Quiz – Investment

At December 31, 2021, Charmaine Corporation properly reported as current assets the following
marketable equity securities:

Lee Corporation shares, P2.50 convertible

P300,000 cost P350,000 market
preference shares (1,000 shares)
Barrios, Inc., 6,000 shares of ordinary P250,000 cost P240,000 market
Remorosa Company, 2,000 shares of ordinary  P315,000 cost P300,000 market

The investment in Lee Corporation and Barrios, Inc., are classified as trading securities, while the
rest of  the investment is intended to pay contractual cash flows and sell.

On January 2, 2022, Charmaine purchased 100,000 shares of Eduardo Corporation ordinary

shares for P1,700,000 representing 10% of Eduardo's outstanding ordinary shares and an
underlying equity of P1,400,000 in Eduardo's net assets at January 2. As a result of Charmaine's
30% ownership of Eduardo, Charmaine has the ability to exercise significant influence over
Eduardo's financial and operating policies.

During 2022, Charmaine disposed of the following securities:

1. January 17 sold 2,500 shares of Barrios shares at P79 per share.

Cash 197,500
Trading Security 100,000
Gain on sale 97,500

2. June 1 sold 500 shares of Remorosa shares, after a 10% share dividend, for 190 per share.

Cash 95,000
Investment at FMVTOCI 68,182
Retained Earnings 26,818

Retained Earnings 3,409

UH loss – OCI 3,409
500/2200 x 15,000

The following 2022 dividend information pertains to the shares held by Charmaine:

1. February 14, Remorosa issued a 10% share dividend, when the market price of Remorosa's
ordinary shares was P160.
2. April 6 and October 6, Lee paid dividends of P1.25 per share on its preference shares, to
shareholders of record on March 9 and September 9, respectively. Lee did not pay any dividends
on its ordinary shares during 2022.

3. June 3 Barrios paid a P5.00 per share dividend on its ordinary shares.

4. March 1, June 1, Sept. 1, and Dec. 1, Eduardo paid quarterly dividends of P1.50 per share on
each of these dates. Eduardo's net income for the year ended December 31, 2022 was
P2,300,000.

The market price per share of the shares as of December 31, 2022 are as follows:
Lee Corporation P360
Barrios, Inc. P55
Remorosa Company P140
Eduardo Corporation P21

Compute the following:

1. Carrying value of the investment in trading securities at year-end. 552,500
2. Carrying value of the investment at FMVTOCI at year-end. 238,000
3. Unrealized holding gain or loss to be reported in earnings at year-end. 62,500 gain
4. Unrealized holding gain or loss to be reported in equity at year-end. 5,409 loss
5. Total Investment income from investment in associates at year-end. 690,000
6. Carrying value of investment in associate at year-end. 1,790,000
7. Total Income from Investment at year-end. 772,500

Lee Corporation Barrios, Inc.

1,000 350,000 6,000 240,000
X 360 (2,500) (100,000) – Selling price 197,500
360,000 3,500 140,000 Carrying Value 100,000
X 55 Gain on sale 97,500
192,500

Trading Securities:
FMV this year FMV last year
Lee 360,000 350,000
Barrios 192,500 140,000
552,500 490,000 = 62,500 unrealized holding gain – P/L

Remorosa Company
2,000 + 200 SD 300,000
(500) ( 68,182) – Selling price 95,000
1,700 Carrying Value 68,182
X 140 Retained Earnings 26,818
238,000
FMVTOCI
FMV this year Cost this year
Remorosa 238,000 243,409 - P315,000 – 71,591 (500/2200 x 315,000)

Unrealized holding loss – OCI 5,409

Unrealized holding loss – OCI per record
UH loss – OCI beg - P15,000
Sold shares - ( 3,409) (3,409)
Adjustment 2,000

Investment in Associate (Eduardo)

Acquisition Cost 1,700,000 Dividend – 3/1 150,000
Share of income 690,000 Dividend – 6/1 150,000
Dividend – 9/1 150,000
________ Dividend – 12/1 150,000
Balance – 12/31/22 1,790,000

Acquisition Cost 1,700,000

Less: Net Asset Acquired 1,400,000
Excess of cost over BV (goodwill) 300,000

Total Investment Income –

Dividend Income:
Lee Shares – April 6 (P1.25 x 1,000 shares) = 1,250
October 6 (P1.25 x 1,000 shares) = 1,250
Barrios – P5.00 x 3,500 shares = 17,500
Unrealized holding gain – P/L = 62,500
Share of income from associates = 690,000
Total = 772,500