dividend income P30,000Investment in Silver Tab P30,000
Date Shares Unit Cost Total cost
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1/2/10 30,000 @35 1,050,000
7/2/11 90,000 @60 5,400,000
3/2/12 30,000 @70 2,100,000
P.D. . ( 30,000)
30,000 @69 2,070,000
Computation of gain (loss):
Sales proceeds (50T x P40) P2,000,000Less cost of investment sold ?
Date Shares Unit Cost Total cost
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1/2/10 30,000 @35 1,050,000
7/15/12 (30,000)
7/2/11 90,000 @60 5,400,000
3/2/12 30,000 @70 2,100,000
P.D. . ( 30,000)
30,000 @69 2,070,000
Date Shares Unit Cost Total cost
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1/2/10 30,000 @35 1,050,000
7/15/12 (30,000) @35
7/2/11 90,000 @60 5,400,000
3/2/12 30,000 @70 2,100,000
P.D. . ( 30,000)
30,000 @69 2,070,000
Date Shares Unit Cost Total cost
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1/2/10 30,000 @35 1,050,000
7/15/12 (30,000) @35 (1,050,000)
7/2/11 90,000 @60 5,400,000
3/2/12 30,000 @70 2,100,000
P.D. . ( 30,000)
30,000 @69 2,070,000
Date Shares Unit Cost Total cost
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1/2/10 30,000 @35 1,050,000
7/15/12 (30,000) @35 (1,050,000)
7/2/11 90,000 @60 5,400,0007/15/12 (20,000)
3/2/12 30,000 @70 2,100,000
P.D. . ( 30,000)
30,000 @69 2,070,000
Date Shares Unit Cost Total cost
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1/2/10 30,000 @35 1,050,000
7/15/12 (30,000) @35 (1,050,000)
7/2/11 90,000 @60 5,400,0007/15/12 (20,000) @60
3/2/12 30,000 @70 2,100,000
P.D. . ( 30,000)
30,000 @69 2,070,000
Date Shares Unit Cost Total cost
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1/2/10 30,000 @35 1,050,000
7/15/12 (30,000) @35 (1,050,000)
7/2/11 90,000 @60 5,400,0007/15/12 (20,000) @60 (1,200,000)
3/2/12 30,000 @70 2,100,000
P.D. . ( 30,000)
30,000 @69 2,070,000
Computation of gain (loss):
Sales proceeds (50T x P40) P2,000,000
Less cost of investment sold:
From 2010 P1,050,000
From 2011 1,200,000 2,250,000
Loss on sale of investment (P 250,000)
AJE 3
Loss on sale P250,000
Investment in Silver Tab P250,000
Date Shares Unit Cost Total cost
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1/2/10 30,000 @35 1,050,000
7/15/12 (30,000) @35 (1,050,000)
7/2/11 90,000 @60 5,400,0007/15/12 (20,000) @60 (1,200,000)
4,200,000
3/2/12 30,000 @70 2,100,000
P.D. . ( 30,000)
30,000 @69 2,070,000
Date Shares Unit Cost Total cost
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1/2/10 30,000 @35 1,050,000
7/15/12 (30,000) @35 (1,050,000)
7/2/11 90,000 @60 5,400,0007/15/12 (20,000) @60 (1,200,000)
70,000 4,200,000
3/2/12 30,000 @70 2,100,000
P.D. . ( 30,000)
30,000 @69 2,070,000
Date Shares Unit Cost Total cost
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58/178
1/2/10 30,000 @35 1,050,000
7/15/12 (30,000) @35 (1,050,000)
7/2/11 90,000 @60 5,400,0007/15/12 (20,000) @60 (1,200,000)
70,000 @60 4,200,000
3/2/12 30,000 @70 2,100,000
P.D. . ( 30,000)
30,000 @69 2,070,000
AJE 4
Investment in Red Tab P20,000Dividend income P20,000
Date Shares Unit Cost Total cost
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1/2/10 30,000 @35 1,050,000
7/15/12 (30,000) @35 (1,050,000)
7/2/11 90,000 @60 5,400,0007/15/12 (20,000) @60 (1,200,000)
70,000 @60 4,200,000
12/20/12
3/2/12 30,000 @70 2,100,000
P.D. . ( 30,000)
30,000 @69 2,070,000
AJE 5Dividend income P100,000
Investment in Silver Tab P100,000
Date Shares Unit Cost Total cost
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1/2/10 30,000 @35 1,050,000
7/15/12 (30,000) @35 (1,050,000)
7/2/11 90,000 @60 5,400,0007/15/12 (20,000) @60 (1,200,000)
70,000 @60 4,200,000
12/20/12 . ( 70,000)
3/2/12 30,000 @70 2,100,000
P.D. . ( 30,000)
30,000 @69 2,070,000
Date Shares Unit Cost Total cost
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1/2/10 30,000 @35 1,050,000
7/15/12 (30,000) @35 (1,050,000)
7/2/11 90,000 @60 5,400,0007/15/12 (20,000) @60 (1,200,000)
70,000 @60 4,200,000
12/20/12 . ( 70,000)
3/2/12 30,000 @70 2,100,000
P.D. . ( 30,000)
30,000 @69 2,070,000
12/20/12
Date Shares Unit Cost Total cost
