MIGRASO, CASHOFIA D
BSA-2
Intermediate Accounting 1
PROBLEM 4 pp. CHAPTER 11
1A Date Interest Received Interest income Amortization
1/1/x1
1/1/x2 100,000 114,236 14,236
1/1/x3 100,000 115,944 15,944
1/1/x4 100,000 117,857 17,857
entry:
1/1/x3 FVPL asset (1M x 104%) 1,040,000
Amortized cost asset
Gain on reclassification (squeeze)
2A New carrying amount- fair value on reclassification date
Face amount
Premium
3C 1/1/x3 FVPL asset (1M x 104%) 1,040,000
Amortized cost asset
Gain on reclassification (squeeze)
4A 1/1/x3 FVPL asset [1M x (104% - 103%)] 10,000
Unrealized gain - OCI
to record the fair value change on reclassification date
1/1/x3 Amortized cost asset (Squeeze) 982,143
Unrealized gain - OCI 57,857
FVOCI asset
to record the reclassification
5D fair value on reclassification date
supporting journal entries:
1/1/x3 FVPL asset [1M x (104% - 103%)] 10,000
Unrealzed gain - P/L
1/1/x3 Amortized cost asset (1M x 104%) 1,040,000
FVPL asset
6A Carrying amount - Jan. 1, 20x3 (after fair value adjustment)
Amortized cost - Jan. 1, 20x3
Cumulative gain on OCI/Equity, including gain on 1/1/x3
7A 12/31/20x Impairment loss- P/L 10,000
Unrealized loss -OCI 30,000
FVOCI [(2M x 98%) -2M]
8B July 1,19x7 10,000
Sept. 21, 19x9 12,000
22,000
Multiply by: P10
220,000
9A 320,000 The non-cash asset's fair value
10 B Ex-dividend price 44
Multiply by: shares 6,000
264,000
11 C Shares 2,800
Multiply by: Selling price 100
280,000
12 D Only a memo entry is made
13 C FIFO method
Lot Date of acquisition Original shares held Share dividends
(a) (b) = (a) x 10%
1 July 1,19x7 10,000 1,000
2 Sept. 21, 19x9 12,000 1,200
Total 2,200
Total share dividends (2,000 x 1/2) 1,100
FIFO cost allocation: (1,000 x 60) + (100 x 40) 64,000
entry:
Cash (2,200 x 1/2 x 25) 27,500
Loss on sale of investment 36,500
Investments in stocks
Average method
Total cost (660k + 528k +264k)
Divide by: Total sahres (10,000 + 12,000 + 6,000 + 2,000
Average cost per share
Multiply by: Number of shares sold
Cost allocated to the shares sold
entry:
Cash (2,200 x 1/2 x 25) 27,500
Loss on sale of investment 25,388
Investments in stocks
14 B Stock rights 1,000
Multiply by: Fair value per stock right 5
5,000
15 D Scenario A: Rights-on
Fair value of share right-on - Subscription price
T/P value of 1 right =
No. rights needed to purchase one share + 1
75 - 45
T/P value of 1 right =
5+1
T/P value of 1 right = 5
Initial measurement of stock received: (20,000 x 5)
Scenario B: ex- rights
Fair value of share ex-rights - Subscription price
T/P value of 1 right =
No. rights needed to purchase one share
65 - 45
T/P value of 1 right =
5
T/P value of 1 right = 4
Initial measurement of stock received: (20,000 x 4)
Scenario C: Investment measured at cost
Stock rights received are recorded through memo entry only
Present Value Carrying amount - Jan. 1, 20x3 (after fair value adjustment)
951,963 Amortized cost - Jan. 1, 20x3
966,199 Cumulative gain on OCI/Equity, including gain on 1/1/x3
982,143
1,000,000
982,143
57,857
1,040,000 supporting journal entries:
-1,000,000 1/1/x3 FVPL asset [1M x (104% - 103%)]
40,000 Unrealzed gain - P/L
1/1/x3 Amortized cost asset (1M x 104%)
FVPL asset
982,143 Carrying amount - Jan. 1, 20x3 (after fair value adjustment)
57,857 Amortized cost - Jan. 1, 20x3
Cumulative gain on OCI/Equity, including gain on 1/1/x3
10,000
1,040,000
10,000
1,040,000
1,040,000
-982,143
57,857
40,000
New shares held Acquisition cost New cost per sh.
(c) = (a) + (b) (d) (d) / (c)
11,000 660,000 60
13,200 528,000 40
shares sold.
64,000
1,452,000
30,200
48.08
1,000
52,888
52,888
ht-on - Subscription price
purchase one share + 1
- 45
+1
100,000
ights - Subscription price
o purchase one share
- 45
5
80,000
0
1,040,000
-982,143
57,857
10,000
10,000
1,040,000
1,040,000
1,040,000
-982,143
57,857