ADAMSON UNIVERSITY

INTERMEDIATE ACCOUNTING 1
ASSIGNMENT - INVESTMENTS
1. Which is not a category of financial assets?
a. financial assets at fair value through profit or loss
b. financial assets at fair value through other comprehensive income
c. financial asset at amortized cost
d. financial asset held for trading

2. Any instrument representing ownership shares and the right to acquire ownership shares is:
a. debt security
b. equity security
c. shareholders’ equity
d. marketable security

3. An investor that owns 10% of the ordinary shares of an investee has the right to
a. be paid 10% of the investee’s profit for the year.
b. receive dividend equal to 10% of the par each year.
c. receive dividend equal to 10% of the total dividends for the year paid by the investee to
shareholders .
d. keep the investee from issuing any new shares unless the investor is willing to buy 10% of the new
shares.

4. Depending on the business model for managing financial assets, an entity shall classify financial
assets subsequent to initial recognition at
a. fair value through profit or loss
b. amortized cost
c. fair value through other comprehensive income
d. all of the above

5. It is an entity over which the investor has significant influence.

6. Which statement best describes significant influence?

7. Jaro acquired a real property for speculation purposes with the intention of selling it at a higher
price. The property was acquired at cash price of P1,000,000. The property has unpaid P100,000 real
property taxes assumed by Jaro. How much should Jaro record the investment?
a. P1,160,000
b. P1,100,000
c. P1,040,000
d. P1,000,000
Cash price land 1,000,000
Real property tax assumed by Jaro 100,000
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Total 1,100,000

8. On January 01, 2021, White Corporation purchased 20% of Rabbit Company’s ordinary shares
outstanding for P6,000,000. The acquisition cost is equal to the carrying amount of the net assets
acquired. During 2021, Rabbit reported net income of P7,000,000 and paid its shareholders total cash
dividend of P4,000,000. What is the balance in the investment in Rabbit Company on December 31,
2021?
a. 5,200,000
b. 6,000,000
c. 6,600,000
d. 7,400,000
Acquisition cost 6,000,000
Add: 20% of Rabbit’s net income
P7,000,000 X 20% 1,400,000
Less: Share in cash dividend
P4,000,000 X 20% (800,000)
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Investment - balance 6,600,000

9. On January 01, 2021, Belle Company paid P18,000,000 for 50,000 ordinary shares of Claire
Company. This represents 25% interest in the net asset of Claire. The acquisition cost is equal to the
carrying amount of the net assets acquired. Belle has the ability to exercise significant influence over
Claire. Belle received a dividend of P35 per share from Claire in 2021. Claire reported net income of
P9,600,000 for the year ended December 31, 2021.

In the December 31, 2021 statement of financial position, what amount should be reported in the
investment in Claire Company?
a. 22,150,000
b. 20,400,000
c. 18,650,000
d. 18,000,000
Acquisition cost 18,000,000
Add: 25% of Claire’s net income
P9,600,000 X 25% 2,400,000
Less: Cash dividend received
50,000 shares X P35 (1,750,000)
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Investment – balance 18,650,000

10. On October 1, 2021, Naga Company purchased 4,000 P1,000 face value 12% bonds for 98,
classified as debt investment at fair value through profit or loss. Interest is paid semi-annually on
January 1 and July 1. Transaction cost was P100,000. At what amount should the acquisition of bonds
be recorded?
a. P3,920,000
b. P4,020,000
c. P4,040,000
d. P4,140,000
4,000 X P1,000 X 98% 3,920,000
A financial asset classified as at fair value through profit or loss, transaction costs are expensed
outright.