7/20/23, 10:24 PM Post Test 4 CAE03 Investment in Debt Securities

Post Test 4 CAE03 Investment in Debt

Securities
* Indicates required question

1. Email *

2. The cumulative balance of unrealized gains or losses which are recognized *

separately in the Equity section of the Statement of Financial Position are from
securities classified as

Mark only one oval.

a. FVPL only

b. FVPL and FVOCI

c. FVOCI and Investment in Associate

d. FVOCI only

3. Which of the following statements is true concerning recognition of unrealized *

gains and losses?

Mark only one oval.

a. Unrealized gains and losses on financial assets held for trading shall be included
in profit or loss.

b. Unrealized gains and losses on financial assets measured at amortized cost are
not recognized.

c. Unrealized gains and losses on financial assets at fair value through other
comprehensive income are not recognized in the income statement.

d. All of the above statements are true.

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7/20/23, 10:24 PM Post Test 4 CAE03 Investment in Debt Securities

4. The bonds issued in June 1 of the current year have interest payment dates of April *
1 and October 1. Bond interest income for the current year ended December 31 is
for a period of

Mark only one oval.

a. 3 months

b. 4 months

c. 6 months

d. 7 months

5. An entity made a year-end amortization for its only investment in bonds by debiting *
Investment at amortized cost and crediting Interest income. The bond investment
must have been purchased at

Mark only one oval. Purchased at Discount:

Purchased at a Premium:
1/1 Debt Investments @AC 897,046
Cash 897,046 1/1 Debt Investments @AC 1,110,401
Premium. Cash 1,110,401
12/31 Cash 60,000 12/31 Cash 75,000
Debt Investments @AC 7,278 Debt Investments @AC 8,376
Discount Interest Revenue 67,278 Interest Revenue 66,624

Face value

At middle of nowhere

6. If an entity failed to amortize the discount on its investment in bond classified as *

FVPL, this may result to

Mark only one oval.

Understatement of net income

Overstatement of net income

No effect on net income No amortization for Debt Investment measured at FVPL

Overstatement on investment account

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7/20/23, 10:24 PM Post Test 4 CAE03 Investment in Debt Securities

7. On May 1, 2021, Wind Company purchased a P2,000,000 face value 9% debt *

instruments for P1,860,000 including the accrued interest. The investment was
designated as Investment at FVPL. The debt instruments pay interest semi-
annually on January 1 and July 1. On December 31, 2021, the fair value of the
instruments is P1,940,000.

How much is the interest income for the year 2021?

Mark only one oval.

a. P120,000
FVPL only uses Nominal Rate x Face Amount of Debt
b. P180,000
2,000,000 x 9% x (8/12) = 120,000

c. P162,000

d. P108,000

8. On May 1, 2021, Wind Company purchased a P2,000,000 face value 9% debt *

instruments for P1,860,000 including the accrued interest. The investment was
designated as Investment at FVPL. The debt instruments pay interest semi-
annually on January 1 and July 1. On December 31, 2021, the fair value of the
instruments is P1,940,000.

How much is the unrealized gain or loss that should be taken to profit or loss for
the year 2021?

Mark only one oval.

a. P80,000 FV 12/31/21 1,940,000

Initial Recognition 5/1/21 1,860,000

b. P140,000 U Gain FVPL 80,000

c. P60,000

d. 0

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7/20/23, 10:24 PM Post Test 4 CAE03 Investment in Debt Securities

9. On May 1, 2021, Wind Company purchased a P2,000,000 face value 9% debt *

instruments for P1,860,000 including the accrued interest. The investment was
designated as Investment at FVPL. The debt instruments pay interest semi-
annually on January 1 and July 1. On December 31, 2021, the fair value of the
instruments is P1,940,000.

How much is the accrued interest/interest receivable on December 31 ,2021?

Mark only one oval. Accrue the receivable on December 31, 2021 since payment will be done on January 1

July 1- Dec 31 2,000,000 x 9% x 6/12 = 90,000

12/31/21 Interest Receivable 90,000

a. P120,000 Interest Income 90,000

1/1/22 Cash 90,000

b. P90,000 Interest Receivable 90,000

c. P180,000

d. 0

10. On January 1, 2020, ABC Corp purchase of a bond investments to XYZ bonds *
with face value of 1,000,000 and stated rate of 15% for 1,110,401, a price to yield
12% with interest payable semiannually every June 30 and December 31. Based
on the business model adopted by the entity for the portfolio of similar instruments
and the contractual cash flow from the instrument, the investment was designed
as at fair value through other comprehensive income. The XYZ bonds were
quoted at 114 and 110 on December 31, 2020 and 2021, respectively.

What amount should be reported as the unrealized gain or loss on the OCI for the
year 2020?
1,110,401
06/30/20 75,000 66,624 8,376 1,102,025
Mark only one oval. 12/31/20 75,000 66,122 8,878 1,093,147

46,853
Fair Value 12/31/20 1,000,000 x 114% = 1,140,000
Carrying Amount 12/31/20 1,093,147
66,122
Cumulative Gain or Loss (Equity) 46,863
Less: Recognized for the previous years 0
8,376 U gain or loss on OCI 46,863

8,878

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7/20/23, 10:24 PM Post Test 4 CAE03 Investment in Debt Securities

11. Assume a bond investment with face value of 1,000,000 and stated rate of 15%, *
was purchased by ABC
Corporation from XYZ Bond on January 1, 2020 for 1,110 ,401, a price to yield
12%, with interest payable
semiannually every June 30 and December 31. Based on the business model
adopted by the company for the
portfolio of similar instrument and contractual cash flow from the instrument, the
investment was designed as
at amortized costs with maturity date on December 31, 2024.

What is the present value of the principal?

Mark only one oval.

558,400 PV of the Principal 1,000,000 x .5584 = 558,400

PV of the Interest 75,000 x 7.3601 = 552,001
Purchase price = 1,110,401
552,001

1,110,401

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