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1/2/10 30,000 @35 1,050,000
7/15/12 (30,000) @35 (1,050,000)
7/2/11 90,000 @60 5,400,0007/15/12 (20,000) @60 (1,200,000)
70,000 @60 4,200,000
12/20/12 . ( 70,000)
3/2/12 30,000 @70 2,100,000
P.D. . ( 30,000)
30,000 @69 2,070,000
12/20/12 . ( 30,000)
Date Shares Unit Cost Total cost
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1/2/10 30,000 @35 1,050,000
7/15/12 (30,000) @35 (1,050,000)
7/2/11 90,000 @60 5,400,0007/15/12 (20,000) @60 (1,200,000)
70,000 @60 4,200,000
12/20/12 . ( 70,000)
70,000 4,130,000
3/2/12 30,000 @70 2,100,000
P.D. . ( 30,000)
30,000 @69 2,070,000
12/20/12 . ( 30,000)
Date Shares Unit Cost Total cost
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1/2/10 30,000 @35 1,050,000
7/15/12 (30,000) @35 (1,050,000)
7/2/11 90,000 @60 5,400,0007/15/12 (20,000) @60 (1,200,000)
70,000 @60 4,200,000
12/20/12 . ( 70,000)
70,000 @59 4,130,000
3/2/12 30,000 @70 2,100,000
P.D. . ( 30,000)
30,000 @69 2,070,000
12/20/12 . ( 30,000)
Date Shares Unit Cost Total cost
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1/2/10 30,000 @35 1,050,000
7/15/12 (30,000) @35 (1,050,000)
7/2/11 90,000 @60 5,400,0007/15/12 (20,000) @60 (1,200,000)
70,000 @60 4,200,000
12/20/12 . ( 70,000)
70,000 @59 4,130,000
3/2/12 30,000 @70 2,100,000
P.D. . ( 30,000)
30,000 @69 2,070,000
12/20/12 . ( 30,000)
30,000 2,040,000
Date Shares Unit Cost Total cost
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1/2/10 30,000 @35 1,050,000
7/15/12 (30,000) @35 (1,050,000)
7/2/11 90,000 @60 5,400,0007/15/12 (20,000) @60 (1,200,000)
70,000 @60 4,200,000
12/20/12 . ( 70,000)
70,000 @59 4,130,000
3/2/12 30,000 @70 2,100,000
P.D. . ( 30,000)
30,000 @69 2,070,000
12/20/12 . ( 30,000)
30,000 @68 2,040,000
Computation of gain (loss):
Sales proceeds (10T x P90) P900,000
Less cost of investment sold(10,000 x P59) 590,000
Gain on sale of investmentP310,000
AJE 6
AR Non-trade P900,000
Investment in Silver Tab P590,000Gain on sale of investment 310,000
Date Shares Unit Cost Total cost
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1/2/10 30,000 @35 1,050,000
7/15/12 (30,000) @35 (1,050,000)
7/2/11 90,000 @60 5,400,0007/15/12 (20,000) @60 (1,200,000)
70,000 @60 4,200,000
12/20/12 . ( 70,000)
70,000 @59 4,130,00012/28/12
3/2/12 30,000 @70 2,100,000
P.D. . ( 30,000)
30,000 @69 2,070,000
12/20/12 . ( 30,000)
30,000 @69 2,040,000
Date Shares Unit Cost Total cost
/ /
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1/2/10 30,000 @35 1,050,000
7/15/12 (30,000) @35 (1,050,000)
7/2/11 90,000 @60 5,400,0007/15/12 (20,000) @60 (1,200,000)
70,000 @60 4,200,000
12/20/12 . ( 70,000)
70,000 @59 4,130,00012/28/12 (10,000)
3/2/12 30,000 @70 2,100,000
P.D. . ( 30,000)
30,000 @69 2,070,000
12/20/12 . ( 30,000)
30,000 @69 2,040,000
Date Shares Unit Cost Total cost
1/2/10 30 000 @35 1 050 000
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1/2/10 30,000 @35 1,050,000
7/15/12 (30,000) @35 (1,050,000)
7/2/11 90,000 @60 5,400,0007/15/12 (20,000) @60 (1,200,000)
70,000 @60 4,200,000
12/20/12 . ( 70,000)
70,000 @59 4,130,00012/28/12 (10,000) @59
3/2/12 30,000 @70 2,100,000
P.D. . ( 30,000)
30,000 @69 2,070,000
12/20/12 . ( 30,000)
30,000 @69 2,040,000
Date Shares Unit Cost Total cost
1/2/10 30 000 @35 1 050 000
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1/2/10 30,000 @35 1,050,000
7/15/12 (30,000) @35 (1,050,000)
7/2/11 90,000 @60 5,400,0007/15/12 (20,000) @60 (1,200,000)
70,000 @60 4,200,000
12/20/12 . ( 70,000)
70,000 @59 4,130,00012/28/12 (10,000) @59 ( 590,000)
3/2/12 30,000 @70 2,100,000
P.D. . ( 30,000)
30,000 @69 2,070,000
12/20/12 . ( 30,000)
30,000 @69 2,040,000
Date Shares Unit Cost Total cost
1/2/10 30 000 @35 1 050 000
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1/2/10 30,000 @35 1,050,000
7/15/12 (30,000) @35 (1,050,000)
7/2/11 90,000 @60 5,400,0007/15/12 (20,000) @60 (1,200,000)
70,000 @60 4,200,000
12/20/12 . ( 70,000)
70,000 @59 4,130,00012/28/12 (10,000) @59 ( 590,000)
60,000
3/2/12 30,000 @70 2,100,000
P.D. . ( 30,000)
30,000 @69 2,070,000
12/20/12 . ( 30,000)
