Problem 1. Gene Company has a portfolio of trading securities as of December 31, 2020 as follows: Cost Fair Value 15,000 ordinary shares of Terry Co. P 477,000 P 417,000 30,000 ordinary shares of Gina Co. 546,000 570,000 P1,023,000 P 987,000 All of the above securities were purchased in 2020. The following transactions related to the securities occurred in 2021: Mar 1. Sold 15,000 shares of Terry Co. at P31 less brokerage commission of P4,500. Apr 1. Bought 1,800 shares of Wendy Co. at P45 plus commission, taxes, and other transaction costs of P1,650. On December 31, 2021, the Company’s investment portfolio appears as follows: Cost Fair Value 30,000 ordinary shares of Gina Co. P 546,000 P 580,000 1,800 ordinary shares of Wendy Co. 82,650 75,000 P 628,650 P 655,000 The fair values excludes the estimated transaction costs that would be incurred on the sale of Gina Co. and Wendy Co. shares at P6,500 and P1,500, respectively. Required: What amount of unrealized gain on these securities should be reported in 2021 income statement? What is the gain or loss on the sale of Terry Co. ordinary shares on Mar 1, 2021? What amount should be reported trading securities in Gene Company’s statement of financial position on December 31, 2021?
Problem 1. Gene Company has a portfolio of trading securities as of December 31, 2020 as follows:
|
|
Cost |
Fair Value |
|
15,000 ordinary shares of Terry Co. |
P 477,000 |
P 417,000 |
|
30,000 ordinary shares of Gina Co. |
546,000 |
570,000 |
|
|
P1,023,000 |
P 987,000 |
All of the above securities were purchased in 2020. The following transactions related to the securities occurred in 2021:
Mar 1. Sold 15,000 shares of Terry Co. at P31 less brokerage commission of P4,500.
Apr 1. Bought 1,800 shares of Wendy Co. at P45 plus commission, taxes, and other transaction costs of P1,650.
On December 31, 2021, the Company’s investment portfolio appears as follows:
|
|
Cost |
Fair Value |
|
30,000 ordinary shares of Gina Co. |
P 546,000 |
P 580,000 |
|
1,800 ordinary shares of Wendy Co. |
82,650 |
75,000 |
|
|
P 628,650 |
P 655,000 |
The fair values excludes the estimated transaction costs that would be incurred on the sale of Gina Co. and Wendy Co. shares at P6,500 and P1,500, respectively.
Required:
- What amount of unrealized gain on these securities should be reported in 2021 income statement?
- What is the gain or loss on the sale of Terry Co. ordinary shares on Mar 1, 2021?
- What amount should be reported trading securities in Gene Company’s statement of financial position on December 31, 2021?
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