Investment in Equity Securities (Additional topics)

Cash Dividends
1. On December 1, 2018, Synthetic Corp. owns 15,000 ordinary shares representing 15% of the shares
outstanding of Prowess Corporation. During the same date, Prowess declared P2 per share dividends
on ordinary shares to the shareholders of record on December 15 payable on December 31.
a. Prepare all the necessary entries at the
- Date of declaration
- Date of record
- Date of payment
b. How much is the dividend income to be recognized on 2018.

Property Dividends
2. Doused Company owns 15% of the outstanding ordinary shares of Albeit Corp. On November 1, 2018,
Albeit declared its inventory as property dividends. Data relating to the fair values of the inventory
follow:
Date Total Fair Values of Property Dividends
November 1, 2018 P250,000
December 31, 2018 P450,000
February 15, 2019 P410,000
a. Prepare all the necessary entries at the
- Date of declaration
- Date of record
- Date of payment
b. How much is the dividend income to be recognized on 2018.

Share Dividends
3. On October 1, 2018, Contentious Corp owns 15,000 fair value through other comprehensive income
ordinary shares at a cost of P1,500,000. The shares represent 15% of the ordinary shares outstanding
of Pulsate Corporation.

Record the receipt of the share dividends on the Contentious’ books under each of the assumption
listed below:

Case No. 1: Assuming the shares are investment in unquoted securities measured at cost:
1. Contentious received 15% ordinary shares as Share Dividends.
2. Contentious received 1,500 preference shares as Share Dividends. The par value of the preference
share is P200 per share while the ordinary shares has a par value of P100.
Case N0. 2: Assuming the shares are financial assets at fair value through profit or loss
3. Contentious received 15% ordinary shares as Share Dividends. The fair value of the ordinary shares
amounted to P100.
4. Contentious received 1,500 preference shares as Share Dividends. The fair value of each
preference share is P150.
Case No. 3: Assuming the shares are investment in equity securities designated as at fair value though
other comprehensive income
5. Contentious received 15% ordinary shares as Share Dividends. The fair value of the ordinary shares
amounted to P100.
6. Contentious received 1,500 preference shares as Share Dividends. The fair value of each
preference share is P150.

Cash Received in Lieu of Share Dividends

4. On October 1, 2018, Qualms Corp. owns 15,000 fair value through other comprehensive income shares
acquired at a cost of P345,000. The shares represent 15% of the shares outstanding of Sarcasm
Corporation. On the same date, Sarcasm declared 15% share dividends payable to stockholders on
October 31. On October 31, the stock is selling at P40 per share. However, on October 31, Sarcasm
gave P36 per share cash in lieu of the supposed share dividends previously declared.
Case no. 1: Assuming the shares are investment in unquoted securities measured as cost.
Case no. 2: Assuming the shares are financial assets at fair value though profit or loss.
Case no. 3: Assuming the shares are investment in equity securities designated as at fair value through
other comprehensive income.
a. Prepare all the necessary entries.
b. What is the dividend income to be recognized in 2018?
c. What is the gain or loss on sale of investment to be recognized in 2018?
Shares Received in Lieu of Cash Dividends
5. On October 1, 2018, Venus Corp owns 15,000 fair value through other comprehensive income shares
acquired at a cost of P345,000. The shares represent 15% of the outstanding shares of Mercury
Coporation. On the same date, Mercury Corp. declared P8 cash dividends on its outstanding shares
payable to stockholders on October 31. However, on October 31, Mercury Corp. issued 1 share for
every 5 shares held by the shareholders in lieu of the supposed cash dividends previously declared.
Case no. 1: Assuming the shares are investment in unquoted securities measured as cost.
Case no. 2: Assuming the shares are financial assets at fair value though profit or loss. On October 1,
2018, the stocks were selling at that time at P44 per share.
a. Prepare all the necessary entries.
b. What is the dividend income to be recognized in 2018?

Liquidating Dividends
6. 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.

Stock Split and Special Assessment

7. 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.

Stock Right
On June 15, 2018, Mars Company owns 10,000 shares with a cost of P700,000 of Moon Company’s
stocks