Reference no: EM132833513

Question -

Q1. The following transactions occurred in the order mentioned:

1. Free company acquired 40,000 ordinary shares of XYZ Company at P50 per share.

2. The shares are exchanged in a 5-for-1 split.

3. Received a preference share dividend of 1 share for every 10 ordinary shares held. Ordinary share is selling ex-dividend at 15 and preference share is selling at 10.

4. Received a dividend in kind of 1 ordinary share of ABC Company, market price, P6, for every 4 ordinary shares held.

5. Sold 80,000 ordinary shares of XYZ Company at P15 per share.

Required - Journal entries to record the foregoing transactions

Q2. The securities owned by Negros Company were held as permanent investments. During the current year, the following transactions occurred.

Jan. 1 Purchased 10,000 shares of King Corporation at P70 per share.

Mar. 1 Purchased 10,000 shares of Plastic Company for P660, 000.

Apr. 1 Received a cash dividend of P5 per share from King Corporation.

July 1 Received 20% stock dividend from Plastic Company.

Aug. 1 Purchased 10,000 shares of Makati Corporation at P50.

Oct. 1 The share of Plastic Company was split on a 5-for-1 basis.

1 Received a cash dividend of P5 per share from King Corporation.

31 Plastic company offered shareholders rights to subscribe to one new share for every 10 rights tendered at P20. At the time of issuance and the market value of the ex-right, was P30 and the right, P3.

Nov.15 Exercised the Plastic company stock rights.

Dec. 1 Received a cash dividend of P5 per share from Plastic Company. 15 Sold 10,000 shares of Plastic Company at P30 per share.

Required -

a. Prepare journal entries to record the above transactions.

b. Prepare summary of the permanent investments of Negros Company showing detail the number of shares and total cost for each investment.