FinAcc 1 Reviewer Finacc1 G.

Ong
Problem: On April 1, 2014, Village Company purchase 25,000 ordinary shares of Sulo Corp. at P180 per share. At the
time of purchase, Sulo had 100,000 ordinary shares outstanding. The first quarter statement ending March 31, 2014 of
Sulo showed an earnings of P480,000. For the year ended December 31, 2014, Sulo recorded a profit of P2,400,000.
Sulo paid Village dividends of P60,000 on June 1 and another P60,000 on December 31, 2014. During 2015, Sulo
reported profit of P2,000,000 and paid dividends of P2,000,000 to its shareholders. On January 2, 2016, Village sold
10,000 shares of Sulo for P200 per share. For the year ended December 31, 2016, the profit of Sulo was P2,500,000 and
dividends of P60,000 was paid to Village. On December 31, 2016, the carrying value of the investment in the books of
Village nearly the fair value of the shares.
38. How much is the carrying value of Village investment in Sulo as of December 31, 2014?
39. Compute the carrying value of Village investment in Sulo as of December 31, 2016.
40. How much is the gain (loss) sale of 10,000 ordinary shares of Sulo?

Problem: Busy own 1,400 shares of Easy Co. acquired for P140,000 on January. On March 15, Easy Co. issued rights
to all its common stockholders. The offer permitted the purchase of one new Easy Co. share at P400 only per share
plus five rights. The stock was selling in the market that day at P480 per share, one right was selling that time at P20.
41. If Busy buys 100 new shares on March 20, how much will be the cost per share of the new shares acquired?

Problem: On July 1, 2015, Hackney Corp. acquired as trading securities a P500,000 face value Breton Company 8%
bonds for P455,000 plus accrued interest to yield 10%. The bonds mature on January 1, 2014 and pays interest
annually on January 1. On December 131, 2015, the bonds had a market value of P472,500. On February 12, 2016,
Hackney decided to sold the bonds for P460,000 plus accrued interest.
42. How much should Hackney report as trading securities on its December 31, 2015 balance sheet?
43. What is the interest income reported by Hackney for the year 2015?
44. What is the gain (loss) on the sale of securities on 2016?

Problem: On its December 31, 2015 balance sheet, the Sxy Company reported the following investments as
financial assets at fair value through profit and loss:
Fair value through profit and loss, at cost P 550,000 Market value , December 31, 2015 P 530,000
On December 31, 2016, the market valuation of the portfolio was P560,000.
45. What should Sxy report on its 2016 statement of income as a result of the increase in the market value of the
investment in 2016?

Problem: Barat Inc. owns 5,000 shares of the outstanding ordinary stock of Kuripot Corp., which has several hundred
thousand shares publicly traded. These 5,000 shares were purchased by Barat in 2012 at P100 per share. On August
31, 2016, Kuripot distributed 5,000 stock rights to Barat. Barat was entitled to buy one new share of Kuripot ordinary
stock for P90 cash and two of these rights. On August 31, 2016, each share of stock has a market value of P132 ex-
right and each right had a market value of P18.
46. What cost should be recorded for each new share if Barat acquired the shares by exercising the rights?
47. What would be the balance of Investment in stock account of Barat, after the purchase of the new shares?
48. If Barat decided to sell the stock rights for P100,000, how much would the gain (loss) on the sale of stock rights?
(Indicate the amount and whether gain or loss)?

Problem: The following items were extracted from EWAN Cos investment in stock account. The investment
represents the acquisition from IWAN Corp. which has outstanding share of 100,000 shares.
2015 Item Amount
01/02 Purchased 12,000 shares. P 420,000
02/15 Cash dividends 12,000
10/15 Received stock rights accounted separately
10/30 Cash dividends 24,000
11/12 Exercised rights to purchase 3,000 shares at P35
Additional information available:

IWAN Corp. net income for the first and second halves of 2015 was P1,000,000 and P1,200,000.

Brokers fee of P6,000 on the original purchase were recorded as an expense.

February 15 dividend represented a distribution of earnings from the second half of 2014.

IWAN Corp. offered its stockholders the opportunity to subscribed to new stock at P35 per share up to 50% of
their holdings. At distribution date, stock rights were selling for P5. Stock was quoted ex-right at P45.

The dividend of October 30 was P2 per share; P1.50 per share represents earnings and the balance represents
liquidating dividend.
49. Compute the cost to be allocated to the stock rights.

Problem: Dividends data from Wray Corps ordinary stock investments for the current year ended December 31,
follows:

August 8, Wray received a P500,000 cash dividend from Seco, Inc., in which Wray owns a 30% interest. A
majority of Wrays directors are also directors of Seco.

October 15, Wray received a P60,000 liquidating dividend from King Co.. Wray owns a 5% interest in King Co.

Wray owns a 2% interest in Bow Corp, which declared a P2,000,000 cash dividend on November 27, payable on
January 5, of next year.
50. What amount should Wray report as dividend income in its income statement for the year ended December 31?

Reviewer 4 of 11