Investment Questionnaire Final
Investment Questionnaire Final
Investment Questionnaire Final
It is a debt or equity security purchased with the intent of selling before it reaches maturity or holding it for a
long period should it not have a maturity date.
EASY
Which of the following is/are related to audit of investments?
I. Existence
II. Completeness
III. Accuracy
IV. Presentation and Disclosure
V. Rights and Obligations
EASY
On January 1, 2019 SANA OL company Purchased 5-year bonds with face amount of 8,000,000 and stated interest of
10% per year payable semiannually on June 30 and December 31. The bonds were acquired to yield 8%. What is the
purchase price of the bonds?
a.7,382,400
b.8,617,600
c.8,648,800
d. 7,351,200
EASY
The contractual agreement between a bondholder (investor) and a bond issuer (borrower) is contained in a
formal document known as _____________.
EASY
On May 1 2019, DIKALAB company purchased a debt security having a face value of 2000000 with an interest rate of 9%
for 2100000 including the accrued interest. DIKALAB company has a business model with the objective of collecting all
the contractual cash flows of debt securities. The bonds mature on January 1, 2024 and pay interest semiannually on
January 1 and July 1. on December 31, 2019 the bonds had a market value of 2205000. What amount should DIKALAB
company report for short-term investment in debt securities at initial recognition.
a. 2000000
b. 2040000
c. 2100000
d. 2205000
EASY
Which of the following statements best describes owner-occupied property?
a. Property held for sale in the ordinary course of business
b. Property held for use in the production and supply of goods or services and property and property held
administrative purposes
c. Property held to earn rentals
d. Property held to earn capital appreciation
EASY
Jan Dy Company acquired 40,000 ordinary shares on October 1 for P6,600,000 to be held for trading. On
November 30, the investee distributed a 10% ordinary stock dividend when the market price of the share was P250. On
December 31, the entity sold 4,000 shares for P1,000,000.
What should be reported as gain on sale of investment for the current year?
EASY
Victor Company reported the following accounts at the end of the reporting period:
Petty cash fund 10,000
Payroll fund 100,000
Sinking fund cash 500,000
Sinking fund securities 1,000,000
Accrued interest receivable – sinking fund securities 50,000
Plant expansion fund 600,000
Cash surrender value, 100,000
Annual advance premium paid 20,000
Investment property 3,000,000
Advances to subsidiary 200,000
Investment in associate 2,000,000
WHAT TOTAL AMOUNT SHOULD BE REPORTED AS NONCURRENT INVESTMENTS AT THE END OF REPORTING
PERIOD?
EASY
A shareholder acquired 10.000 shares costing P2,500,000. Subsequently, the shareholder received stock rights
to for new shares at P150 per share for every five rights held.
The market value of the share is P210 per share The right has no known market value.
How much would the shareholder sell each stock options if they are sold ex right?
AVERAGE
On January 1, 2014, Psyduck Company acquired a long term investment for P7,000,000, a 40% interest of Pikachu
Corporation when the fair value of Pikachu’s net assets was P17,500,000.
Pikachu Corp. reported the following net income(losses):
2014 (5,000,000) 2017 (1,000,000)
2015 (8,000,000) 2018 3,000,000
2016 (4,000,000)
What carrying amount of the investment on 2017 and 2018?
AVERAGE
If an entity fails to amortize the premium on its trading bond investment, then the income is
a. Overstated
b. Understated
c. Not affected
d. Either overstated or understated
Average
On January 1, 2014, Ren Company owned an investment property which had an original cost of 5,800,000 and
useful life of 40 years
On December 31, 2016, the fair value was 6,000,000 and on December 31, 2017 was 5,900,000
Compute the gain or loss on change in fair value for the year ended December 2017 under fair value model and
the depreciation expense to be recognized for the year ended December 2017 under cost model
Average
Which of the following would provide the best form of evidence pertaining to the annual valuation of a long-
term investment in which the independent auditor’s client owns less than 20% voting interest?
a. Market quotations of the investee company’s share
b. Current fair value of the investee company’s assets
c. Historical cost of the investee company’s assets
d. Audited financial statements of the investee company
AVERAGE
Taro Company owns 60,000 shares of the outstanding ordinary shares of Gandus. These 60,000 shares were
originallypurchased for P100 per share. On December 1, 2016, Gandus distributed 60,000 rights to Taro. Taro was
entitled to buy one share of Gandus’ ordinary shares for P120 and five of this rights. On December 1, 2016, each share
has a market value of P150 and each right had market value of P10. The stock rights are accounted for separately and
measured initially at fair value. On December 31, 2016, Taro exercised all rights.
What total cost should be recorded for the new shares that Taro acquired by exercising the rights?
