Valix Finacc vol 1 Problem 9-15

Financial Accounting Volume 1 2008 Valix-Peralta
Chapter 1 Problem 9-15

01/01/2008    Available for sale securities                                          6,500,000

                           Cash                                                                                               6,500,000

12/31/2008    Unrealized loss – AFS                                                       750,000

                            Available for sale securities                                                             750,000

                                    (6,500,000 – 5,750,000)

06/30/2009    Unrealized loss – AFS                                                       450,000

                            Available for sale securities                                                             450,000

                                    (5,750,000 – 5,300,000)

06/30/2009    Held to maturity securities                                            5,300,000

                            Available for sale securities                                                           5,300,000

12/31/2009    No entry is required to recognize the decrease

                       in value of P400,000 (P5,300,000 – P4,900,000).

The total unrealized loss of P1,200,000 on the reclassification of AFS securities will continue to be reported as part of equity as a deduction. However, it is amortized through interest income over the remaining life of the debt security starting June 30, 2009.