30,000 @69 2,040,000
Date Shares Unit Cost Total cost
1/2/10 30 000 @35 1 050 000
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1/2/10 30,000 @35 1,050,000
7/15/12 (30,000) @35 (1,050,000)
7/2/11 90,000 @60 5,400,0007/15/12 (20,000) @60 (1,200,000)
70,000 @60 4,200,000
12/20/12 . ( 70,000)
70,000 @59 4,130,00012/28/12 (10,000) @59 ( 590,000)
60,000 @59
3/2/12 30,000 @70 2,100,000
P.D. . ( 30,000)
30,000 @69 2,070,000
12/20/12 . ( 30,000)
30,000 @69 2,040,000
Date Shares Unit Cost Total cost
1/2/10 30 000 @35 1 050 000
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1/2/10 30,000 @35 1,050,000
7/15/12 (30,000) @35 (1,050,000)
7/2/11 90,000 @60 5,400,0007/15/12 (20,000) @60 (1,200,000)
70,000 @60 4,200,000
12/20/12 . ( 70,000)
70,000 @59 4,130,00012/28/12 (10,000) @59 ( 590,000)
60,000 @59 3,540,000
3/2/12 30,000 @70 2,100,000
P.D. . ( 30,000)
30,000 @69 2,070,000
12/20/12 . ( 30,000)
30,000 @69 2,040,000
Date Shares Unit Cost Total cost
1/2/10 30 000 @35 1 050 000
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1/2/10 30,000 @35 1,050,000
7/15/12 (30,000) @35 (1,050,000)
7/2/11 90,000 @60 5,400,0007/15/12 (20,000) @60 (1,200,000)
70,000 @60 4,200,000
12/20/12 . ( 70,000)
70,000 @59 4,130,00012/28/12 (10,000) @59 ( 590,000)
60,000 @59 3,540,000
3/2/12 30,000 @70 2,100,000
P.D. . ( 30,000)
30,000 @69 2,070,000
12/20/12 . ( 30,000)
30,000 @69 2,040,000
Carrying of Investment in Silver Tab:
From 2011 P3,540,000
From 2012 2,040,000
Total P5,580,000
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Problem No. 6
Question # 1
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Question # 1
Sale of Laoag, Inc. Shares (TS)
Proceeds, net P152,000
Less carrying amount
(P288,000 x 8/16) 144,000
Gain on sale P 8,000
Question # 2
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Question # 2
Sale of Batac, Inc. Shares (AFS)
Proceeds, net
(3,200 x P15) P48,000
Less cost of investment
(P960,000 x 3.2/80) 38,400
Gain on sale P 9,600
Question # 3
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Question # 3
Santiago bonds
(P200,000 x .1) P 20,000Ilocos bonds
(P1,926,000 x .14) 269,640
Total interest income P289,640
Effective interest rate computation:
CA, 12/31/11 P1,926,000
Less initial CA 1,900,000
Discount amortization 26,000
Nominal interest (P2M x .12) 240,000
Effective int. inc. -2011 266,000
Divide by initial CA 1,900,000
.14
Question # 4
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Question # 4
CA of trading securities:
Vigan, Inc. (9,600 x P22) P211,200
Laoag, Inc. (8,000 x P15) 120,000
Santiago bonds 151,200
P482,400CA of AFS:
Candon Products (32T x P42) P 1,344,000
Pagudpud, Inc. (240T x P28) 6,720,000
Batac, Inc. (76,800 x P18) 1,382,400Ilocos bonds (P2M x 1.01) 2,020,000
P11,466,400
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Problem No. 8
Journal entries - 2010
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Journal entries 2010
Acquisition
AFS securities P500,000Cash P500,000
Share of profitNo entry
DividendsCash P15,000
Dividend income P15,000
FV adjustmentAFS securities P70,000
FV adj. gain - OCI P70,000
Requirement # 1
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Dividend income (P/L) P15,000
FV adjustment gain (OCI)(P570T P500T) 70,000
Total amount in CI P85,000
Requirement # 1
Journal entries - 2011
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Journal entries 2011
Share of profit
No entry
Dividends
Cash P20,000
Dividend income P20,000
FV adjustment
FV adj. gain - OCI P45,000
AFS securities P45,000
Balances, 12/31/11
AFS = P525,000; FV adj. gain-OCI = P25,000
Requirement # 2
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Dividend income (P/L) P20,000
FV adjustment loss (OCI)(P525T P570T) (45,000)
Total amount in CI (P25,000)
Requirement # 2
Investing in Stages
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g g In a business combination achieved in
stages, the acquirer shall remeasure itspreviously held equity interest in theacquiree at its acquisition-date fair valueand recognize the resulting gain or loss, ifany, in profit or loss.
