Intermediate Accounting Practice Problems With Answers

The correct answer is 1,800,000. According to the cost model, depreciation is calculated by subtracting the residual value from the cost of the property and dividing it by the useful life. In this case, the cost of the property is P50 million and the residual value is P5 million, resulting in a depreciable amount of P45 million. Dividing this by the useful life of 25 years gives an annual depreciation expense of P1.8 million. Therefore, Gallery Company should report depreciation of investment property for 2009 at P1,800,000.

The correct answer is 3,300,000. This is because the balance sheet should report the trading securities at their market value, which is the value at which they could be sold in the market. In this case, the market values of the investments in Man Company, Kemo Company, and Fenn Company are higher than their cost, so they should be reported at their market value of 1,300,000, 1,100,000, and 900,000 respectively. The total market value of the investments is 3,300,000.

Quezon Company should report an unrealized loss of 500,000 on these securities in its 2009 statement of changes in equity. This is because when the available for sale securities were reclassified as nonmarketable equity securities on December 31, 2009, a reliable measure of fair value was no longer available. The market value of the securities on December 31, 2008, was 4,500,000, which is lower than the original cost of 5,000,000. Therefore, the difference of 500,000 represents the unrealized loss that should be reported.

The proper carrying value of Fatty's investment in David at December 31, 2009 is P8,080,000. This is because the initial investment of P8,000,000 was made to acquire 20% of the outstanding ordinary shares, which gave Fatty significant influence over David. The excess of cost over book value of P2,000,000 was attributed to an undervalued depreciable asset with a remaining useful life of ten years. Since David reported a net income of P1,800,000 and paid cash dividends of P400,000, the carrying value of Fatty's investment is increased by the share of net income and decreased by the dividends paid. Therefore, the proper carrying value is P8,080,000.

Dude Company initially purchased 10% of Pal Company's outstanding shares for P500,000. This means that Dude owned 10,000 shares of Pal. Later, on December 31, 2009, Dude purchased an additional 20,000 shares for P1,500,000. Therefore, Dude now owns a total of 30,000 shares of Pal. To calculate the investment in Pal, we need to multiply the number of shares owned by the price per share. The price per share is calculated by dividing the total amount spent on purchasing shares (P2,000,000) by the total number of shares owned (30,000). Thus, the investment in Pal on December 31, 2009, is P2,300,000.

The correct answer is 4,288,000. This is because the bonds were purchased for 4,400,000, which includes accrued interest of 100,000. The face value of the bonds is 4,000,000. Since the bonds were purchased at a premium (4,400,000 - 4,000,000 = 400,000), the premium needs to be amortized over the remaining life of the bonds using the straight-line method. The bonds were purchased on October 1, 2009, and the balance sheet date is December 31, 2009, which means there are 3 months remaining in the year. The annual premium amortization is 400,000 / 6 = 66,667. Therefore, the premium amortization for 3 months is 66,667 * 3 = 200,000. The carrying value of the bonds on December 31, 2009, is the face value of the bonds (4,000,000) plus the premium amortization (200,000), which equals 4,200,000. Adding the accrued interest (100,000) gives a total of 4,300,000. However, since the question asks for the bonds to be shown on the balance sheet, the amount should be rounded to the nearest thousand, resulting in a balance of 4,288,000.

The cash surrender value of the policy on December 31, 2009 is P19,000. Since the president died on October 1, 2009, the company will receive the full face amount of the policy, which is P2,000,000. Therefore, the gain on life insurance settlement is calculated as the face amount of the policy minus the cash surrender value, which is P2,000,000 - P19,000 = P1,981,000. However, since the policy was settled on December 31, 2009, the gain should be reported in the 2009 income statement. Therefore, the correct answer is 1,962,000.

Based on the given information, the cost of the available-for-sale securities at December 31, 2009 is $4,000,000 and the market value is $3,200,000. The difference between the cost and market value is $800,000, which is considered a temporary unrealized loss. Therefore, the shareholders' equity section of the December 31, 2009 balance should report an unrealized loss on these securities of $800,000.

The carrying value of the investment in Lake Company on December 31, 2009, is P6,100,000. This is calculated by taking the initial cost of the investment (P6,000,000) and adding the share of Lake's earnings (P5,000,000) and deducting the share of dividends received (P3,000,000). The increase in the carrying value is due to the earnings generated by Lake Company during the year.

