Scribd
Upload
45 views2 pages

Straight Problems

Tama Co. acquired 2,000 shares of Home Inc. stock on January 2, 2018 for a total cost of P303,750. This included the purchase price of P300,000, transaction fees of P3,750. Home Inc. also declared a cash dividend of P10 per share to shareholders of record on January 31, 2018, payable to Tama Co. in the amount of P20,000. The journal entry to record Tama Co.'s acquisition of this investment includes a debit to Investment in Shares for P283,750 and a credit to Cash for P303,750, with the dividend receivable of P20,000 also recorded.

Uploaded by

Queenie Valle
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
45 views2 pages

Straight Problems

Tama Co. acquired 2,000 shares of Home Inc. stock on January 2, 2018 for a total cost of P303,750. This included the purchase price of P300,000, transaction fees of P3,750. Home Inc. also declared a cash dividend of P10 per share to shareholders of record on January 31, 2018, payable to Tama Co. in the amount of P20,000. The journal entry to record Tama Co.'s acquisition of this investment includes a debit to Investment in Shares for P283,750 and a credit to Cash for P303,750, with the dividend receivable of P20,000 also recorded.

Uploaded by

Queenie Valle
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 2

STRAIGHT PROBLEMS

1. Tama Co. bought 2,000 shares of Home Inc. on January 2, 2018 at P150 per share and paid P2,250 as brokerage fee and
P1,500 non-refundable tax. At the time of acquisition, Tama Co, had a positive intent to hold this instrument for an indefinite
period of time. On December 9, 2017, Home Inc. declared a P10 cash dividend to shareholders on record as of January 31, 2018
payable on April 30, 2018. The shares of Home Inc. have market value of P160. Prepare the journal entry on the books of Tama
Co. to record the acquisition of investment.

January 2 Investment in Shares 283,750


Dividend Receivable 20,000
Cash 303,750

Purchase Price (2,000 x P150) 300,000


Transaction Cost 3,750
Total Cost 303750
Dividends On (2,000 x P10) (20,000)
Investment in Shares 283,750

2. Below are transactions pertaining to FRUITY Co.'s investments in ordinary shares during the year ended December 31, 2018:

a. Acquired 10% interest in Apple Co. which declared a cash dividend of

P400,000 on December 1, 2018 to all shareholders of record on January


31,2019 and payable on February 14, 2019.

b. On January 1, 2018, purchased 10,000 ordinary shares of Saba Co. at P90 per share. On December 31, 2018, it received 2,000
share of Saba
Co. in lieu of cash dividend of P10 per share. On this date, the share

of
Saba Co. has market value of P100.

c. Purchased 50,000 shares (5% ownership) of Pineapple Co. on January 2, 2018 for P1,000,000. Pineapple Co. distributed a 10%
stock

dividend

on March 31, 2018 and paid a cash dividend of P8 per share on December 25, 2018. THY d. Acquired 5% interest in Orange
Co. which declared P1,000,000 dividends on October 31, 2018, P150,000 of which represents return of invested capital.

How much should be reported by FRUITY Co. as dividend income for the year 2018?
a. 400,000 x 10% 40,000
b. 2,000 x P100 200,000
c. 55,000 x P8 440,000
d. 1M – 150k = 850k x 5% 42,500
Dividend Income 722,500

3. East Co. owns 20% of West Corporation's preferred shares and 40% of its ordinary shares. West Corporation's share
outstanding at December 31, 2018 is as follows:

10% cumulative preferred shares P100,000


ordinary shares P700,000

West Corporation reported net income of P60,000 and paid dividends of P10,000 to its preferred shareholders for the year ended
December 31, 2018. How much total revenue should East Co. record due to its investment in West Corporation?

Net Income 60,000


10% Cumulative Preferred Shares (10,000)
50,000
40%
20,000 20,000
Dividends 10,000
20% Preferred Shares 20%
2,000 2,000
Total Revenue 22,000

4. On January 3, 2017, Lonely Inc. purchased 10,000 shares of the X 100,000 ordinary shares P50 par value of JOY Co. for
P600,000.

Half of the excess over book value is attributable to an equipment of JOY Co. with remaining useful life of 8 years.

On December 31, 2017, Lonely Inc. acquired additional 20,000 ordinary shares of JOY Co. for P1,700,000. On this date, the
book value of JOY Co.'s net assets is P7,500,000. Investigation of records revealed that a building with remaining 5 years useful
life has a carrying value of P3,000,000 and fair value of P 3, 400, 000 on December 31, 2017. JOY Co. had not issued additional
shares of stock during 2018 and reported the following for years 2017 and 2018:
Net Income Dividends
2017 P700,000 P200,000
2018 P1,200,000 P500,000
How much is the Investment balance as of December 31, 2018?
FV 10% Interest 600,000
AC 20% Interest 1,700,000
Investment in Associate 2,300,000
Share Dividends (150,000)
Investment Income 406,000
Investment in Associate 2,556,000
Share in Net Income 2018 (1.2M x 30%) 360,000
Amortization of Excess (120k/5) (24,000)
Excess of FV over Cost 70,000
Investment Income 406,000
Acquisition Cost 2,300,000
CA of NA acquired (7.5M x 30%) (2,250,000)
Excess of Cost over BV 50,000
Attributable to Building (400k x 30%) (120,000)
Goodwill (Excess of FV over Cost) (70,000)

You might also like