In prior reporting periods, the acquirermay have recognized changes in the valueof its equity interest in the acquiree inother comprehensive income (OCI).
If so, the amount that was recognized in
OCI shall be recognized on the same basisas would be required if the acquirer haddisposed directly of the previously heldequity interest.
Journal entries - 2012
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Acquisition
Investment in associate P2,100,000FV adj. gain-AFS (OCI) 25,000
Cash P1,575,000AFS securities 525,000
Gain on derecognition-AFS(P/L) 25,000
Retrospective adjustment (Requirement # 3)
None
Journal entries - 2012
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Share of profit
Share of profit (P550T x .4) P220,000Excess amortization (P440,000/8) ( 55,000)Share of profit , net P165,000
Investment in associate P165,000SOPA P165,000
DividendsCash P70,000
Investment in associate P70,000
FV adjustmentNo entry
Requirement # 4
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Total purchase price P2,100,000
Share of profit, net 165,000
Dividends ( 70,000)
CA, 12/31/12 P2,195,000
q
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Problem No. 10
Question # 1
1 1 08^-5
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Q
PV of Principal
(P10M x 0.6806) P 6,806,000PV of Interest
(P10M x .1 x 3.9927) 3,992,700
PV, 1/1/09 10,798,700
Less prem. amort. 1/1 4/1:NI (P10M x .1 x 3/12) P250,000
EI (PV x .08 x 3/12) (215,974) 34,026
Purchase price, 4/1/09 10,764,674
Accrued interest 250,000
Total amount paid P11,014,674
1.08^-51 1.08^ 5
.08
Question # 2
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Q
PV of Principal
(P10M x 0.7350) P 7,350,000
PV of Interest
(P10M x .1 x 3.3121) 3,312,100
AC, 12/31/09 P10,662,100
1.08^-4
1 1.08^-4
.08
PAS 39: Financial Assets
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Measurement Summary
Category Initial Sub-sequent
Change inFV
FA @ FVTPL FV FV P/L
AFS FV + TC FV/Cost/AC OCI
(Equity)
HTM FV + TC AC Ignore
L&R FV + TC AC Ignore
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Impairment Summary
Measure
ment
Loss
computation
Reversal
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Impairment Summary
Measure
ment
Loss
computation
Reversal
FVTPL
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Impairment Summary
Measure
ment
Loss
computation
Reversal
FVTPL n/a n/a
PAS 39: Financial AssetsI i t S
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Impairment Summary
Measure
ment
Loss
computation
Reversal
FVTPL n/a n/a
AC
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Impairment Summary
Measure
ment
Loss
computation
Reversal
FVTPL n/a n/a
AC CA PV of CF
(Use orig. EIR)
PAS 39: Financial AssetsImpai ment S mma
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Impairment Summary
Measure
ment
Loss
computation
Reversal
FVTPL n/a n/a
AC CA PV of CF
(Use orig. EIR)
P/L, subject to
limit
PAS 39: Financial AssetsImpairment Summary
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Impairment Summary
Measure
ment
Loss
computation
Reversal
FVTPL n/a n/a
AC CA PV of CF
(Use orig. EIR)
P/L, subject to
limitCost
PAS 39: Financial AssetsImpairment Summary
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Impairment Summary
Measure
ment
Loss
computation
Reversal
FVTPL n/a n/a
AC CA PV of CF
(Use orig. EIR)
P/L, subject to
limitCost CA PV of CF
(Use prev. IR)
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Impairment Summary
Measure
ment
Loss
computation
Reversal
FVTPL n/a n/a
AC CA PV of CF
(Use orig. EIR)
P/L, subject to
limitCost CA PV of CF
(Use prev. IR)Not allowed
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Impairment Summary
Measure
ment
Loss
computation
Reversal
FVTPL n/a n/a
AC CA PV of CF
(Use orig. EIR)
P/L, subject to
limitCost CA PV of CF
(Use prev. IR)Not allowed
AFS-Equity
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Impairment Summary
Measure
ment
Loss
computation
Reversal
FVTPL n/a n/a
AC CA PV of CF
(Use orig. EIR)
P/L, subject to
limitCost CA PV of CF
(Use prev. IR)Not allowed
AFS-Equity Cost - FV
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PAS 39: Financial AssetsImpairment Summary
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Impairment Summary
Measure
ment
