PROBLEMS PROBLEM 1: TRUE OR FALSE 1. According to PFRS 9, amortized cost financial assets are initially measured at fair value. 2. Investments in ordinary shares can be classified as financial assets measured at amortized cost. 3. Subsequent changes in the fair value of a financial asset measured at amortized cost are normally ignored. 4. Investments in preference shares with mandatory redemption can be classified as financial assets measured at amortized cost. 5. Entity A acquired bonds with face amount of P1M for P976,231. The effective interest rate on the bonds must be lower than the stated rate. 6. The amortized cost of an investment in term bonds that is acquired at a discount decreases each year. 7. Whether an investment in debt securities is measured at amortized cost or FVOCI, the total effect of the investment in profit or loss would be the same. 8. Entity B acquired bonds at a discount and classified them as FVOCI. The amount of interest income for the period would be' higher if the bnds were classified as amortized cost asset. 9. Discount or premium amortization is unnecessary if investments in bonds are measured at FVOCI. 10. Entity C acquired bonds and classified them as FVOCI. Subsequently, the bonds were sold at P100. The bonds were reported at a fair value of P90 in the latest annual financial statements. The bonds have an amortized cost of P80 as at the date of sale. Entity C would probably recognize a gain of P20 in profit or loss at the date of sale