For the year ended December 31, 2019, WQA Company reported opening retained earnings of P1,850,000 and cumulative unrealized gains recorded as reserves of P25,000. These gains are from an investment with an original cost of P100,000 and a fair value of P125,000. The company policy is to value all investments at fair value with unrealized gains and losses included in reserves. The company's accounting policy is that when an investment is sold, the reserve amount is transferred to retained earnings. During 2020, one-half of the investment was sold. The remaining investment increased in value to P70,000. A second investment was bought for P150,000 and its fair value had increased to P165,000 by the end of 2020. What is the reserve balance at December 31, 2020? P60,000 P45,000 P27,500 P35,000
For the year ended December 31, 2019, WQA Company reported opening retained earnings of P1,850,000 and cumulative unrealized gains recorded as reserves of P25,000. These gains are from an investment with an original cost of P100,000 and a fair value of P125,000. The company policy is to value all investments at fair value with unrealized gains and losses included in reserves. The company's accounting policy is that when an investment is sold, the reserve amount is transferred to retained earnings. During 2020, one-half of the investment was sold. The remaining investment increased in value to P70,000. A second investment was bought for P150,000 and its fair value had increased to P165,000 by the end of 2020. What is the reserve balance at December 31, 2020? P60,000 P45,000 P27,500 P35,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
For the year ended December 31, 2019, WQA Company reported opening retained
earnings of P1,850,000 and cumulative unrealized gains recorded as reserves of
P25,000. These gains are from an investment with an original cost of P100,000 and a
fair value of P125,000. The company policy is to value all investments at fair value
with unrealized gains and losses included in reserves. The company's accounting
policy is that when an investment is sold, the reserve amount is transferred to
retained earnings. During 2020, one-half of the investment was sold. The remaining
investment increased in value to P70,000. A second investment was bought for
P150,000 and its fair value had increased to P165,000 by the end of 2020. What is
the reserve balance at December 31, 2020?
P60,000
P45,000
P27,500
P35,000
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