Loss
computation
Reversal
FVTPL n/a n/a
AC CA PV of CF
(Use orig. EIR)
P/L, subject to
limitCost CA PV of CF
(Use prev. IR)Not allowed
AFS-Equity Cost - FV OCI (Equity);
prohibited in P/L
AFS-Debt
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Impairment Summary
Measure
ment
Loss
computation
Reversal
FVTPL n/a n/a
AC CA PV of CF
(Use orig. EIR)
P/L, subject to
limitCost CA PV of CF
(Use prev. IR)Not allowed
AFS-Equity Cost - FV OCI (Equity);
prohibited in P/L
AFS-Debt AC - FV
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Impairment Summary
Measure
ment
Loss
computation
Reversal
FVTPL n/a n/a
AC CA PV of CF
(Use orig. EIR)
P/L, subject to
limitCost CA PV of CF
(Use prev. IR)Not allowed
AFS-Equity Cost - FV OCI (Equity);
prohibited in P/L
AFS-Debt AC - FV P/L (subject tolimit); excess OCI
(Equity)
PFRS 9: Financial AssetsM t S
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Measurement Summary
Category Initial Sub-sequent
Change inFV
FA @ FVTPL FV FV P/L
FA @ AC FV + TC AC Ignore
FA @FVTOCI
FV + TC FV OCI
(Equity)
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Impairment Summary
Measure
ment
Loss
computation
Reversal
FVTPL
FVTOCI
AC
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Impairment Summary
Measure
ment
Loss
computation
Reversal
FVTPL n/a
FVTOCI
AC
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Impairment Summary
Measure
ment
Loss
computation
Reversal
FVTPL n/a n/a
FVTOCI
AC
PFRS 9: Financial AssetsImpairment Summary
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Impairment Summary
Measure
ment
Loss
computation
Reversal
FVTPL n/a n/a
FVTOCI n/a
AC
PFRS 9: Financial AssetsImpairment Summary
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Impairment Summary
Measure
ment
Loss
computation
Reversal
FVTPL n/a n/a
FVTOCI n/a n/a
AC
PFRS 9: Financial AssetsImpairment Summary
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Impairment Summary
Measure
ment
Loss
computation
Reversal
FVTPL n/a n/a
FVTOCI n/a n/a
AC CA PV of CF(Use orig. EIR)
PFRS 9: Financial AssetsImpairment Summary
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Impairment Summary
Measure
ment
Loss
computation
Reversal
FVTPL n/a n/a
FVTOCI n/a n/a
AC CA PV of CF(Use orig. EIR)
P/L, subject tolimit
Question # 3
1 1 08^-2
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PV of Principal
(P10M x 0.8573) P 8,573,000
PV of Interest
(P10M x .1 x 1.7833) 1,783,300
AC, 12/31/11 10,356,300PV of CF (P8M x .8573) 6,858,400
Impairment loss P 3,497,900
1.08^-21 1.08^ 2
.08
Question # 4
Interest income - 2012
(P6,858,400 x .08) = P548,672
Question # 5
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PV of expected CF, 12/31/12
(P13M x 0.9259) P12,036,700
AC w/o imp., 12/31/12
(P11M x 0.9259) P10,184,900
Carrying amount,12/31/12
CA, 12/31/11 6,858,400
Disc. Amort. 2012 548,672
7,407,072Gain on reversal P 2,777,828
1.08^-1
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Problem No. 11
Requirement # 1 CA,12/31
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B C D
Requirement # 1 CA,12/31
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B C D
Purchase price
Requirement # 1 CA,12/31
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B C D
Purchase price 10,000
Requirement # 1 CA,12/31
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B C D
Purchase price 10,000 15,000
Requirement # 1 CA,12/31
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B C D
Purchase price 10,000 15,000 28,000
Requirement # 1 CA,12/31
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B C D
Purchase price 10,000 15,000 28,000
Transaction costs (1%)
Requirement # 1 CA,12/31
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B C D
Purchase price 10,000 15,000 28,000
Transaction costs (1%) 100
Requirement # 1 CA,12/31
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B C D
Purchase price 10,000 15,000 28,000
Transaction costs (1%) 100 150
Requirement # 1 CA,12/31
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B C D
Purchase price 10,000 15,000 28,000
Transaction costs (1%) 100 150 280
Requirement # 1 CA,12/31
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B C D
Purchase price 10,000 15,000 28,000
Transaction costs (1%) 100 150 280
Total cost
Requirement # 1 CA,12/31
