Mock Test - EQUITY Investment With Answers

UNIVERSITY OF SANTO TOMAS
AMV-COLLEGE OF ACCOUNTANCY
CA5105-INTERMEDIATE ACCOUNTING I
INVESTMENT IN EQUITY SECURITIES
In 2019, All Home Corp. acquired the following portfolio of equity

instruments and reported the following information.
Security Purchase Price Broker’s fee Market Value Market Value

12/31/19 12/31/20
2Go Group P 300,000 P 5,000 P 350,000 P 345,000
Asiabest 450,000 10,000 410,000 400,000
ACE Enexor 540,000 12,500 640,000 350,000
Aboitiz 610,000 15,000 650,000 700,000
On October 1, 2020, All Home Corp. sold half of the investment ACE Enexor for P325,000.
Assuming All Home Corp. classified the foregoing securities as at fair value through profit or
loss, determine the following:
1. The amount taken to profit or loss for the year ended

December 31, 2019.
a. P192,500
b. P150,000
c. P107,500
d. P42,500
2. Gain on sale of ACE Enexor’s security.

a. P5,000
b. P48,750
c. P55,000
d. P61,250
3. Unrealized gain or loss to be presented in profit or loss the year ended December 31,
2020.
a. P60,000 UG
b. P65,000 UG
c. P165,000 UG
d. P255,000 UL
Assuming All Home Corp. classified the foregoing securities as at fair value through other
comprehensive income, determine the following:
4. The amount taken to profit or loss for the year ended

December 31, 2019.
a. P0
b. P42,500
c. P107,500
d. P150,000
5. Amount transferred to retained earnings as a result of the sale of ACE Enexor’s

security.
a. P55,000
b. P48,750
c. P43,750
d. P0
6. Cumulative balance of unrealized gain or loss reported in other comprehensive income
section as component of shareholders’ equity as at December 31, 2020.
a. P123,750 UG
b. P128,750 UG
c. P165,000 UG
d. P172,500 UG
SM Investment, Corp. provided the following information on December 31, 2019:
Financial asset at fair value through OCI P6,750,000

Unrealized loss on Financial Asset @ FVOCI (in the
2019 statement of comprehensive income) 200,000
Unrealized gain on Financial Asset @ FVOCI (in the 2019 statement of
financial position) 480,000
The financial asset was purchased in 2017. SM Investment paid and capitalized P20,000
transaction cost in relation to the acquisition of the asset.
7. What was the historical cost of the financial asset?

a. P7,250,000
b. P6,290,000
c. P6,470,000
d. P6,270,000
8. What was the carrying value of the investment on December 31, 2018?
a. P6,470,000
b. P6,550,000
c. P6,950,000
d. P7,030,000
Nitrogen Trading has the following securities in its investment at Fair Value through Other
Comprehensive Income. An analysis of the investments on December 31, 2019 showed the
following:
No. of shares Cost Market values

NI Co. ordinary 600 shares 307,500 270,000
TRO Inc. ordinary 225 shares 76,500 90,000
GEN Co. ordinary 2,000 shares 269,500 280,600
On July 1, 2020, all shares of TRO were sold for P 70,000. On December 31, 2020, NI shares
were quoted at P 440 per share; GEN shares were quoted at P 138 per share.
9. How much is the unrealized gain or loss that should be reported in the Statement of
Financial Position on December 31, 2020?
a. 37,000 unrealized loss c. 10,600 unrealized loss
b. 37,000 unrealized gain d. 10,600 unrealized gain
10. How much is the total net amount transferred to Retained Earnings upon sale of TRO
shares?
a. 6,500 c. 13,500
b. 20,000 d. 70,000
On January 1, 2020, PAM Company invested P600,000 in equity securities representing 20,000 ordinary
shares of BAWI Company. PAM Company incurred transaction cost of P5,000 related to the acquisition
of the securities. On December 31, 2020, these securities had a fair value of P35 per share. Cost to
sell on this date was P2,000.
11. How much is the carrying value of the Investment on December 31, 2020?
a. 700,000 b. 698,000 c. 595,000 d. 702,000
Morgan Company began business in October of 2019. During the year, Morgan purchased a portfolio
of securities listed below designated as FVOCI. In its December 31, 2019 Statement of Financial Position,
Morgan appropriately reported a P300,000 debit balance in its “Unrealized gain/loss” account. The
composition
of the securities did not change during the year 2020. Pertinent data are as follows:
Security Cost Market Value, December 31, 2020

P P2,400,000 P2,450,000
Q 2,500,000 2,550,000
R 1,900,000 2,000,000
P6,800,000 P7,000,000
12. What amount of unrealized gain or loss on these securities should be included in Morgan’s
Statement of Comprehensive Income for the year ended December 31, 2020? 500,000
13. What amount of unrealized gain or loss on these securities should be included in Morgan’s
Statement of Financial Position as of December 31, 2020? 200,000
14. Equity securities may be classified as

a. FVPL only
b. FVOCI only
c. FVPL and FVOCI
d. FVPL, FVPL and amortized cost
15. These investments are initiallyrecorded at purchase price plus

transaction costs.
I. Financial assets at fair value through profit or loss.
II. Financial assets at fair value through other comprehensive
income.
III. Financial assets at amortized cost.
a. I only
b. II only
c. I and II
d. II and III
16. Unrealized holding gains or losses which are recognized in the statement of
comprehensive income are from securities classified as
a. FVPL only
b. FVPL and FVOCI
c. FVOCI and Investment at Amortized Cost
d. FVOCI only
17. It is a financial instrument representing ownership interest or the right to acquire

ownership interest.
a. Cash equivalents
b. Inventories
c. Equity securities
d. Debt securities
18. Noctis Corporation acquired equity securities for trading purposes. In the books of
Noctis, the equity securities are designated as:
a. Equity Investments – FVPL
b. Equity Investments – FVOCI
c. Investments in Associate
d. Financial Assets at Amortized Cost
19. Kingdom of Lucis Incorporated acquired equity securities for non-trading purposes. In
the books of Lucis, the equity securities are designated as:
a. Equity Investments – FVPL
b. Equity Investments – FVOCI
c. Irrevocable choice of either Equity Investments – FVPL or Equity Investments –
FVOCI
d. Investments in Associate
20. Transaction costs of acquiring equity investments:

a. Is included in the initial cost of the investment if designated at FVPL.
b. Is included in the initial cost of the investment if designated at FVOCI.
c. Is expensed outright.
d. Is not recognized in the books.

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UNIVERSITY OF SANTO TOMAS

In 2019, All Home Corp. acquired the following portfolio of equity

Security Purchase Price Broker’s fee Market Value Market Value

1. The amount taken to profit or loss for the year ended

2. Gain on sale of ACE Enexor’s security.

4. The amount taken to profit or loss for the year ended

5. Amount transferred to retained earnings as a result of the sale of ACE Enexor’s

SM Investment, Corp. provided the following information on December 31, 2019:

Financial asset at fair value through OCI P6,750,000

7. What was the historical cost of the financial asset?

No. of shares Cost Market values

Security Cost Market Value, December 31, 2020

14. Equity securities may be classified as

15. These investments are initiallyrecorded at purchase price plus

17. It is a financial instrument representing ownership interest or the right to acquire

20. Transaction costs of acquiring equity investments:

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