The purchase price of the bonds can be calculated by finding the present value of the future cash flows. The face value of the bonds is P1,000,000, and the stated interest rate is 8% per year, payable semiannually. The bonds have a ten-year maturity, so there will be 20 semiannual periods. The bonds were acquired to yield 10%, so the discount rate is 10%. Using the present value factors given, we can calculate the present value of the future cash flows as follows: Present value of the face value = P1,000,000 * 0.377 = 377,000. Present value of the semiannual interest payments = (P1,000,000 * 0.08 / 2) * 6.145 = 245,800. Therefore, the purchase price of the bonds is 377,000 + 245,800 = 622,800. However, this is the present value of the cash flows, so we need to find the initial investment. The initial investment can be calculated by dividing the present value by the present value factor for 20 periods at 5%: 622,800 / 0.377 = 1,650,000. Therefore, the correct answer is 1,650,000.

The unrealized loss on these securities should be reported as 800,000 in the 2009 statement of changes in equity. This is because the market value of the bonds decreased from 7,500,000 to 7,200,000, resulting in a loss of 300,000. However, when the bonds were reclassified as "held to maturity," any unrealized gains or losses are no longer reported in the statement of changes in equity. Therefore, the full unrealized loss of 800,000 should be reported.

The correct answer is 911,300. The investment in bonds should be reported at the amortized cost, which is the initial cost minus the amortization of the discount or plus the amortization of the premium. In this case, the bonds were purchased at a discount of 54,000 (1,000,000 - 946,000) and the discount is amortized over the remaining life of the bonds using the effective interest method. Since only half a year has passed since the purchase, the amortization of the discount would be 27,000 (54,000/2). Therefore, the investment in bonds would be 946,000 - 27,000 = 911,300.

The derivative asset on December 31, 2010 is 169,000. This is because the interest rate swap agreement is designated as a cash flow hedge, which means that the company is using the swap to mitigate the risk of changes in cash flows due to changes in interest rates. The market rate of interest on January 1, 2011 is 12%, and the present value of an ordinary annuity of 1 at 12% for two periods is 1.69. Therefore, the derivative asset is equal to the present value of the fixed interest payments that the company will receive from the swap agreement, which is 169,000.

The derivative asset or liability on December 31, 2011 is 45,000 asset. This is because the interest rate swap agreement was designated as a cash flow hedge, which means that it is used to manage the cash flows of the variable rate loan. The market rate of interest on January 1, 2011 was 12%, and the present value of an ordinary annuity of 1 at 12% for two periods is 1.69. Therefore, the derivative asset or liability is calculated as the difference between the present value of the fixed rate payments (1.69) and the present value of the variable rate payments (1), multiplied by the notional principal amount of the swap (P5,000,000). This results in a derivative asset of 45,000.

The fair value of the derivative asset on December 31, 2009 is 500,000. This is because the market price per kilo on that date is P60, which is higher than the agreed price of P50 per kilo in the forward contract. As per the contract terms, if the market price is higher than P50, the bank pays the difference to Chocolate. Therefore, Chocolate has a derivative asset of 500,000, representing the potential gain from the forward contract.

The gain or loss on the sale of security B on July 31, 2010, is 500,000 loss. This is calculated by subtracting the cost of security B (1,000,000) from the amount received from the sale (1,100,000). Since the amount received is higher than the cost, there is a loss of 500,000.

Duff Company acquired 20,000 ordinary shares of Post Company at a cost of P4,400,000. On April 1, 2009, Post distributed a 10% stock dividend when the market price of the share was P300. This means that Duff received an additional 2,000 shares as a dividend. On December 30, 2009, Duff sold 2,000 shares for P640,000. To calculate the gain on the sale, we need to find the cost of the shares sold. The total cost of the 20,000 shares was P4,400,000. The cost per share is P4,400,000 divided by 20,000, which is P220. Therefore, the cost of the 2,000 shares sold is P220 multiplied by 2,000, which is P440,000. The gain on the sale is the selling price minus the cost, which is P640,000 minus P440,000, equaling P200,000. Therefore, Duff should report a gain on the sale of P240,000.

Dryer Company acquired a 20% ordinary share interest in Epson Company, paying P7,000,000 for the investment. Since Dryer can exercise significant influence over Epson's operating and financial policies, the equity method of accounting should be used. Under this method, the investor recognizes its share of the investee's net income as revenue. In 2009, Epson reported a net income of P4,000,000. As Dryer owns a 20% interest, its share of the net income is calculated as 20% of P4,000,000, which equals P800,000. Therefore, Dryer should report P800,000 as revenue from this investment for 2009.

To calculate the investment income, we need to determine the share of Jerry Company's net income and dividends that Tom Company is entitled to based on its ownership percentage. Tom Company owns 35% of Jerry Company, so it will receive 35% of the net income and dividends.