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B C D
Purchase price 10,000 15,000 28,000
Transaction costs (1%) 100 150 280
Total cost 10,100
Requirement # 1 CA,12/31
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B C D
Purchase price 10,000 15,000 28,000
Transaction costs (1%) 100 150 280
Total cost 10,100 15,150
Requirement # 1 CA,12/31
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B C D
Purchase price 10,000 15,000 28,000
Transaction costs (1%) 100 150 280
Total cost 10,100 15,150 28,280
Requirement # 1 CA,12/31
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B C D
Purchase price 10,000 15,000 28,000
Transaction costs (1%) 100 150 280
Total cost 10,100 15,150 28,280
Impairment loss
FV CTS of Entity B (P13M x .95) = P12.35M
Requirement # 1 CA,12/31
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B C D
Purchase price 10,000 15,000 28,000
Transaction costs (1%) 100 150 280
Total cost 10,100 15,150 28,280
Impairment loss -
FV CTS of Entity B (P13M x .95) = P12.35M
FV CTS of Entity C (P29M x .95) = P27.55M
Requirement # 1 CA,12/31
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B C D
Purchase price 10,000 15,000 28,000
Transaction costs (1%) 100 150 280
Total cost 10,100 15,150 28,280
Impairment loss - -
FV CTS of Entity B (P13M x .95) = P12.35M
FV CTS of Entity C (P29M x .95) = P27.55M
FV CTS of Entity D (P15M x .95) = P14.25M
Requirement # 1 CA,12/31
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B C D
Purchase price 10,000 15,000 28,000
Transaction costs (1%) 100 150 280
Total cost 10,100 15,150 28,280
Impairment loss - - (14,030)
FV CTS of Entity B (P13M x .95) = P12.35M
FV CTS of Entity C (P29M x .95) = P27.55M
FV CTS of Entity D (P15M x .95) = P14.25M
Requirement # 1 CA,12/31
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B C D
Purchase price 10,000 15,000 28,000
Transaction costs (1%) 100 150 280
Total cost 10,100 15,150 28,280
Impairment loss - - (14,030)CA, 12/31/12
FV CTS of Entity B (P13M x .95) = P12.35M
FV CTS of Entity C (P29M x .95) = P27.55M
FV CTS of Entity D (P15M x .95) = P14.25M
Requirement # 1 CA,12/31
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B C D
Purchase price 10,000 15,000 28,000
Transaction costs (1%) 100 150 280
Total cost 10,100 15,150 28,280
Impairment loss - - (14,030)CA, 12/31/12 10,100
FV CTS of Entity B (P13M x .95) = P12.35M
FV CTS of Entity C (P29M x .95) = P27.55M
FV CTS of Entity D (P15M x .95) = P14.25M
Requirement # 1 CA,12/31
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B C D
Purchase price 10,000 15,000 28,000
Transaction costs (1%) 100 150 280
Total cost 10,100 15,150 28,280
Impairment loss - - (14,030)CA, 12/31/12 10,100 15,150
FV CTS of Entity B (P13M x .95) = P12.35M
FV CTS of Entity C (P29M x .95) = P27.55M
FV CTS of Entity D (P15M x .95) = P14.25M
Requirement # 1 CA,12/31
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B C D
Purchase price 10,000 15,000 28,000
Transaction costs (1%) 100 150 280
Total cost 10,100 15,150 28,280
Impairment loss - - (14,030)CA, 12/31/12 10,100 15,150 14,250
FV CTS of Entity B (P13M x .95) = P12.35M
FV CTS of Entity C (P29M x .95) = P27.55M
FV CTS of Entity D (P15M x .95) = P14.25M
CA Entity B, 12/31/12 P10,100,000
CA
Entity C, 12/31/12 15,150,000CA Entity D, 12/31/12 14,250,000
Total P39,500,000
Requirement # 1: P/L2012
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Dividend income:
B (P1M x .25) P 250,000C (P8M x .25) 2,000,000
Impairment loss (D) ( 14,030,000)
Net amount in P/L (P11,780,000)
Requirement # 2: CA
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FV, 12/31/12
Entity B P13MEntity C 29M
Entity D 15M
Total P57M
Requirement # 2 P/L
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B C D
Requirement # 2 P/L
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B C D
Transaction costs (1%)
Requirement # 2 P/L
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B C D
Transaction costs (1%) ( 100)
Requirement # 2 P/L
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B C D
Transaction costs (1%) ( 100) ( 150)
Requirement # 2 P/L
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B C D
Transaction costs (1%) ( 100) ( 150) ( 280)
Requirement # 2 P/L
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B C D
