Reference no: EM132629877

Question 1 - Liquidating Dividends

On January 2, 2018, Earth Company has 20,000 shares of P100 par value ordinary shares. The shares were acquired a year ago at a cost of P440,000. On February 14, of the current year, Earth Company received 15% cash, liquidating dividends from the Investee Corporation.

a. Assuming that the Investee Corporation is a wasting asset corporation and partial liquidation, how much is the amount of loss on liquidation to be recognized in 2018?

b. Assuming that the Investee Corporation is a wasting asset corporation and partial liquidation, provide the relevant entries.

c. Assuming that the Investee Corporation is other than a wasting asset corporation, how much is the amount of loss on liquidation to be recognized in 2018?

d. Assuming that the Investee Corporation is other than a wasting asset corporation and partial liquidation, provide the relevant entries.

Question 2 - Stock Split and Special Assessment

On January 1 of the current year, Phobos Company acquired 10,000 shares of Investment in equity designate as at Fair Value through Other Comprehensive Income of Deimos Company at P400,000 plus brokerage expense of P20,000. On March 1 of the current year, Deimos Company ordinary shares was split on a 5-for-2 basis. On October 1, Deimos Company made a special assessment of P3.20 per share on all ordinary shareholders. Phobos Company accordingly paid the assessment. The fair value on December 31 amounted to P30 per share.

a. The total number of shares at the end of the year.

b. The unrealized gain to be presented in the other comprehensive income for the current year.

c. Journal entry on January 1.

d. Journal entry on December 31.