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WorksheetsBonds and Investment in Associate
Total questions: 8
Worksheet time: 17mins
Maker Company purchased a held to maturity instruments with a face value of P5,000,000 on January 2, 2016. The bonds will mature on January 2, 2019 and the nominal rate of interest is 12%. Interest is payable annually every December 30. The market rate of interest on this date is 10%.
How much did Maker pay in acquiring the instruments? (Round off PV factor to three decimal places)
P5,247,610
P5,326,006
P5,348,580
P5,379,600
On January 1, 2021, Dean Company purchased ten-year bonds with a face value of ₱1,000,000 and a stated interest rate of 8% per year payable semiannually July 1 and January 1. The bonds were acquired to yield 10%.
What is the purchase price of the bonds?
₱1,124,620
₱1,100,000
₱1,000,000
₱875,380
On January 1, 2018, Tabular Company purchased bonds with face value of ₱2,000,000. The bonds are dated January 1, 2018 and mature on January 1, 2022. The interest on the bonds is 10% payable semiannually every June 30 and December 31. The prevailing market rate of interest on the bonds is 12%.
What is the present value of the bonds on January 1, 2018?
₱1,881,000
₱1,888,000
₱1,360,000
₱1,480,000
It is an entity, including an unincorporated entity such as a partnership over which the investor has significant influence and that is neither a subsidiary nor an interest in joint venture.
Associate
Investee
Venture capital organization
Mutual fund
When an investor uses the equity method to account for investment in ordinary shares, cash dividends received by the investor from the investee should be treated as
Dividend income
An addition to the investor’s share of the investee’s profit
A deduction from the investor’s share of the investee’s profit
A deduction from the investment account
On January 1, 2021, Saxe Company purchased 20% of Lax Company’s ordinary shares outstanding for ₱6,000,000. The acquisition cost is equal to the book value of the net assets acquired. During 2021, Lax reported net income of ₱7,000,000 and paid cash dividend of ₱4,000,000. What is the balance in the investment in Lax Company on December 31, 2021?
₱5,200,000
₱6,600,000
₱6,000,000
₱7,400,000
On January 1, 2021, Well Company purchased 10% of Rea Company’s outstanding ordinary shares for ₱4,000,000. Well is the largest single shareholder in Rea and Well’s officers are a majority of Rea’s board of directors. Rea reported net income of ₱5,000,000 for 2021 and paid dividends of ₱1,500,000.
In its December 31, 2021 statement of financial position, what amount should Well report as investment in Rea?
₱4,500,000
₱4,000,000
₱4,350,000
₱3,850,000
On July 1, 20221, Denver Company purchased 30,000 shares of Eagle Company’s 100,000 outstanding ordinary shares for ₱200 per share. On December 15, 2021, Eagle paid ₱400,000 in dividends to its ordinary shareholders. Eagle’s net income for the year ended December 31, 2021 was ₱1,200,000, earned evenly throughout the year. In its 2021 income statement, what amount of income from the investment should Denver report?
₱360,000
₱120,000
₱180,000
₱60,000
