Question

Problem 15-12 (AICPA Adapted) 

Nightmare Company provided the following information on December 31, 2019 regarding the portfolio of equity securities: 

Aggregate cost 1,700,000

Unrealized gains  40,000

Unrealized losses  260,000

Net realized gains during the current year  300,000

The equity investments are measured at fair value through other comprehensive income. 

On January 1, 2019, the entity reported an unrealized loss of P15,000 to reduce investments to market on a portfolio basis. 

In the December 31, 2019 statement of changes in equity what amount of unrealized loss should be reported? 

a. 260,000 b. 220,000 c. 205,000 d. 0. 

Problem 15-13 (AICPA Adapted) 

During 2019, Opulence Company purchased marketable equity securities as short-term investment to be measured at fair value through other comprehensive income. The cost and market value on December 31, 2019 were: 

Security	Cost	Market value
A 1,000 shares	300,000	350,000
B  10,000 shares	1,700,000	1,550,000
C 20,000 shares	3,150,000	2,950,000

The entity sold 10,000 shares of B on January 5, 2020 for P1,450,000 What total amount should be charged to retained earnings result of the sale of equity securities in 2020? 

a. 200,000 

b. 100,000 

c. 250,000 

d. 50,000

Answer 1

Problem 15-12

ANSWER:

b. 220000

ie. 260000 Unrealised loss-40000 Unrealised gains

Net unrealised loss = 220000

Problem 15-13
31-Dec
Journal entry will be
OCI a/c-Unrealised loss(1700000-1550000)	150000
Shares of B-AFS		150000
Jan 5,JE will be(on sale of the AFS)
Cash	1450000
Loss on sale (bal.fig.)	250000
OCI a/c-Unrealised loss(1700000-1550000)		150000
AFS		1550000
Hence, ANSWER: c. 250000
(amt. to be charged to retained earnings in 2020,through the Income statement for the year, on a/c of this sale)