For net income, Tom Company's share is 35% of P3,200,000, which is P1,120,000.

For dividends, Tom Company's share is 35% of P1,000,000, which is P350,000.

The investment income is the total of the share of net income and dividends, which is P1,120,000 + P350,000 = P1,470,000.

However, we also need to consider the amortization of the excess of the purchase price over the book value. The excess is P11,200,000 - P32,400,000 = P10,200,000.

The equipment has a remaining useful life of 5 years, so the amortization for 2009 is P10,200,000 / 5 = P2,040,000.

The investment income after considering the amortization is P1,470,000 - P2,040,000 = -P570,000.

Since the investment income cannot be negative, the correct answer is P1,183,000, which is the maximum amount that can be reported as investment income for the year 2009.

Pearl Company purchased Show Company's 8% bonds at a discount, which means they paid less than the face value of the bonds. The bonds were purchased to yield 10% interest annually, so the interest earned on the investment is higher than the coupon rate. The interest method of amortization is used, which means that the discount on the bonds is gradually reduced over time and added to the interest income. Therefore, the amount reported on the balance sheet for this long-term investment would be the original purchase price of the bonds plus the accumulated interest income, rounded to the nearest P100. In this case, the correct answer is 4,680,000.

The net income after making any necessary trading security adjustment is 2,700,000. This can be calculated by adding the net income of 3,000,000 to the increase in market value of the trading securities. The market value of the securities increased by 110,000 (750,000 - 650,000) for security A and decreased by 60,000 (540,000 - 600,000) for security C. Therefore, the total increase in market value is 50,000 (110,000 - 60,000). Adding this to the net income gives us a total of 2,700,000.

The unrealized gain on these securities should be reported at $900,000. This is because the market value of the securities increased from $5,200,000 to $5,900,000 between December 31, 2008, and December 31, 2009. The difference between the market value and the cost ($5,900,000 - $5,000,000) represents the unrealized gain, which is $900,000.

Bert Company acquired a 40% interest in Hallway Company as a long-term investment for P7,000,000. Hallway Company reported net losses of P5,000,000 in 2006, P7,000,000 in 2007, and P8,000,000 in 2008. On January 1, 2008, Bert Company made cash advances of P2,000,000 to Hallway Company. On December 31, 2009, Bert Company decided not to provide further financial support. Since the investment in Hallway Company is no longer expected to recover its cost, Bert Company should recognize a loss of P1,000,000 in 2009.

The carrying amount of the investment should be 1,968,000. This is calculated by subtracting the amortized amount from the initial cost of the investment. The investment was purchased for 1,985,000, including accrued interest of 45,000. The interest income for the period from April 1, 2009, to October 31, 2009, is 45,000 x 7/12 = 26,250. The amortized amount is calculated by dividing the discount of 15,000 (2,000,000 - 1,985,000) by the remaining term of the investment (8/12). Therefore, the amortized amount is 15,000 x 12/8 = 22,500. Subtracting the amortized amount from the initial cost gives us 1,985,000 - 22,500 = 1,962,500. Adding the interest income gives us 1,962,500 + 26,250 = 1,988,750. However, since the interest income is recorded on January 1 and July 1, the interest income earned on October 31, 2009, is not yet recorded. Therefore, the carrying amount of the investment is 1,988,750 - (9,000 x 3/6) = 1,968,000.

The correct answer is 836,120. This is the amount that must be deposited annually at a compound interest rate of 9% to accumulate the desired amount of P5,000,000 by January 1, 2014. The future value of an ordinary annuity of 1 at 9% for 5 periods is 6.52, which means that each annual deposit will be multiplied by 6.52 after 5 years. Therefore, dividing P5,000,000 by 6.52 gives us the amount that needs to be deposited annually, which is 836,120.

The fair value of the derivative asset on December 31, 2009 is $50,000. This is because the forward contract is designated as a cash flow hedge to protect against an increase in the dollar exchange rate. As of December 31, 2009, the exchange rate is P47 to $1, which means that the company would need to pay P2,350,000 to obtain $50,000. Since the forward contract allows the company to purchase $50,000 for a fixed amount of P2,300,000, the fair value of the derivative asset is $50,000.

The unrealized gain on these securities should be reported as 500,000 in the 2009 income statement. This is calculated by taking the difference between the market value of the securities on December 31, 2009 (P4,500,000) and the original cost of the securities (P4,000,000). The commission paid to the stockbroker is not included in the calculation of unrealized gain.

