This Study Resource Was: Date of Record

 It is the date on which the stock and transfer book of the corporation is closed for
registration. Only those shareholders registered as of this date are entitled to receive
dividends.
Date of record
 All of the following would result into non-recognition of dividend income, except
Shares received in lieu of cash dividends.
 A dividend in the form of another company's share is considered as a

Property dividend
 Civil Co. owns 40,000 shares purchased for P 75 per share as noncurrent investment.
The following transactions pertain to such investment in the chronological order:
1. Received stock rights to purchase one new share at P 80 Tw0 rights are required to acquire
one share. The market value of the share and rights at issuance date are P 90 and P 10,
respectively.
2. Exercised 30,000 rights..
3. Sold 6,000 rights at P 12 per right. 4. The remaining rights expired.
What is the total cost of the remaining investments?
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4,100,000
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 On January 2, 2014, Paragon Company acquired 16,000 ordinary shares of Hexagon
Company at P50 per share. On July 1, 2014, the Hexagon ordinary share was split 5 to
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1. On October 1, 2014, Paragon received from Hexagon a preference share dividend of
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one share for every 10 ordinary shares held. On this date, the market price of Hexagon
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ordinary is P15 per share and preference, P10 per share. On December 31, 2014,
Paragon received from Hexagon a dividend in kind of one share of Octagon Company
ordinary share for every 4 Hexagon ordinary shares held. The market price of Octagon
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ordinary is P5 per share. In its 2014 statement of comprehensive income, how much
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should Paragon report as dividend income?

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100,000
 Threshold Company purchased 20,000 shares out of 200,000 shares outstanding of

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Power Company's ordinary shares on February 23, 2014 for P924,000. Threshold
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Company has designated the equity security at Fair Value to other comprehensive
income. Threshold received a P40,000 cash dividend on Power Company on July 1,
2014 Power declared a 10% share dividend on December 1, 2014 to shareholders of
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record as of December 31, 2014. The dividend was distributed on January 31, 2015. The
market price of the share was P38 on December 1, 2014, P40 on December 31, 2014
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and P42 on January 31, 2015. What amount should Threshold Company report the
investment in its 2014 statement of financial position?
880,000
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 On January 1, 2014, Falk Co purchased 50,000 shares of Milo ordinary shares for
P3,600,000. On December 31, 2014. Falk received 50,000 stock rights from Milo Each
right entitles the holder to acquire one share for P 85. The market price of Milo's share
was P 100 a share immediately before the rights were issued, and P 90 a share
immediately after the rights were issued. Falk sold its rights on December 31, 2014 for P
15 a right. What is Falk's gain from the sale of rights?
250,000
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one share.
The market value of the share and rights at issuance date are P 90 and P 10, respectively.
2. Exercised 30,000 rights.
3. Sold 6,000 rights at P 12 per right.
4. The remaining rights expired.
How much is the gain or loss on the sale of stock rights?
12,000 gain
 Kikay Corp. has the following transactions on the dates shown:

2014
Aug 1 - Purchased 1,000 shares of Makati Co. for P60,000. (Lot 1)
Oct. 1 - Purchased 8,000 shares of Makati Co. for P560,000. (Lot 2)
2015
Jul 1 - Purchased 6,000 shares of Makati Co. for P480,000. (Lot 3)
Aug. 1 - Sold 5,000 shares of Makati Co. for P500,000. (Use FIFO.)
2016
Feb. 1 - Received 50% stock dividend.
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Nov. 1 - Received stock rights (Right issue) to purchase one new share at P60 for every 5 rights
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tendered. On this date, the share is selling ex-right at P70 and the right at P10.
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Dec. 1 - Sold all stock rights at P15 per right.
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The total gain on sale of the investment securities from 2014 to 2016 would be
235,000 o.
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 Guess Company purchased 50,000 shares (5% ownership) of Fortune Company on the
market price of the share is P40. On November 30, Guess paid P20 January 2, 2014.
Guess received a share dividend of 15% on March 31, 2014 when share special
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assessment on the shares. On December 15, 2014, Guess paid a cash dividend of P8
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per share. In the December 31, 2014 statement of comprehensive income of Guess
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Company, what amount should be reported as dividend income?

