EXERCISE 3

At December 31, 2016, REY Co. properly reported as available for sale following marketable
equity securities:
Cost Market
BOB Corp., 1,000 shares, convertible preferred P 40,000 P 44,000 On
stock 60,000 54,000 January 2,
ROD, Inc, 6,000 shares of common stock 55,000 50,000 2017,
TOM Co., 2,000 shares of common stock P 155,000 P 148,000 REY
Total purchased
100,000
shares of
Jeff Corp. common stock for P1,700,000 representing 20% of Jeff’s outstanding common stock
and an underlying equity of P1,400,000 in Jeff’s net assets on January 2. As a result of REY’s
20% ownership of Jeff, REY has the ability to exercise significant influence over Jeff’s financial
and operating policies.

During 2017, REY disposed of the following securities:

Jan 18 sold 2,500 shares of ROD for P9 per share.

Jun 01 sold 500 shares of TOM for P30 per share
Oct 01 Sold 500 shares of Bob’s preferred stock for P35 per share.

The following 2017 dividend information pertains to stock owned by REY:

Feb 14 TOM issued a 10% stock dividend, when the market price of TOM’s common
stock was P22 per share.

Apr5 & Oct5 BOB paid dividends of P1.20 per share on its preferred stock to stockholders of
record on March 9 and September 9, respectively.

Jun 30 ROD paid a P1 per share dividend on its common stock.

Mar 1, Jun 1, Sep 1, and Dec 1

- Jeff paid quarterly dividends of P0.50 per shares on each of these dates. Jeff’s net
income for the year ended December 31, 2017 was P1,200,000.
Required:
1. What is the gain or loss on sale of ROD shares?
2. What is the gain or loss on sale of TOM shares?
3. What is the gain or loss on sale of Bob shares
4. The dividend income from TOM is
5. How much is the total dividend income for the year?
6. What is the carrying value of REY’s investment in Jeff?