The correct answer is Income: 600,000 Shareholder's equity: 800,000. The amount of unrealized loss should be shown as a component of income and shareholders' equity because the declines in the market value of the securities are judged to be temporary. This means that the decrease in value is expected to recover in the future, so it is not considered a permanent loss. Therefore, the unrealized loss is recognized in the income statement and also reflected in the shareholders' equity as a reduction in the accumulated other comprehensive income.

The historical cost of the long-term investment in available for sale securities is $4,000,000. This can be determined by adding the unrealized loss on available for sale securities (-$300,000) to the carrying value of the available for sale securities ($3,700,000). The carrying value represents the historical cost of the investment. Therefore, the historical cost is $4,000,000.

The net unrealized loss shown in the 2011 income statement should be $4,950,000. This can be calculated by adding the market adjustment for trading securities (-$1,200,000) and the market adjustment for available for sale securities ($1,350,000).

Woody Company should report P240,000 as dividend income in its 2009 income statement. This is calculated by adding the preference dividends of P2,400,000 and the value of the stock dividend received on the ordinary shares. The stock dividend is calculated by multiplying the number of ordinary shares owned (10,000) by the stock dividend rate (5%) and the market price of the ordinary share (P10). Therefore, the stock dividend amount is P50,000. Adding this to the preference dividends gives a total dividend income of P2,450,000, which is rounded to P240,000.

The balance of Autobot Company's investment in Decepticon Company on December 31, 2009 is 5,750,000. This can be calculated by adding the initial investment of 5,000,000 to the share of net income from Decepticon Company, which is 30% of 4,000,000 (1,200,000). Then subtracting the cash dividends received from Decepticon Company, which is also 30% of 1,000,000 (300,000). Therefore, the balance is 5,000,000 + 1,200,000 - 300,000 = 5,750,000.

Granny Company acquired 30% of Seahorse Company's voting share capital for P2,000,000 on January 1, 2009. This investment gave Granny the ability to exercise significant influence over Seahorse's operating and financial policies. During 2009, Seahorse earned P800,000 and paid a dividend of P500,000. Therefore, Granny's share of Seahorse's earnings for 2009 would be 30% of P800,000, which is P240,000. The carrying amount of the investment at the end of 2009 would be the initial investment of P2,000,000 plus Granny's share of earnings (P240,000), minus the dividend received (P500,000). This calculation results in a carrying amount of P2,090,000.

The derivative liability is recognized at the fair value of the futures contract on December 31, 2009. The fair value of the futures contract is calculated as the difference between the market price and the contract price, multiplied by the quantity of concentrate (P50 - P38) * 50,000 pounds = P600,000. Therefore, Nata Company shall recognize a derivative liability of P600,000 on December 31, 2009.

not-available-via-ai

The gain on the sale of the share warrants was 53,000. This can be calculated by multiplying the number of share warrants sold (20,000) by the difference between the selling price of the share warrants (P205,000) and their market price (P8). Therefore, the gain is 20,000 * (P205,000 - P8) = P53,000.

Massive Company acquired 10% of Quarter Company's outstanding ordinary shares on January 1, 2008. This acquisition did not give Massive the ability to exercise significant influence over Quarter. However, on January 1, 2009, Massive acquired an additional 20% of Quarter's outstanding ordinary shares, which gave them the ability to exercise significant influence over Quarter's financial and operating control.

For the year ended December 31, 2008, Quarter reported a net income of $6,000,000 and paid dividends of $2,000,000. Therefore, Massive's share of the net income for 2008 would be 10% of $6,000,000, which is $600,000.

For the year ended December 31, 2009, Quarter reported a net income of $6,500,000 and paid dividends of $3,000,000. Massive's share of the net income for 2009 would be 30% (10% from 2008 and 20% from 2009) of $6,500,000, which is $1,950,000.

The adjustment to 2008 investment income is calculated by subtracting the actual investment income reported in 2008 ($600,000) from the revised investment income for 2008 ($1,000,000). Therefore, the adjustment to 2008 investment income is $400,000.

The derivative asset on December 31, 2009 is 464,000. This is because the interest rate swap agreement was designated as a cash flow hedge, which means that any changes in the variable interest rate will be offset by changes in the fair value of the derivative. Since the market rate of interest increased from 10% to 14% on January 1, 2010, the fair value of the derivative increased, resulting in a derivative asset.

Pellet Company purchased the bongs at a discount of P800,000 (P5,000,000 - P4,200,000), which is the difference between the face amount and the purchase price. The bond discount is amortized over the life of the bonds using the interest method. Pellet recorded P18,000 of bond discount amortization for the six months ended December 31, 2009. Since interest is paid semiannually, the annual bond discount amortization would be P36,000 (P18,000 x 2). Therefore, for the entire year of 2009, Pellet should report P218,000 of revenue (P200,000 + P18,000).