460,000
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 All of the following statements are incorrect, except

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The purpose of the stock right is to enable the shareholders to preserve their equity or
proportionate interest in the corporation
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respectively.
How much is the cost of the stock rights?
400,000
 The "theoretical" or "parity" value of right issue is the assumed or indicated value of the
right in the absence of any clear or known market value. This "theoretical" value can be
determined
Either when the market value of share right-on or share ex right is known
 Nonmarketable equity securities are measured at

cost
 Shares received in lieu of cash dividend are recorded as
income at fair value of the shares received
 Which of the following statements is correct?

I. When stock rights are not exercised or sold, no journal entry is necessary.
II. A shareholder is entitled to acquire a new share for every stock rights held.
Neither I or II
 Which of the following is not an example of an equity security?

Convertible bonds

2014
2015
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2016
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Assuming the average cost method is used, the gain on sale of Makati ordinary shares and
stock rights would be higher (lower) than when FIFO is used by how much?
Gain on Sale of Stocks; Gain on Sale of Rights
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(26,667):0
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 Soprano Co. acquired 50,000 ordinary shares of Alto Co. on Sept. 30, 2015 for
P8,250,000.
On Oct. 30, the shares were split into a 2:1 basis. On Nov. 30, 2016, Alto distributed 10%
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ordinary shares dividends when the market price of the share was P100 per share. On Dec. 31,
2016, Soprano sold 6,000 of its Alto shares for P600,000. For the year ended December 31,
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2016, how much should Soprano report as gain on sale of investment?

150,000
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 On January 4, 2015 Phone Co. purchased 10,000 shares (10%) of the outstanding
ordinary shares of Pal, Inc. for P25 per share. The purchase was appropriately
designated as investment to other comprehensive income. The market price of the share
was P24 per share on December 31, 2015. During 2016, Pal experienced severe
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financial difficulties and Phone disposed of its entire investment in Pal share for P15 per
share on Nov. 9, 2016. In its 2016 statement of comprehensive income, how much
should Phone report as loss from disposal of the long-term investment?
0
 On September 30, 2016, Pilgrims Company exchanged equipment for 2.500 Sale shares
of Theme Company's ordinary share. On that date, the equipment had a carrying value
of P250,000 and its fair market value was not clearly determinable. The par value of
Theme's share was P80 per share but its market value on September 30, 2016 is P90
per share. What is the amount of gain or loss on the disposal of the equipment?
25,000 loss
Which statement is incorrect?
I. A stock split will always result into reduction in the par or stated value of each share.
II. A stock split will always require the surrender of old shares to be replaced by new shares with
different par or stated value.
I only
 Giggs Co. purchased 10,000 shares representing 2 % ownership of Rooney Co. on

February 11, 2014. Giggs received a share dividend of 2,000 shares on March 31, 2014,
when the carrying amount per share on Rooney's books was P 350 and the market
value per share was P 400. Rooney paid a cash dividend of P 15 per share on
September 15, 2014. In Giggs' income statement for the year ended October 31, 2014,
what amount should be reported as dividend income?
180,000
 Comfort Company purchased 10,000 shares of Abel ordinary shares at P90 per share on
January 2, 2014. On December 31, 2014, Comfort received 2,000 shares of Abel
ordinary share in lieu of cash dividend of P10 per share. On this date, the Abel ordinary
share has a quoted market price of P60 per share. In its 2014 statement of
comprehensive income, how much should Comfort report as dividend income?
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120,000
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 Specifically, these securities represent ownership shares such as ordinary shares,
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preference shares and other shares.
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Equity securities
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2014
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2015
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2016
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is

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The total cost of investment as of 12/31/16 is

610,000

sh
2014
2015
2016
The total cost of investment in Makati ordinary shares as of 12/31/15 is
760,000
 Threshold Company purchased 20,000 shares out of 200,000 shares outstanding of
Power Company's ordinary shares on February 23, 2014 for P924,000. Threshold
Company has designated the equity security at Fair Value to other comprehensive
income. Threshold received a P40,000 cash dividend on Power Company on July 1,
2014 Power declared a 10% share dividend on December 1, 2014 to shareholders of
record as of December 31, 2014. The dividend was distributed on January 31, 2015. The
market price of the share was P38 on December 1, 2014, P40 on December 31, 2014
and P42 on January 31, 2015. What amount should Threshold record as dividend
revenue for the year ended December 31, 2014?
40,000

2014
Oct.
1 - Purchased 8,000 shares of Makati Co. for P560,000. (Lot 2)
2015
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2016
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Assuming the average cost method is used, the total cost of investment in Makati ordinary
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shares as of 12/31/16 would be

583,000
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 What is the effect of share split-up?