Transaction costs (1%) ( 100) ( 150) ( 280)
Dividend income
Requirement # 2 P/L
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B C D
Transaction costs (1%) ( 100) ( 150) ( 280)
Dividend income 250
Requirement # 2 P/L
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B C D
Transaction costs (1%) ( 100) ( 150) ( 280)
Dividend income 250 2,000
Requirement # 2 P/L
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B C D
Transaction costs (1%) ( 100) ( 150) ( 280)
Dividend income 250 2,000 -
Requirement # 2 P/L
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B C D
Transaction costs (1%) ( 100) ( 150) ( 280)
Dividend income 250 2,000 -
FV adjustment gain (loss)
FV adjustment of Entity B (P13M P10M) = P3M
Requirement # 2 P/L
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B C D
Transaction costs (1%) ( 100) ( 150) ( 280)
Dividend income 250 2,000 -
FV adjustment gain (loss) 3,000
FV adjustment of Entity B (P13M P10M) = P3M
FV adjustment of Entity C (P29M
P15M) = P14M
Requirement # 2 P/L
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B C D
Transaction costs (1%) ( 100) ( 150) ( 280)
Dividend income 250 2,000 -
FV adjustment gain (loss) 3,000 14,000
FV adjustment of Entity B (P13M P10M) = P3M
FV adjustment of Entity C (P29M
P15M) = P14MFV adjustment of Entity D (P15M P28M) = (P13M)
Requirement # 2 P/L
8/12/2019 4) Audit of Investments
154/178
B C D
Transaction costs (1%) ( 100) ( 150) ( 280)
Dividend income 250 2,000 -
FV adjustment gain (loss) 3,000 14,000 (13,000)
FV adjustment of Entity B (P13M P10M) = P3M
FV adjustment of Entity C (P29M
P15M) = P14MFV adjustment of Entity D (P15M P28M) = (P13M)
Requirement # 2 P/L
B C D
8/12/2019 4) Audit of Investments
155/178
B C D
Transaction costs (1%) ( 100) ( 150) ( 280)
Dividend income 250 2,000 -
FV adjustment gain (loss) 3,000 14,000 (13,000)
Net amount in P/L
FV adjustment of Entity B (P13M P10M) = P3M
FV adjustment of Entity C (P29M
P15M) = P14MFV adjustment of Entity D (P15M P28M) = (P13M)
Requirement # 2 P/L
B C D
8/12/2019 4) Audit of Investments
156/178
B C D
Transaction costs (1%) ( 100) ( 150) ( 280)
Dividend income 250 2,000 -
FV adjustment gain (loss) 3,000 14,000 (13,000)
Net amount in P/L 3,150
FV adjustment of Entity B (P13M P10M) = P3M
FV adjustment of Entity C (P29M
P15M) = P14MFV adjustment of Entity D (P15M P28M) = (P13M)
Requirement # 2 P/L
B C D
8/12/2019 4) Audit of Investments
157/178
B C D
Transaction costs (1%) ( 100) ( 150) ( 280)
Dividend income 250 2,000 -
FV adjustment gain (loss) 3,000 14,000 (13,000)
Net amount in P/L 3,150 15,850
FV adjustment of Entity B (P13M P10M) = P3M
FV adjustment of Entity C (P29M
P15M) = P14MFV adjustment of Entity D (P15M P28M) = (P13M)
Requirement # 2 P/L
B C D
8/12/2019 4) Audit of Investments
158/178
B C D
Transaction costs (1%) ( 100) ( 150) ( 280)
Dividend income 250 2,000 -
FV adjustment gain (loss) 3,000 14,000 (13,000)
Net amount in P/L 3,150 15,850 (13,280)
FV adjustment of Entity B (P13M P10M) = P3M
FV adjustment of Entity C (P29M P15M) = P14M
FV adjustment of Entity D (P15M P28M) = (P13M)
P/L Entity B P 3,150,000
P/L Entity C 15,850,000
P/L Entity B ( 13,280,000)
Total P 5,720,000
Requirement # 3 CA
B C D
8/12/2019 4) Audit of Investments
159/178
B C D
Purchase price 10,000 15,000 28,000
Transaction costs (1%) 100 150 280
Total cost 10,100 15,150 28,280
Requirement # 3 CA
B C D
8/12/2019 4) Audit of Investments
160/178
B C D
Purchase price 10,000 15,000 28,000
Transaction costs (1%) 100 150 280
Total cost 10,100 15,150 28,280
SOPA (SOLA)
Requirement # 3 CA
B C D
8/12/2019 4) Audit of Investments
161/178
B C D
Purchase price 10,000 15,000 28,000
Transaction costs (1%) 100 150 280
Total cost 10,100 15,150 28,280
SOPA (SOLA) 1,250
Requirement # 3 CA
B C D
8/12/2019 4) Audit of Investments
162/178
B C D
Purchase price 10,000 15,000 28,000
Transaction costs (1%) 100 150 280
Total cost 10,100 15,150 28,280
SOPA (SOLA) 1,250 4,500
Requirement # 3 CA
B C D
8/12/2019 4) Audit of Investments
163/178
B C D
Purchase price 10,000 15,000 28,000
Transaction costs (1%) 100 150 280
Total cost 10,100 15,150 28,280
SOPA (SOLA) 1,250 4,500 ( 5,000)
Requirement # 3 CA
B C D
8/12/2019 4) Audit of Investments
164/178
B C D
Purchase price 10,000 15,000 28,000