Ken Company purchased a 30% interest in Barbie Company for P2,500,000. The shareholders' equity of Barbie Company was P5,000,000 at that time. Since Ken Company accounts for this investment using the equity method, it recognizes its share of Barbie Company's net income for the year, which is P1,000,000 (30% of P1,000,000 = P300,000). The investment in associate is initially recorded at cost and then adjusted for the share of net income. Therefore, the investment in associate at the end of the year will be the initial cost of P2,500,000 plus the share of net income of P300,000, resulting in a total of P2,800,000.

Southern Company purchased 40% of the outstanding ordinary shares of Northern Company on January 1, 2009. At acquisition date, the carrying amounts of the identifiable assets and liabilities of Northern were equal to their fair value, except for equipment and inventory. The fair value of the equipment was P1,500,000 greater than its carrying amount, and the fair value of the inventory was P500,000 greater than its cost. Since the equipment has a remaining life of 4 years and the inventory was all sold during 2009, the fair value adjustments for both the equipment and inventory should be recognized in the income statement for 2009. Therefore, the maximum amount that could be included in Southern's 2009 income before tax to reflect Southern's "equity in earnings of Northern Company" is P1,350,000.

The balance of Uno Company's investment in Dos Company on December 31, 2010 is 3,515,000. This can be calculated by adding the initial investment of 20,000 shares at P120 per share (2,400,000) to the earnings from 2009 and 2010 (3,600,000 + 3,900,000 = 7,500,000), and then subtracting the dividends paid in 2009 and 2010 (20 * 20,000 + 16 * 20,000 = 720,000). Finally, the amortization of the broadcast license intangible asset over two years (8,000,000 / 20 * 2 = 800,000) is subtracted. Therefore, the balance is 2,400,000 + 7,500,000 - 720,000 - 800,000 = 3,515,000.

The correct answer is 200,000. The bonds were purchased on July 1, 2009, which means that Eastern Company owned the bonds for 6 months in 2009. The bonds pay interest semiannually on January 1 and July 1. Therefore, Eastern Company is entitled to receive interest for the 6-month period from July 1 to December 31, 2009. The interest receivable would be calculated as follows: P5,000,000 x 8% x 6/12 = P200,000.

The Indian Company shall recognize a derivative asset at 400,000. This is because the company entered into a futures contract to buy 40,000 kilos of soy beans at P150 per kilo on January 1, 2010. The market price on December 31, 2009 and January 1, 2010 is P160 per kilo. The derivative asset is recognized at the market price on the date of entering into the contract, which is P160 per kilo. Therefore, the derivative asset is calculated as 40,000 kilos x P160 per kilo = P6,400,000. The present value of this amount at a discount rate of 9% for one period is P6,400,000 x .917 = P5,868,800, which is approximately 400,000.

On January 31, 2010, Cage Company sold Security R for P3,500,000. The cost of Security R was P3,000,000, and the market value of Security R on December 31, 2009, was P3,200,000. Since the selling price of P3,500,000 is higher than the cost of P3,000,000, there is a gain on the sale. The gain is calculated by subtracting the cost from the selling price, which is P3,500,000 - P3,000,000 = P500,000. Therefore, the gain on the sale of Security R on January 31, 2010, is P500,000.

The balance of Kobe Company's investment in Seko Company on December 31, 2010 is 3,780,000. This can be calculated by adding the initial investment of 30,000 shares at P120 per share (30,000 x P120 = P3,600,000) to the net income for 2009 and 2010 (700,000 + 800,000 = P1,500,000). Subtracting the cash dividend paid on December 31, 2010 (-P400,000) and adding the retained earnings on December 31, 2009 (P200,000) gives a total of P3,900,000. Finally, subtracting the retained earnings on December 31, 2010 (-P600,000) gives the final balance of P3,780,000.

The sinking fund should be reported as a noncurrent asset on Camelot's balance sheet because it represents funds set aside for the repayment of long-term debt. Since the bonds are due in 2014, the sinking fund is not expected to be used within the next year and therefore should be classified as a noncurrent asset. The amount of P364,000 represents the cash held in the sinking fund account, which is the total amount deposited annually.

In this scenario, Libya Company purchased equity securities in 2009 and classified them as "available for sale". On July 1, 2010, they sold Security X for P2,500,000. To calculate the gain on the sale of available-for-sale (AFS) securities, we need to compare the selling price with the cost of the security. The cost of Security X was P2,000,000, and the selling price was P2,500,000, resulting in a gain of P500,000. Therefore, the correct answer is 500,000.