Increase in number of shares and decrease in cost per share.
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 Cash received in lieu of share dividends is accounted for as

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If the share dividends are received and subsequently sold and gain or loss is recognized
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respectively.
sh

How much is the loss on stock rights resulting from the expiration of the same?
40,000
 On derecognition of marketable equity securities, the difference between the

consideration received and the carrying amount of the investment
shall be recognized in profit or loss.
respectively.
How much is debited to investment in equity securities for transaction 2?
1,500,000
 Which of the following will not result into reduction of the carrying cost of the Investment
in Ordinary Shares account?
Preference shares received in lieu of cash dividends
 Achilles Co. has the following long-term investments on hand on Jan. 1, 2014:
Investment in SMC Co. preference shares, 12%, P 200 par, 5,000 shares P 1,200,000
Investment in Benguet ordinary shares, 10,000 shares 1,000,000
During the year, the following transactions were completed:
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1. Purchased 4,000 ordinary shares of ANA for P 300,000
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2. Received 2,000 ordinary shares of Benguet in lieu of a cash dividend of P 10 per share. On
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this date, Benguet ordinary shares has a quoted market price of P 60.
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3. Purchased 6,000 shares of ANA ordinary shares for P 420,000.
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4. Received semiannual dividend on SMC Co. 12 % preference shares.
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5. ANA ordinary share was split on a 2-for-1 basis.

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6. Sold 8,000 ordinary shares of ANA Company at P 85 less transactions costs of 5 %. Use
FIFO.
How much is the dividend income on transaction 4?
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60,000
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 What is the effect of share dividend of the same class?

no effect on investment balance but decrease in cost per share
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 Achilles Co. has the following long-term investments on hand on Jan. 1, 2014:
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Investment in SMC Co. preference shares, 12%, P 200 par, 5,000 shares P 1,200,000
Investment in Benguet ordinary shares, 10,000 shares 1,000,000
During the year, the following transactions were completed:
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1. Purchased 4,000 ordinary shares of ANA for P 300,000

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2. Received 2,000 ordinary shares of Benguet in lieu of a cash dividend of P 10 per share. On
this date, Benguet ordinary shares has a quoted market price of P 60.
3. Purchased 6,000 shares of ANA ordinary shares for P 420,000.
4. Received semiannual dividend on SMC Co. 12 % preference shares.
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5. ANA ordinary share was split on a 2-for-1 basis.

6. Sold 8,000 ordinary shares of ANA Company at P 85 less transactions costs of 5 %. Use
FIFO.
How much should be recognized as dividend income, if any, for transaction 2?
120,000
 On January 2, 2014, Lotus Company purchased 8,000 shares of Pearl Co. at P100 per
share and designated the equity investment at Fair Value to other comprehensive
income. Brokerage fees of P24,000 and tax of P4,000 were paid on the same date. A P5
dividend per share of Pearl had been declared on December 17, 2013 to be paid on
March 1, 2014 to shareholders of record on January 31, 2014. On July 31, 2014, Lotus
Company received a 10% share dividend and also paid P10 for each share on
December 31, 2014 as special assessment. If market value of Pearl Company securities
is not clearly determinable as of December 31, what is the unit cost for each share on
December 31, 2014?
99.54
 Property dividends are recorded as
Dividend income at fair value of the property
 An investor owns 10% of the ordinary share of an investee company throughout the
year. The investee has no preference share outstanding. The investor's stock gives the
right to
Receive dividends equal to 10% of the total dividend paid by the investee company for
the year to stockholders.
 When share warrants are received, the shareholder can subscribe for new shares issued
by the corporation through the exercise of these rights. The exercise price is usually
inclusive of the fair market value of the rights issue.
Lower than fair market value of the new shares
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 On September 30, 2016, Pilgrims Company exchanged equipment for 2.500 Sale shares
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of Theme Company's ordinary share. On that date, the equipment had a carrying value
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of P250,000 and its fair market value was not clearly determinable. The par value of
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Theme's share was P80 per share but its market value on September 30, 2016 is P90
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per share. What is the cost of the investment?

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225,000
 Liquidating dividends are credited to

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Investment balance
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 A stockholder is still entitled to receive cash dividends declared during the year even if
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he/she has sold his/her stockholdings

after the date of record but before the date of payment.
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 Which statement is incorrect?

