Reference no: EM132965416
Problem -
1. Valedictory Company issued rights to subscribe to its stock, the ownership of 4 shares entitling the shareholders to subscribe for 1 share at P100. Vast Company owned 50,000 shares of Valedictory Company with total cost of P5,000,000. The share is quoted right-on at 125. The stock rights are accounted for separately. What is the cost of the new investment if all of the stocks are exercised by Vast Company?
a. 1,500,000
b. 1,250,000
c. 1,562,500
d. 1,450,000
2. On January 1, 2014, Hostile Company purchased 4,000 shares of another entity at P100 per share. Transactions costs amounted to P12,000. The investment is measured at fair value through other comprehensive income.
A P5 dividend per share had been declared on December 15, 2013, to be paid on March 31, 2014 to shareholders of record on January 31, 2014. No other transactions occurred in 2014 affecting the investment.
What is the initial measurement of the investment on January 1, 2014?
a. 392,000
b. 400,000
c. 412,000
d. 380,000
3. On July 1, 2014, Impervious Company exchanged a land for 25,000 ordinary shares of Ace Company. On this date, the carrying amount of the land was P2,500,000 and the fair value was P3,000,000.
On July 1, 2014, the carrying amount of Ace Company's share was P60 and the market value was P150. On December 31, 2014, Ace Company had 250,000 ordinary shares and the carrying amount per share was P80.
What amount should be reported on December 31, 2014 as investment in Ace Company?
a. 1,500,000
b. 2,500,000
c. 3,750,000
d. 3,000,000
4. On July 1, 2014, Impervious Company exchanged a land for 25,000 ordinary shares of Ace Company. On this date, the carrying amount of the land was P2,500,000 and the fair value was P3,000,000.
On July 1, 2014, the carrying amount of Ace Company's share was P60 and the market value was P150. On December 31, 2014, Ace Company had 250,000 ordinary shares and the carrying amount per share was P80.
What amount should be reported on December 31, 2014 as investment in Ace Company?
a. 1,500,000
b. 2,500,000
c. 3,750,000
d. 3,000,000
5. Maxim Company acquired 40,000 ordinary shares on October 1 for P6,600,000 to be held for trading. On November 30, the investee distributed a 10% ordinary share dividend when the market price of the share was P250. On December 31, the entity sold 4,000 shares for P1,000,000. What amount should be reported as gain on sale of investment in the current year?
a. 340,000
b. 400,000
c. 500,000
d. 600,000
6. Presumptuous Company revealed the following information pertaining to dividends from nontrading investments in ordinary shares during the year ended December 31, 2019:
The entity owned a 10% interest in Beal Company, which declared a cash dividend of P500,000 on November 30, 2019 to shareholders of record on December 31, 2019 and payable on January 15, 2020.
On October 15, 2019, the entity received a liquidating dividend of P100,000 from Clay Mining Company. The entity owned a 5% interest in Clay Mining Company.
What amount of dividend income should be reported for the current year?
a. 500,000
b. 600,000
c. 150,000
d. 50,000