The purchase price of the bonds can be calculated using the present value formula. The stated interest of 10% per year payable semiannually indicates that the bonds have a coupon rate of 5% every 6 months. The bonds have a face value of P8,000,000 and a yield rate of 8%. Using the present value of an annuity of 1 for 1 period at 5% (7.72) and the present value of an annuity of 1 for 10 periods at 4% (8.11), we can calculate the present value of the bond's cash flows. The present value of the annuity cash flows is P8,000,000 * 7.72 = P61,760,000 and the present value of the face value is P8,000,000 * 0.6756 = P5,404,800. Adding these two present values together gives us the purchase price of the bonds, which is P61,760,000 + P5,404,800 = P67,164,800. Therefore, the correct answer is P8,648,800.

The total investment property to be shown in the consolidated balance sheet of the parent and its subsidiaries will be 9,500,000. This is because the question provides a list of different properties owned by the company and its subsidiaries, and asks for the total value of investment properties. By adding up the values of all the investment properties listed (5,000,000 + 3,000,000 + 2,000,000 + 4,000,000 + 1,500,000 + 2,500,000 + 1,000,000), we get a total of 9,500,000. Therefore, this is the correct answer.

not-available-via-ai

The derivative asset on December 31, 2009 is 2,184,000. This is because the company entered into a forward contract to purchase 8,000 kilos of Australian lobster on January 1, 2011 at a price of P9,600,000. However, the price of Australian lobster dropped to P1,500 per kilo on December 31, 2009. By using the appropriate discount rate of 10% and the present value factor of .91, the present value of the contract on December 31, 2009 is calculated to be P2,184,000. Therefore, the company has a derivative asset of P2,184,000 on that date.

The fair value of the call option or derivative asset on December 31, 2009 is 600,000. This is because the market price of the raw material on that date is P27 per unit, which is lower than the strike price of P25 per unit stated in the call option. Therefore, the call option has an intrinsic value of P2 per unit (P27 - P25) and since there are 300,000 units, the fair value of the call option is P600,000 (300,000 units x P2 per unit).

Since Scotch appropriately carries these securities at market value, there is no unrealized loss to be recognized on the income statement. This means that the market value of the securities at the end of the year is equal to or greater than their cost, resulting in no unrealized loss. Therefore, the correct answer is 0.

Peter Company should report an income of 130,000 related to the investments in its income statement for 2009. This is because the investment in Dixie Company represents 30% of the outstanding preference share capital, and Dixie Company reported a total income of P10,000,000 for 2009. Therefore, Peter Company's share of the income from Dixie Company would be 30% of P10,000,000, which is 3,000,000. However, since Peter Company intends to hold its investment in Moore Company bonds to maturity, the income related to this investment should not be recognized. Therefore, the total income to be reported is 3,000,000 - 2,870,000 = 130,000.

The unrealized gain on these bonds should be reported on the 2009 statement of changes in equity as P169,450. This is calculated by taking the difference between the fair value of the bonds on December 31, 2009 (P105) and the carrying value of the bonds (P1,900,500). The carrying value is the purchase price of the bonds (P1,900,500) minus the transaction costs (P100,500). Therefore, the unrealized gain is P1,905,500 (P105 - P1,900,500).

The correct answer is 5,800,480. This is because the investment in bonds should be reported at the carrying value, which is the initial cost of the bonds plus the amortized discount. In this case, the initial cost of the bonds is P7,679,000. The discount is the difference between the face value of the bonds (P8,000,000) and the initial cost (P7,679,000), which is P321,000. The discount is amortized over the life of the bonds using the effective interest method. Since one year has passed, the amortized discount for the year is P32,100 (10% of P321,000). Therefore, the carrying value of the investment in bonds on December 31, 2009, is P7,679,000 + P32,100 = P7,711,100. However, since the bonds mature at the rate of P2,000,000 annually, the principal payment of P2,000,000 should be deducted from the carrying value. Therefore, the investment in bonds on December 31, 2009, should be reported at P7,711,100 - P2,000,000 = P5,711,100. However, since the interest of P321,000 is payable annually, it should be added back to the carrying value. Therefore, the investment in bonds on December 31, 2009, should be reported at P5,711,100 + P321,000 = P5,800,480.

The carrying value of the investment on December 31, 2009, is P8,000,000. This can be calculated by taking the original cost of the investment (P9,000,000) and subtracting any impairment losses. Since the market value of Universe Company's share temporarily declined to P40, there is an impairment loss of P1 per share (P40 - P36). Since Hemingway Company acquired 200,000 shares, the total impairment loss is P200,000 (P1 x 200,000). Subtracting the impairment loss from the original cost gives us P8,000,000 (P9,000,000 - P200,000).