Transaction costs (1%) 100 150 280
Total cost 10,100 15,150 28,280
SOPA (SOLA) 1,250 4,500 ( 5,000)
Dividends
Requirement # 3 CA
B C D
8/12/2019 4) Audit of Investments
165/178
B C D
Purchase price 10,000 15,000 28,000
Transaction costs (1%) 100 150 280
Total cost 10,100 15,150 28,280
SOPA (SOLA) 1,250 4,500 ( 5,000)
Dividends ( 250)
Requirement # 3 CA
B C D
8/12/2019 4) Audit of Investments
166/178
B C D
Purchase price 10,000 15,000 28,000
Transaction costs (1%) 100 150 280
Total cost 10,100 15,150 28,280
SOPA (SOLA) 1,250 4,500 ( 5,000)
Dividends ( 250) (2,000)
Requirement # 3 CA
B C D
8/12/2019 4) Audit of Investments
167/178
B C D
Purchase price 10,000 15,000 28,000
Transaction costs (1%) 100 150 280
Total cost 10,100 15,150 28,280
SOPA (SOLA) 1,250 4,500 ( 5,000)
Dividends ( 250) (2,000) -
Requirement # 3 CA
B C D
8/12/2019 4) Audit of Investments
168/178
B C D
Purchase price 10,000 15,000 28,000
Transaction costs (1%) 100 150 280
Total cost 10,100 15,150 28,280
SOPA (SOLA) 1,250 4,500 ( 5,000)
Dividends ( 250) (2,000) -
CA, 12/31/12-before IL
Requirement # 3 CA
B C D
8/12/2019 4) Audit of Investments
169/178
B C D
Purchase price 10,000 15,000 28,000
Transaction costs (1%) 100 150 280
Total cost 10,100 15,150 28,280
SOPA (SOLA) 1,250 4,500 ( 5,000)
Dividends ( 250) (2,000) -
CA, 12/31/12-before IL 11,100
Requirement # 3 CA
B C D
8/12/2019 4) Audit of Investments
170/178
B C D
Purchase price 10,000 15,000 28,000
Transaction costs (1%) 100 150 280
Total cost 10,100 15,150 28,280
SOPA (SOLA) 1,250 4,500 ( 5,000)
Dividends ( 250) (2,000) -
CA, 12/31/12-before IL 11,100 17,650
Requirement # 3 CA
B C D
8/12/2019 4) Audit of Investments
171/178
B C D
Purchase price 10,000 15,000 28,000
Transaction costs (1%) 100 150 280
Total cost 10,100 15,150 28,280
SOPA (SOLA) 1,250 4,500 ( 5,000)
Dividends ( 250) (2,000) -
CA, 12/31/12-before IL 11,100 17,650 23,280
Requirement # 3 CA
B C D
8/12/2019 4) Audit of Investments
172/178
B C D
Purchase price 10,000 15,000 28,000
Transaction costs (1%) 100 150 280
Total cost 10,100 15,150 28,280
SOPA (SOLA) 1,250 4,500 ( 5,000)
Dividends ( 250) (2,000) -
CA, 12/31/12-before IL 11,100 17,650 23,280
Impairment loss
FV CTS of Entity B (P13M x .95) = P12.35M
FV CTS of Entity C (P29M x .95) = P27.55M
FV CTS of Entity D (P15M x .95) = P14.25M
Requirement # 3 CA
B C D
8/12/2019 4) Audit of Investments
173/178
B C D
Purchase price 10,000 15,000 28,000
Transaction costs (1%) 100 150 280
Total cost 10,100 15,150 28,280
SOPA (SOLA) 1,250 4,500 ( 5,000)
Dividends ( 250) (2,000) -
CA, 12/31/12-before IL 11,100 17,650 23,280
Impairment loss - - ( 9,030)
FV CTS of Entity B (P13M x .95) = P12.35M
FV CTS of Entity C (P29M x .95) = P27.55M
FV CTS of Entity D (P15M x .95) = P14.25M
Requirement # 3 CA
B C D
8/12/2019 4) Audit of Investments
174/178
B C D
Purchase price 10,000 15,000 28,000
Transaction costs (1%) 100 150 280
Total cost 10,100 15,150 28,280
SOPA (SOLA) 1,250 4,500 ( 5,000)
Dividends ( 250) (2,000) -
CA, 12/31/12-before IL 11,100 17,650 23,280
Impairment loss - - ( 9,030)
CA, 12/31/11
Requirement # 3 CA
B C D
8/12/2019 4) Audit of Investments
175/178
B C D
Purchase price 10,000 15,000 28,000
Transaction costs (1%) 100 150 280
Total cost 10,100 15,150 28,280
SOPA (SOLA) 1,250 4,500 ( 5,000)
Dividends ( 250) (2,000) -
CA, 12/31/12-before IL 11,100 17,650 23,280
Impairment loss - - ( 9,030)
CA, 12/31/11 11,100
Requirement # 3 CA
B C D
8/12/2019 4) Audit of Investments
176/178
Purchase price 10,000 15,000 28,000
Transaction costs (1%) 100 150 280
Total cost 10,100 15,150 28,280
SOPA (SOLA) 1,250 4,500 ( 5,000)
Dividends ( 250) (2,000) -
CA, 12/31/12-before IL 11,100 17,650 23,280
Impairment loss - - ( 9,030)
CA, 12/31/11 11,100 17,650
Requirement # 3 CA
B C D
8/12/2019 4) Audit of Investments
177/178
Purchase price 10,000 15,000 28,000
Transaction costs (1%) 100 150 280
Total cost 10,100 15,150 28,280
SOPA (SOLA) 1,250 4,500 ( 5,000)
Dividends ( 250) (2,000) -
CA, 12/31/12-before IL 11,100 17,650 23,280
Impairment loss - - ( 9,030)
CA, 12/31/11 11,100 17,650 14,250
Requirement # 2 P/L, 2012 (P 8,280,000)
CA Entity B, 12/31/12 P11,100,000
CA Entity C, 12/31/12 17,650,000
CA Entity D, 12/31/12 14,250,000
Total P43,000,000
8/12/2019 4) Audit of Investments
178/178
End