Investment in equity securities (Valix)

1. On january 1, 2017, ABC Company purchased 40,000 shares of RST at P100 per share. The
investment is measured at fair value through other comprehensive income. Brokerage fees
amounted to P120,000. A P5 dividend per share of RST had been declared on December 15,
2016, to be paid on March 31, 2017 to shareholders of record on January 31, 2017. No other
transactions occurred in 2017 affecting the investment in RST shares. What is the initial
measurement of the investment?

2. On January 1, 2016, Adam Company purchased as a long-term investment 100,000 ordinary

shares of Mill Company for P40 a share. On December 31, 2016, the market price of Mills share
was P35, reflecting a temporary decline in market price. On December 28, 2017, Adam Company
sold 80,000 shares of Mill Company for P30 a share. For the year ended December 31, 2017,
what amount should be reported as loss on disposal of long-term investment?

3. Cobb company purchased 10,000 shares representing 2% ownership of Roe Company on

February 15, 2017. Cobb Company received a stock dividend of 2,000 shares on March 31,
2017, when the carrying amount per share was P350 and the market value per share was P400.
Roe company paid a cash dividend of P15 per share on September 15, 2017. In income
statement for the year ended October 31, 2017, what amount should be reported as dividend
income?

4. During 2016, Lawan Company bought the shares of Burwood Company as follows:
June 1 20,000 shares @ 100 2,000,000
December 1 30,000 shares @ 120 3,600,000
5,600,000
The transactions for 2017 are:
January 10 Received cash dividend at P10 per share
January 20 Received 20% stock dividend
December 10 Sold 30,000 shares at P125 per share
a. If FIFO approach is used, what is the gain on the sale of the shares?
b. If the Average approach is used, what is the gain on the sale of shares?

5. Wood company owns 20,000 shares of Arlo Companys 200,000 shares of P100 par, 6%
cumulative, nonparticipating preference share capital and 10,000 shares representing 2%
ownership of Arlos ordinary share capital. During 2017, Arlo declared and paid preference
dividends of P2,400,000. No dividends had been declared or paid during 2016. In addition, Wood
received a 5% stock dividend on ordinary shares from Arlo when the quoted market price of Arlos
ordinary share was P10. What amount should be reported as dividend income in the 2017 income
statement?

6. Day company received dividends from share investments during the year ended December 31,
2017 as follows:
 A stock dividend of 4,000 shares from Parr Company on July 31, 2017 when the market
price of Parrs share was P20. Day owns less than 1% of Parrs share capital.
A cash dividend of P150,000 from Lark Company in which Day owns a 25% interest. A
majority of Larks directors are also directors of Day.

What amount of dividend revenue should be reported in 2017?

7. Ray company provided the following data for 2017:

On September 1, Ray received a P500,000 cash dividend from Seco Company in which
Ray owns a 30% interest.
On October 1, Ray received a P60,000 liquidating dividend from King Company. Ray
owns a 5% interest in King.
Ray owns a 2% interest in Bow Company, which declared a P2,000,000 cash dividend on
November 15, 2017 payable on January 15, 2018.

What amount should be reported as dividend income for 2017?

8. During 2017, Neil Company held 30,000 shares of Brock Companys 100,000 outstanding shares
and 6,000 shares of Amal Companys 300,000 outstanding shares. During the year, Neil received
P300,000 cash dividend from Brock, P15,000 cash dividend and 3% stock dividend from Amal.
The closing price of Amal share is P150. What amount should be reported as dividend revenue
for 2017?

9. On March 1, 2017, Evan Company purchased 10,000 ordinary shares of LVC at P80 per share.
On September 30, 2017, Evan received 10,000 stock rights to purchase an additional 10,000
shares at P90 per share. The stock rights had an expiration date on February 1, 2018. On
September 30. 2017, LVCs share had a market value P95 and the stock right had a market value
of P5. What amount should be reported on September 30, 2017 for investment in stock rights?

10. Rice company owned 30,000 ordinary shares of Wood Company acquired on July 31, 2017, at a
total cost of P1,100,000. On December 1, 2017, Rice received 30,000 stock rights from Wood.
Each right entitles the holder to acquire one share at P45. The market price of Woods share on
this date was P50 and the market price of each right was P10. Rice sold its rights on December
31, 2017 for P450,000 less a P10,000 commission. What amount should be reported as gain
from the sale of the rights?