Acquisition of Unquoted Investment in Equity Securities

Problem 1: Bilikoy Company purchased 10,000 unquoted ordinary shares of McJollibee Corporation for
P20 each. The entity paid P30,000 transaction cost for the said purchased. The total ordinary shares of
the investee company are 100,000 shares. The par value of shares is P10 each
Bilikoy also purchased 20,000 unquoted preference share of Mang Inasar Corporation for
P50 each. The entity paid P100,000 transaction cost for the purchased. The total preference share of
Mang Inasar at the date of purchased is 100,000 shares. The par value of shares is P40
1. How much is the investment in equity securities – McJollibee? P230,000
2. How much is the investment in equity securities – Mang Inasar? P1,100,000
3. How much is the investment in associates – Mang Inasar? 0
4. If Bilikoy is elected as one of the board of directors of McJollibee Corporation, how much is the
investment in equity securities – ordinary ? 0

Problem 2: Mikasa Company purchased 30,000 ordinary shares of Eren Corporation for P15 each.
Mikasa also paid P50,000 transaction cost. At the date of purchased, Eren has 120,000 outstanding
shares. The shares purchased are unquoted
1. Provide the journal entry
2. If Mikasa was not able to affect the policy making process of Eren Corporation, provide the
necessary journal entry

Problem 3: Kapalit Palit Ba Company exchange its land for an unquoted equity securities of another
entity. The following are the data regarding the exchange
Land Equity Instrument
Historical Cost 1,000,000 1,200,000
Fair value at the date of exchange 1,500,000 1,600,000
Cash paid by Kapalit Palit Ba Company 200,000
1. How much is the initial value of the Equity Instrument if the transaction has commercial
substance? P1,700,000
2. How much is the gain or loss on exchange if the transaction has commercial substance?
P500,000
Acquisition of Unquoted Investment in Equity Securities

3. How much is the initial value of the Equity Instrument If the transaction lacks commercial
substance? P1,200,000
4. How much is the gain or loss on exchange if the transaction lacks commercial substance? 0

Problem 4: Robo Cough Company purchased ordinary share and preference of San SM Corporation for a
lump sum price of P1,100,000. The following are the data of the purchased.
Preference shares
Number of shares purchased: 20,000 shares
Market value per share: P50
Par Value of shares: P40
Ordinary Shares
Number of shares purchased: 10,000 shares
Market value per share: P20
Par Value of shares: P10
1. How much is the Investment in equity securities – Ordinary shares? P183,333.33
2. How much is the Investment in equity securities – Preference shares? P916,666.67
3. If the market value of the Ordinary shares are not available, how much is the
a. Investment in equity securities – Ordinary shares? P100,000
b. Investment in equity securities – Preference shares? P1,000,000
4. If the market value of preference share and ordinary share is not available, how much is the
a. Investment in equity securities – Ordinary shares?
b. Investment in equity securities – Preference shares?