Reference no: EM132924475
PROBLEM 1 - Barcelona Company owns 20,000 shares of ABC Corporation, representing 10% ownership. Barcelona received a share dividend of 2,000 on September 1, 2020, when the carrying value per on ABC Corporation's books was P30 per share, and the market price is P33 per share. ABC Corporation paid a cash dividend of P10 per share on October 31, 2020, declared on September 30, 2020, of record October 15, 2020.
Requirements -
1. How much is the dividend income at the end of 2020?
2. Prepare the necessary journal entries to record September 1, 2020, and October 31, 2020.
PROBLEM 2 - The securities owned by Miraflores Company were held as a long-term investment. During the current year, the following transactions occurred:
Jan. 1 Purchased 15,000 shares of ABC Company at P70 per share.
May 1 Purchased 8,000 shares of DEF Corporation for P660,000.
Apr 1 Received a cash dividend of P6 per share from ABC Company.
July 1 Received a share for a share dividend from DEF Corporation.
Aug 1 Purchased 10,000 shares of GHI Enterprises at P75 each.
Oct 1 Received a cash dividend of P6 per share from ABC Company.
Oct 31 DEF Corporation offered shareholders rights to subscribe to one new share for every ten rights tendered at P25. At the time of issuance, the market value of the right is P4. Share rights are not accounted for separately.
Nov 15 Exercised the DEF Corporation's share rights.
Dec. 1 Sold 10,000 shares of DEF Corporation at P35 per share. Use the FIFO approach in determining the cost of the shares sold.
Dec. 31 The fair values of the portfolio is as follows:
ABC Company - P73 per share
DEF Corporation - P75 per share
GHI Enterprises - P80 per share
Requirements -
1. Prepare the necessary journal entries to record the above transactions.
2. How much is the carrying value of the investment at year-end?
PROBLEM 3 - Cobarrubias Corporation had the following investment at FVTPL at the beginning of the current year:
Fair Value
ABC Corporation, 10,000 shares (originally cost P1,000,000) - P1,200,000
JKL Company, 20,000 shares (originally cost P500,000) - 450,000
During the current year, the following transactions occurred:
Feb. 28 ABC Corporation declared a 3-for-2 share split.
Apr 31 JKL Company declared a 20% share dividend. The market value of JKL Company on this date is P3.00.
June 30 Sold 5,000 shares of JKL Company for P100,000, less brokers fee of P1,000.
July 31 Sold 5,000 shares of ABC Corporation for P135.
Sept 30 Received share rights to purchase one share of ABC Corporation for P100 per share. The company should tender five rights for every share acquired. The market price of ABC Corporation shares on this date is P140.
Oct. 31 Exercise all the share rights from ABC Corporation.
Dec. 31 The market value of the portfolio:
ABC Corporation - P155 per share
JKL Company - P36 per share
Requirements -
1. Prepare the necessary journal entries to record the above transactions.
2. How much is the carrying value of the investment at year-end?