AVERAGE
In testing long-term investments, an auditor would use analytical procedures to ascertain the reasonableness of
the
a. Completeness of recorded investment income
b. Classification between current and non current portfolios
c. Valuation of marketable securities
d. Existence of unrealized gains or losses in the portfolio
AVERAGE
Which of the following additional disclosures must be made when an entity chooses the cost model as the
accounting policy for investment property?
a. The fair value of the property
b. The present value of the property
c. The value in use of the property
d. The net realizable value of the property
AVERAGE
Which of the following would provide the best form of evidence pertaining to the annual valuation of a long-
term investment in which the independent auditor’s client owns a 30% voting interest?
a. Market quotations of the investee company’s share
b. Current fair value of the investee company’s assets
c. Historical cost of the investee company’s assets
d. Audited financial statements of the investee company
AVERAGE
A company holds bearer bonds as a short-term investments. Responsibility for the custody of these bonds and
for the submission of coupons for periodic interest collections probably should be delegated to the
a. Chief Accountant
b. Internal Auditor
c. Cashier
d. Treasurer
AVERAGE
If an auditor is unable to inspect and count a client’s investment securities until after the balance sheet date, the
bank in which the securities are held in a safe deposit box should be asked to
a. Verify any differences between the contents of the box and the balances in the client’s subsidiary ledger.
b. Provide a list of securities added to and removed from the box between the balance sheet date and the security count
date.
c. Confirm that there has been no access to the box between the, balance sheet date and the security count date
d. Count the securities in the box so the auditor will have an independent verification
DIFFICULT
Wolf Company purchased a 1,000,000 life insurance policy on its president J. Wolf, of which Wolf Company is
the beneficiary.
Wolf Company provided the following information for the year ended December 31, 2019
Cash surrender value, Jan 1 87,000
Cash surrender value, Dec 31 108,000
Dividend received Jul 1 3,000
The increase in CSV is more than 2,000 than the life insurance expense reported for the year. The dividend
received was already applied to increase the cash surrender value of the policy.
How much was the premium paid for 2019?
DIFFICULT
Apple Co. received dividends from its investments in ordinary shares during the year ended December 31, 2015,
as follows:
/a/ Apple co. owns 2% interest in Banana who declared P36,000,000 cash dividend on Nov. 15, 2015 to stockholders of
record December 15, 2015 payable on January 15, 2016.
/b/ A cash dividend of P3,600,000 from Coconut Corporation of which Apple co. owns 30% interest
/c/ A stock dividend of 18,000 shares from Shane Company was received on Dec. 15, 2015, on which date the quotaed
market value of Shane’s shares was P20 per share. Apple Co. Owns less than 1% of Shane’s ordinary shares
/d/ 5,000 ordinary shares of Durian Co. in lieu of cash dividend of P20 per share. The market price of Durian shares was
P150. Apple holds originally 50,000 shares of Durian.Apple owns 5% of Durian
/e/ Apple received from Fruitas Company a stock dividend of Grapes Company, 1 Grapes’ share for every 4 shares of
Fruitas held. Apple holds 100,000 Fruitas Company shares, which have a market price of P50 per share on Dec. 1, 2015.
The market price of Grapes ordinary share is P30 per share.
What amount of dividend income should be reported by Apple Co, in its 2015 income statement?
DIFFICULT
Kurt Company has an investment in financial equity instrument in Marcus Company acquired at a cost of
P900,000 in 2014. The investment was designated at initial recognition as fair value to other comprehensive income.
Kurt Company’s investment in Marcus has a market value of P700,000, as a result, Kurt Company recognized the
impairment loss of its investment in the 2014 other comprehensive income.
During the year 2015,due to changes in financial climate, there has been a complete turn-around in Marcus
Company’s financial instrument, market value at the close of 2015 was established at P950,000. On April 30, 2016 Kurt
Company sold all the equity investment in Marcus Company at the prevailing market value of P1,000,000.
What amount of impairment reversal should Kurt Company recognize in its 2015 profit or loss?
DIFFICULT
On April 1, 2019 SINGLE company purchased a 1000000 12% bonds at 96 plus accrued interest. Interest
is payable January 1 and July 1. The bonds are held as trading investment. On October 31, 2019 SINGLE company sold
600000 face value bonds for 101 plus accrued interest. The bonds are quoted at 120 at the end of the year. How much is
the unrealized gain to be recognized in profit and loss?
DIFFICULT
Bebe Co. has a 12% holding in the shares of Zebby Co. In addition, Bebe has, through one of its subsidiaries, an
option to buy 13% more shares in Zebby. Although the exercise price is in the money, Bebe Co. does not have the
intention and the financial ability to exercise this option.
What should be the treatment of the foregoing investment?
a. A subsidiary c. A joint arrangement
b. An associate d. None of these categories
DIFFICULT
On January 1, 2017 MENINGO company purchased 2,000,000 face value bonds at a price of 1,824,800
which will yield an interest rate of 10%. The nominal interest rate on the bonds is 8% payable annually every December
31. The company’s business model is to collect contractual cash flow that are solely payments of principal and interest.
On December 31, 2018, MENINGO company changed the business model in managing the bonds from collecting
contract cash flows that are solely payments of principal and interest to realizing short term gains. The market value of
the bonds on January 1,2019 is 106.
On reclassification date, what amount of gain on reclassification of financial asset should be recognized by
MENINGO company.