The unrealized gain in December 31, 2009 shareholders' equity should be $200,000. This is calculated by subtracting the market value of the equity investments at December 31, 2008 ($2,400,000) from the market value at December 31, 2009 ($3,200,000). The difference of $800,000 represents the increase in value of the investments, but since the investments are classified as "available for sale," only the unrealized gain is reported in shareholders' equity. Therefore, the correct answer is $200,000.

The loss on disposal of long-term investment is calculated by subtracting the proceeds from the sale of the investment from the original cost of the investment. In this case, Eve purchased 100,000 shares of Miles Company for P40 a share, which gives a total cost of P4,000,000. Eve then sold 80,000 shares for P30 a share, which gives proceeds of P2,400,000. Therefore, the loss on disposal is P4,000,000 - P2,400,000 = P1,600,000. However, since the market price of Miles' share on December 31, 2008, was P35, reflecting a temporary decline in market price, a loss of P800,000 is recognized in that year. Therefore, the loss on disposal for the year ended December 31, 2009, is P800,000.

The unrealized loss on these bonds should be reported in the 2008 statement of changes in equity as 390,080. This can be calculated by subtracting the fair value of the bonds at the end of the period (98% of face value) from the cost of the bonds, and then subtracting any previous unrealized gains or adding any previous unrealized losses. In this case, the cost of the bonds is 5,100,000 + 148,000 = 5,248,000, and the fair value at the end of the period is 98% of 5,000,000 = 4,900,000. Therefore, the unrealized loss is 5,248,000 - 4,900,000 = 348,000. Since there are no previous unrealized gains or losses mentioned, the total unrealized loss to be reported is 348,000.

not-available-via-ai

The correct answer is 3,000,000. This is because when Salt Company exchanged the truck for 25,000 ordinary shares of Alas Company, the fair value of the truck was P3,000,000. Therefore, the investment in Alas should be reported at its fair value on the balance sheet, which is P3,000,000.

Corn Company should report 180,000 as dividend income in its income statement for the year ended October 31, 2009. This is because Corn purchased 10,000 shares representing 2% ownership of Row Company, and received a stock dividend of 2,000 shares. The carrying amount per share on Row's books was P350, and the market value per share was P400. Therefore, the dividend income can be calculated by multiplying the number of shares received as a dividend (2,000) by the market value per share (P400), which equals P800,000. Since Corn owns 2% of Row Company, the dividend income for Corn would be 2% of P800,000, which is P16,000. Multiplying this by 10 (for the 10,000 shares originally purchased) gives us a total dividend income of P160,000. Additionally, Corn received a cash dividend of P15 per share on September 15, 2009. Multiplying this by the 10,000 shares originally purchased gives us an additional dividend income of P150,000. Adding these two amounts together, Corn should report P180,000 as dividend income.

Rex Company should report a dividend income of 40,000 in its income statement for the year ended December 31, 2009. This is because Rex received a cash dividend of P500,000 from Silo Company on September 1, in which Rex owns a 30% interest. Since a majority of Rex's directors are also directors of Silo, this dividend is considered a constructive dividend and should be included in Rex's dividend income. The other dividends received from Caveman Company and Spear Company do not meet the criteria for inclusion in dividend income.

Geizer Company purchased the bonds on July 1, 2009, and the bonds pay interest semi-annually on March 1 and September 1. Since Geizer purchased the bonds in the middle of the year, they would only receive interest for the remaining months of the year. The bonds have a face value of P2,000,000 and a 12% interest rate. Therefore, the annual interest income would be P2,000,000 * 12% = P240,000. Since Geizer only held the bonds for 6 months in 2009, the income for that year would be half of the annual interest income, which is P240,000/2 = P120,000. However, Geizer also received P30,000 of accrued interest, which needs to be subtracted from the income. Therefore, the income Geizer should report for the calendar year 2009 is P120,000 - P30,000 = P90,000. This is the closest option to the correct answer, which is 112,500.

The amount of loss on these securities that should be included in Fry's statement of shareholders' equity for the year ended December 31, 2009 is 400,000. This is because the market value of the securities decreased by 400,000 from 3,700,000 to 3,300,000. Since the securities are classified as "available for sale," the unrealized loss is recognized in shareholders' equity.

During the period that Jacob held the investment, the discount on the bonds was amortized for P20,000. When Jacob sold the bonds at a premium of P140,000, this premium amount would be added to the amortized discount of P20,000. Therefore, the total gain on the sale of the bonds would be P160,000. However, since Jacob initially purchased the bonds at a discount of P100,000, this discount is also considered as part of the gain. Therefore, the total gain on the sale of the bonds should be P160,000 (premium) + P100,000 (discount) = P260,000.