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I. Investment in equity instruments that do not have a quoted market price in an active market
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and whose fair value cannot be reliably measured shall be measured at cost.
II. If there is objective evidence that an impairment loss has been incurred on such investment
mentioned in statement I above, the impairment loss is measured as the difference between the
carrying amount of the investment and the present value of estimated future cash flows
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discounted at the market rate of return for a similar asset

Neither I nor II
 Dancer Company purchased 40,000 shares of Lancer Corp's newly issued 6%,
cumulative preference shares, P50 par for P3,040,000 on May 9, 2014. Each share
carried one detachable share warrants entitling the holder to acquire at P60 one share of
Lancer ordinary shares. On May 9, 2014, the market price of the preference shares ex-
warrant was P69 per share and the market price of the share warrant was P6 per
warrant. On December 31, 2014, Dancer sold stock warrants for P295,000. What is the
gain on sale of the warrants?
51,800
 On January 2, 2014, Lotus Company purchased 8,000 shares of Pearl Co. at P100 per
share and designated the equity investment at Fair Value to other comprehensive
income. Brokerage
fees of P24,000 and tax of P4,000 were paid on the same date. A P5 dividend per share of
Pearl had been declared on December 17, 2013 to be paid on March 1, 2014 to shareholders of
record on January 31, 2014. On July 31, 2014, Lotus Company received a 10% share dividend
and also paid P10 for each share on December 31, 2014 as special assessment. Assuming
Lotus Company investment in Pearl Company has a total market value of P900,000 as of
December 31, 2014, what amount of unrealized gain before tax should be shown in the
statement of comprehensive income?
24,000
 At which of the following dates has the shareholder theoretically realized income from
dividend?
The date the dividend is declared.
 The following transactions for the current year relate to the permanent investments of
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Living Colour Co.:
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Purchased 10,000 shares of ABC Co.P 100 par value ordinary for P 720,000.
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Received 20 % share dividend.
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Sold the share dividends at P 70 per share.
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Exchanged 5,000 shares of ABC ordinary for 10,000 ABC preference shares.
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At the time of the exchange, ABC ordinary is selling at P 70 and ABC preference at P 40.
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ABC Co, made special assessment of P 20 per share on all ordinary shareholders. Living
Colour accordingly paid the assessment.
What is the net effect of the transactions for the current year to the investment account?
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750,000 increase
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 It is the date on which the stock and transfer book of the corporation is closed for

 A dividend in the form of another company's share is considered as a

should Paragon report as dividend income?

 Threshold Company purchased 20,000 shares out of 200,000 shares outstanding of

 Kikay Corp. has the following transactions on the dates shown:

Company, what amount should be reported as dividend income?

 All of the following statements are incorrect, except

 Nonmarketable equity securities are measured at

 Which of the following statements is correct?

 Which of the following is not an example of an equity security?

 Kikay Corp. has the following transactions on the dates shown:

Dec. 1 - Sold all stock rights at P15 per right.

2016, how much should Soprano report as gain on sale of investment?

 Giggs Co. purchased 10,000 shares representing 2 % ownership of Rooney Co. on

 Kikay Corp. has the following transactions on the dates shown:

Aug 1 - Purchased 1,000 shares of Makati Co. for P60,000. (Lot 1)

Oct. 1 - Purchased 8,000 shares of Makati Co. for P560,000. (Lot 2)

Feb. 1 - Received 50% stock dividend.

Dec. 1 - Sold all stock rights at P15 per right.

The total cost of investment as of 12/31/16 is

 Kikay Corp. has the following transactions on the dates shown:

 Kikay Corp. has the following transactions on the dates shown:

shares as of 12/31/16 would be

 What is the effect of share split-up?

 Cash received in lieu of share dividends is accounted for as

The following transactions pertain to such investment in the chronological order:

2. Exercised 30,000 rights.

 On derecognition of marketable equity securities, the difference between the

5. ANA ordinary share was split on a 2-for-1 basis.

 What is the effect of share dividend of the same class?

1. Purchased 4,000 ordinary shares of ANA for P 300,000

5. ANA ordinary share was split on a 2-for-1 basis.

per share. What is the cost of the investment?

 Liquidating dividends are credited to

he/she has sold his/her stockholdings

 Which statement is incorrect?

discounted at the market rate of return for a similar asset

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