Case 2-4. Audit of various equity and debt securities. Assassin Corporation's accounting records included the following investments: 1/1/18 12/31/18 12/31/19 1/1/20 Investment in Ordinary Shares P1,000,000 7/1/20 200,000 300,000 Investment in Bonds P1,051,510 P800,000

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Chapter1: Financial Statements And Business Decisions
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Requirements:
Based on the above and the result of your audit, answer the following:
1. The carrying amount of Investment in Ordinary Shares as of December 31, 2020 is misstated by
с. Р50,000 оver
d. P50,000 under
а. Р200,000 over
b. P200,000 under
2. The carrying amount of Investment in Bonds as of December 31, 2020 is overstated by
а. Р13,900
b. P15,880
c. P18,020
d. P33,900
3. The net amount to be recognized in 2020 profit or loss related to these investments is
с. Р134,121
d. P114,121
а. Р384,121
b. P284,121
4. If the investment in bonds is FVTOCI, the carrying amount as of December 31, 2020 is overstated by
а. Р15,880
b. P18,020
с. Р33,900
d. P38,020
5. An audit procedure that provides evidence about proper valuation of equity securities classified as FA@FVTPL
is
Confirmation of securities held by broker.
b. Calculation of premium or discount amortization.
Recalculation of investment carrying amount by applying the equity method.
d. Comparison of carrying amount with current market quotations.
a.
С.
Transcribed Image Text:Requirements: Based on the above and the result of your audit, answer the following: 1. The carrying amount of Investment in Ordinary Shares as of December 31, 2020 is misstated by с. Р50,000 оver d. P50,000 under а. Р200,000 over b. P200,000 under 2. The carrying amount of Investment in Bonds as of December 31, 2020 is overstated by а. Р13,900 b. P15,880 c. P18,020 d. P33,900 3. The net amount to be recognized in 2020 profit or loss related to these investments is с. Р134,121 d. P114,121 а. Р384,121 b. P284,121 4. If the investment in bonds is FVTOCI, the carrying amount as of December 31, 2020 is overstated by а. Р15,880 b. P18,020 с. Р33,900 d. P38,020 5. An audit procedure that provides evidence about proper valuation of equity securities classified as FA@FVTPL is Confirmation of securities held by broker. b. Calculation of premium or discount amortization. Recalculation of investment carrying amount by applying the equity method. d. Comparison of carrying amount with current market quotations. a. С.
Case 2-4. Audit of various equity and debt securities.
Assassin Corporation's accounting records included the following investments:
Investment in Ordinary Shares
P1,000,000 7/1/20
1/1/18
12/31/18
12/31/19
P800,000
200,000
300,000
Investment in Bonds
1/1/20
P1,051,510
During the course of your audit, you noted the following.
Investment in Ordinary Shares
The investment is not designated at FVTOCI.
Acquired on January 1, 2018 at P950,000 plus transaction costs of P50,000.
On July 1, 2020, the entity sold half of the investment for its fair value of P800,000.
Fair value of the investment: December 31, 2018, P1,200,000; December 31, 2019, P1,500,000; December
31, 2020, P900,000.
Investment in Bonds
The entity uses the 'held for collection' business model for acquired and originated debt instruments.
P1,000,000, 10% bonds, purchased for P1,051,510 including transaction costs of P20,000. Interest is payable
annually every December 31. The bonds mature on December 31, 2022. The effective interest rate is 8%.
The prevailing market rate for the bonds is 9% at December 31, 2020.
Transcribed Image Text:Case 2-4. Audit of various equity and debt securities. Assassin Corporation's accounting records included the following investments: Investment in Ordinary Shares P1,000,000 7/1/20 1/1/18 12/31/18 12/31/19 P800,000 200,000 300,000 Investment in Bonds 1/1/20 P1,051,510 During the course of your audit, you noted the following. Investment in Ordinary Shares The investment is not designated at FVTOCI. Acquired on January 1, 2018 at P950,000 plus transaction costs of P50,000. On July 1, 2020, the entity sold half of the investment for its fair value of P800,000. Fair value of the investment: December 31, 2018, P1,200,000; December 31, 2019, P1,500,000; December 31, 2020, P900,000. Investment in Bonds The entity uses the 'held for collection' business model for acquired and originated debt instruments. P1,000,000, 10% bonds, purchased for P1,051,510 including transaction costs of P20,000. Interest is payable annually every December 31. The bonds mature on December 31, 2022. The effective interest rate is 8%. The prevailing market rate for the bonds is 9% at December 31, 2020.
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