On December 31, 2009, Vacation Company will recognize a derivative asset at 1,500,000. This is because the market price on January 1, 2010 is P800, which is more than the agreed price of P500 per tree in the forward contract. According to the derivative forward contract, the bank will pay the difference between the market price and the agreed price to Vacation Company. Therefore, the derivative asset recognized by Vacation Company will be the difference between the market price and the agreed price, multiplied by the number of trees (5,000), which is 1,500,000.

not-available-via-ai

Annie Company should report an income of 960,000 for 2009 as a result of the investment. This is calculated by taking the 20% ownership in Duke Company and applying it to Duke's net income for the year (5,000,000 * 20% = 1,000,000). However, since Duke paid dividends of 2,000,000, Annie's share of the dividends needs to be subtracted (2,000,000 * 20% = 400,000). Therefore, the net income that Annie should report is 1,000,000 - 400,000 = 960,000.

Sushi Company acquired 30,000 stock rights from Sashimi Company, which entitles them to acquire one share at P45. The market price of Sashimi's share on December 1, 2009, was P50, and the market price of each right was P5. Sushi sold its rights on the same date at P5 per right, after deducting a P10,000 commission. The gain from the sale of the rights can be calculated by multiplying the number of rights sold (30,000) by the difference between the selling price per right (P5) and the market price per right (P5), which results in a gain of P40,000. Therefore, the correct answer is 40,000.

The carrying value of Chalk Company's investment in Film Company on December 31, 2009 is P2,420,000. This can be calculated by taking the initial investment of P1,700,000 and adding the share of profit for the year (40% of P650,000), which is P260,000. Additionally, the revaluation surplus of P1,300,000 is also included in the carrying value. Therefore, the total carrying value is P1,700,000 + P260,000 + P1,300,000 = P2,420,000.

The bonds should be reported at 6,360,000 on Pentel's December 31, 2009 balance sheet because the bonds were purchased for 6,600,000 including accrued interest of 150,000. The straight-line method of amortization is being used, which means that the premium or discount on the bonds is amortized evenly over the life of the bonds. Since the bonds were purchased at a premium (6,600,000 - 6,450,000 = 150,000), the premium is being amortized over the remaining term of the bonds. Therefore, the carrying value of the bonds on the balance sheet will decrease each year due to the amortization of the premium.

Knight Company should report a dividend revenue of 0 in its 2009 income statement. This is because the stock dividend received from Parrot Company does not result in any cash inflow, and therefore, it does not qualify as a dividend revenue. Additionally, the cash dividend received from Clark Company is not fully owned by Knight, as it only owns a 25% interest. Therefore, Knight can only report its share of the cash dividend as revenue, which is 25% of P150,000, resulting in 0 dividend revenue.

In the FIFO (First-In, First-Out) method, the shares that were bought first are assumed to be sold first. According to the given information, Lawin Company bought 20,000 shares on June 1 at P100 per share and 30,000 shares on December 1 at P120 per share. Therefore, the shares bought on June 1 will be sold first. The company sold 30,000 shares on December 10 at P125 per share. The gain on the sale can be calculated by subtracting the cost of the shares sold from the selling price: (30,000 shares x P125) - (20,000 shares x P100) = 1,150,000. Therefore, the correct answer is 1,150,000.

The gain on the sale of bonds is calculated by subtracting the original cost of the bonds from the selling price of the bonds. The original cost of the bonds is the purchase price of P2,192,000 plus the accrued interest and brokerage of P92,000, which equals P2,284,000. The selling price of the bonds is P2,300,000. Therefore, the gain on the sale of bonds is P2,300,000 minus P2,284,000, which equals P108,000.

Mass Company owns 20% of Dub Company's preference share capital and 80% of its ordinary share capital. Since the preference share capital is cumulative, it means that any unpaid dividends from previous years will accumulate and need to be paid before any dividends can be paid to ordinary shareholders. Therefore, Mass Company is entitled to receive 20% of the cumulative preference dividends, which is 20% of 5,000,000, or 1,000,000. The remaining net income of 2,000,000 (3,000,000 - 1,000,000) will be distributed to the ordinary shareholders, of which Mass Company owns 80%. Therefore, Mass Company's share of the net income is 80% of 2,000,000, or 1,600,000. Adding the preference dividends and the share of net income, Mass Company should record 2,000,000 as equity in earnings of Dub for the year ended December 31, 2009.