Dividends – Cash, Property, and Share Dividends

Problem 1: On February 1,2023, Erwin Company purchased 30,000 unquoted equity investment for
P300,000 which is equal to 10% of ownership of ABC Corporation. On March 1,2023, ABC Company
declared a total of P100,000 cash dividend, with a date of record of April 1,2023, the dividend was paid
on May 1,2023.
1. Prepare the necessary journal entry
2. On March 31,2023, Erwin sold the investment to Hange Company for P400,000. How much
is the gain on sale?
3. Assuming that Erwin sold the investment to Hange Company on April 2 for P400,000. How
much is the gain on sale?

Problem 2: Assume on January 1,2023, Company Company bought 20,000 shares of Corporation
Corporation and accounted it using the cost method . On October 1,2023, ABC Corporation is entitled to
receive property dividends in the form of land at a cost of P 300,000 and fair value of P 400,000
distributable on January 31,2024 . On December 31, 2023, the land fair value has dropped to P 250,000.
On January 31, the fair value of land is 450,000
1. Prepare the necessary journal entry
2. How much is the dividend income for the year 2023?
3. How much is the value of the land received on 2024?

Problem 3: On January 1,2023, Luffy Company purchased 100,000 ordinary shares of Nami Corporation
for P1,000,000 with a transaction cost of P100,000. On February 3,2023, Luffy received from Nami
Corporation a dividend in kind of one share of Sanji Corporation share for every 4 share that Luffy held.
The market price of Nami’s share is P20 per share on the date of declaration, while the market price of
Sanji’s share at the same date is P5 per share. On the date of payment, the price of Nami has fair value
of P15 and Sanji’s share has a fair market value of P10 per share
1. How much is the dividend income on the date of declaration?
2. How much is the value of the asset received as dividends?
3. How much is the dividend income for the year 2023?
Dividends – Cash, Property, and Share Dividends

Problem 4: On March 1,2023, Chopper corporation purchased 30,000 ordinary shares of Franky
Corporation for P90,000. On April 1,2023, Chopper received 10% ordinary share dividend. The fair
market value of the share on that date is P5 per share.
1. How much is the dividend income on April 1,2023?
2. How much is the investment in equity securities – ordinary shares after the distribution of
share dividends?
3. How much is the cost per unit of the ordinary share after the distribution of share
dividends?
4. How many ordinary shares does Chopper have after the distribution of share dividends?
5. If instead of ordinary share, Chopper received another class of shares which is a preference
shares. The fair market value of ordinary share is P2 per share while preference share is P5
per share.
a. How much is the dividend income?
b. How much is the investment in equity securities – ordinary shares after the
distribution?
c. How much is the investment in equity securities – preference share after the
distribution?
d. How much is the cost per unit of ordinary share and cost per unit of preference
share after the distribution of share dividends?
e. How many ordinary shares does Chopper have after the distribution of share
dividends?
f. How many preference shares does Chopper have after the distribution of share
dividends?

Problem 5: An entity purchased 100,000 ordinary share of ABC Company for P2,000,000 plus transaction
cost of P200,000 on February 15,2023. The following are the transaction during the year regarding the
ordinary share
February 28 – Received cash dividends P0.5 per share
March 1 – Received 5% ordinary share dividends, the fair market value of the share is
P30 per share
March 3 – Received cash dividends P1 per share
March 5 – Received equity instrument of another entity as dividend in kind. The entity
received 1 share of BCD Company for every 5 shares held of ABC Company share. The
fair market value of ABC share is P25, while BCD’s share has a fair market value of P5.
1. How much is the cash received on March 3?
2. How much is the Investment in Equity instrument received on March 5?
3. How much is the dividend income during the year ?