Problem 1
Prepare the journal entries for the following transactions made by SIMULA COMPANY for the calendar year ended December
31, 2023
a) January 5 - Acquired 10,000 shares of Leonarda Co for P1,000,000. Paying additional 20,000 for brokerage and
another 5,000 for commission. Upon assessment of the investment, the entity will record the item as held for
trading.
1/5/2023
b)
Financial Assets at FVTPL
Brokerage Fee – P&L
Commission Expense – P&L
Cash
Financial Assets at FVOCI
Cash
517,000
517,000
January 7- Acquired 10,000 shares of Ugac Co. For 1,000,000 to be recorded at FVTPL.
1/7/2023
d)
1,025,000
January 6 - Acquired 5,000 shares of Bagay Co for P500,000. Paying additional 15,000 for brokerage and another
2,000 for commission. Upon assessment of the investment, the entity irrevocably designated the investment to other
comprehensive income.
1/6/2023
c)
1,000,000
20,000
5,000
Financial Assets at FVTPL
Cash
1,000,000
1,000,000
February 14 - Received dividends from Leonarda Co. Declared January 10,2023 to stock holders of record January 31,
2023, 20,000
1/10/2023
Dividend Receivable
Dividend Income – P&L
2/14/2023
Cash
20,000
20,000
20,000
Dividend Receivable
e)
20,000
February 15 - Received dividends from Ugac Co. Declared January 5 ,2023 to stock holders of record January 31,
2023, 30,000
1/10/2023
Dividend Receivable
Dividend Income – P&L
2/14/2023
Cash
30,000
30,000
30,000
Dividend Receivable
30,000
Problem 2
On January 1, 2018, Dadao Corp owns 15,000 ordinary shares representing 15% of the Shares outstanding of Dibay Corp
acquired last November 12, 2017 at a cost of 1,500,000. The shares have fair value of 1,600,000 on December 31, 2017. On
January 2018, Dadao Corp sold half of its investment for P100 per share incurring a brokerage and commission expense of
20,000. Prepare all the necessary Journal Entries assuming
a. FVTPL
12/12/17
12/31/17
01/01/18
b.
1500,000
Financial Asset at FVTPL
Unrealized Gain – P&L
100,000
Cash
Loss on Sale – P&L
Financial Asset at FVTPL
730,000
70,000
Financial Asset at FVTOCI
Cash
1500,000
Financial Asset at FVTOCI
Unrealized Gain – OCI
100,000
1500,000
100,000
800,000
FVOCI
12/12/17
12/31/17
01/01/18
c.
Financial Asset at FVTPL
Cash
1500,000
100,000
Unrealized Loss – OCI
Investment in equity at FVTOCI
50,000
Cash
Brokerage and Commission Expense
Investment in equity at FVTOCI
730,000
20,000
Unrealized gain – OCI
Unrealized Loss
50,000
FAAC
No Entries
50,000
750,000
50,000
Problem 3
On October 1, 2018, Poblacion corp owns 15,000 ordinary shares at cost of 1,500,000. The shares represents 15% of the
ordinary shares outstanding of Centro 2 Company. The following dividends were received by the entity.
A. 15% ordinary share dividends. Fair Value of ordinary shares amounted to P 100.
B. 1,500 preference shares as share dividends. The par value of the preference shares is P200 while the ordinary share has
par value of P100. The fair value of each preference share is 150
Prepare the journal entries of the above transactions assuming
Case 1 - unqouted securities measured at cost
Investment in equity securities at cost - OS
Unrealized Gain – P&L
225,000
Investment in equity securities at cost - PS
Unrealized Gain – P&L
300,000
225,000
300,000
Case 2 – FVTPL
FVTPL – ordinary shares
Unrealized gain – P&L
225,000
FVTPL – preference shares
Unrealized gain – P&L
225,000
225,000
225,000
Case 3 – FVTOCI
FVTPL – ordinary shares
Unrealized gain – OCI
225,000
FVTPL – preference shares
Unrealized gain – OCI
225,000
225,000
225,000
Problem 4
On October 1, 2018, Dilam Co owns 15,000 FVTOCI shares acquired at cost of 345,000. The shares represents 15% outstanding
shares of Dalupiri Co. On the same date Dalupiri Co. Declared P8 cash dividends on its outstanding shares payable to
stockholders on October 31. However on October 31, Dalupiri Co. Issued 1 share for every 5 shares held by the shareholders in
lieu of supposed cash dividends previously declared.
Prepare the journal entries assuming
Case 1 - unquoted securities measured at cost
10/1/2018
10/31/2018
Dividend Receivable
Dividend Income – P&L
120,000
120,000
Investment in Equity Securities at Cost
Dividend Income
Dividend Receivable
120,000
Case 2 - FVTPL with FV of P 44 per share on Oct 1, 2018
10/1/2018
10/1/2018
10/31/18
FA@FVTPL
Unrealized gain – P&L
315,000
Dividend Receivable
Dividend Income – P&L
120,000
315,000
FVTOCI
132,000
Dividend Receivable
Dividend Income – P&L
120,000
120,000
12,000
Problem 5
On January 1 of the current year , Camiguin Co. Acquired 10,000 shares investment in equity designated as at FVTOCI of Sagpat
Co at P400,000 plus brokerage expense of P20,000. On March 1 of the current year, Sagpat ordinary shares was split on 5 - fr-2
basis. On October 1, Sagpat made special assessment of P3.2 per share on all ordinary shareholders. Camiguin Co accordingy
paid the assessment. The fair value on December 31 amounted to P30 per share.
Required:
1. The total number of shares at the end of the year
10,000 * 5/2 = 25,000
2. The unrealized gain to be presented in Other Comprehensive Income
Unrealized Gain = FV, end year – CA
FV, end year = Total Shares Outstanding X FV/share
= 25,000 * 30
= 750,000
CA = 400,000 + 20,000 + (3.2 * 25,000)
= 500,000
Unrealized Gain = 250,000
1/1 10,000
3/1 15,000
Total 25000
Special
Dec
Total
42
420,000
--420,000
80,000
30
750,000
The necessary entries from January 1 to December 31
1/1
12/1
12/31
FVTOCI
Cash
420,000
FVTOCI
Cash
80,000
420,000
FVTOCI
Unrealized gain – OCI
80,000
250,000
250,000
Problem 6
On June 15, 2018, Bangaan Company owns 10,000 shares with a cost of P700,000 of Sibang Company’s stocks. During the same
period, Sibang Company issued stock rights to existing shareholders. Bangaan received 10,000 stock rights entitling him to
purchase 5,000 new shares at P80. The ordinary shares was trading ex-right at P80 a share and rights had a market value of P20
per right.
On July 15, 2018, Bangaan exercised all the stock rights. The share is quoted right-on at P90.
Required:
1. Assuming the above securities are FVTPL, the stock rights should be initially recognized at
Zero. Memo entry only.
2. Assuming the above securities are FVTOCI, the stock rights should be initially recognized at
06/15/18
Stock Rights
Unrealized Gain – P/L
200,000
200,000
3. Assuming the above securities are FVTPL, the cost of investment acquired through exercise of rights should be
07/15/18
FVTPL
400,000
Unrealized Gain – P/L
400,000
4. Assuming the above securities are FVTOCI, the cost of investment acquired through exercise of rights should be
07/15/18
FVTOCI
Cash
Stock Rights
600,000
400,000
200,000