1.

Rite Company holds 10,000 shares of Leaf Company acquired at a total cost of
P1,800,000. Leaf issued rights to subscribe to new shares at P150 per share in the
ratio of one new share for every five rights held. The share has market value of P190
and the right has market value of P10. The rights are to be accounted for
separately. What is the entry to record the acquisition of the new investment though
exercise of stock rights?
a. Dr. Investment in Equity Securities 300,000 Cr. Cash 200,000 Cr. Investment in
Stock Rights 100,000
b. Dr. Investment in Equity Securities 400,000 Cr. Cash 300,000 Cr. Investment in
Stock Rights 100,000
c. Dr. Investment in Equity Securities 300,000 Cr. Cash 300,000
d. Dr. Investment in Equity Securities 400,000 Cr. Cash 400,000

2. XYZ Company has the following transactions during 2020 for its Investment in Equity
Securities:

Acquired 10,000 ordinary shares from ABC Company at P50 per share.

The ABC Company shares were split 2 for 1.

Sold 2,000 shares of ABC Company for P30 per share gross of transaction costs
of P10,000.

Received preference share dividend of 1 for every 3 ordinary shares held.

Ordinary shares are selling ex-dividend at P20 and preference shares are selling at
P15 per share.

Received 1,500 shares in lieu of cash dividends of P40,000. The shares of ABC on
this date sells for P40 per share.

Received P50,000 in lieu of 10% stock dividends. The shares of ABC Company
sell for P35 per share on this date.

What amount of gain or loss shall XYZ recognize on the sale of investment in no. 3?
a. P10,000 gain
b. P0
c. P5,000 loss
d. P20,000 gain