HW On Equity Securities C

HOMEWORK ON EQUITY SECURITIES
PROBLEM 1(FA-FVOCI, share dividend, cash dividend, disposal)
During the course of your study of the financial statements of Green Co. for the year ended December 31,
2023, you found a new account, ‘Investment in Equity Securities.’ Further study revealed that during 2023,
Green began a program of investments, and all investment-related transactions were entered in this
account. Your analysis of this account for 2023 follows:
White Co. ordinary shares Debit Credit

Feb. 14 Purchased 10,000 shares at P110 per share P1,100,000
July 26 Received 1,000 ordinary shares of White as a share dividend.
(Memorandum entry in general ledger)
Sept. 28 Sold the 1,000 ordinary shares of White Co. received on July
26 at P140 per share P140,000
Animo Co. ordinary shares Debit Credit

Apr. 30 Purchased 50,000 shares at P80 per share P4,000,000
Oct. 28 Received cash dividend of P2.40 per share P120,000
Additional information:
a. The fair value for each security as of the 2023 date of each transaction follow:
Security Feb. 14 Apr. 30 July 26 Sept. 28 Dec. 31

White Co. P110 P124 P140 P148
Animo Co. P80 64
Green Co. 50 56 60 66 70
b. All of the investments of Green Co. are nominal in respect to percentage of ownership (5% or less).
c. Each investment is considered by Green Co. to be non-trading. Green designates its investment in
these non-trading securities as financial asset at fair value through other comprehensive income.
1. How much should be reported as gain on sale of non-trading equity securities in 2023 Statement of
Comprehensive Income?
2. The receipt of 1,000 share dividend would cause the investment balance to increase by how much?
3. What entry is necessary to correct the recording of the cash dividend received from Animo Co.?
4. How much is the unrealized gain or loss to be reported in the 2023 statement of comprehensive income
as component of other comprehensive income?
5. How much should be reported as Investment in Equity Securities in the statement of financial position
on December 31, 2023?
1
PROBLEM 2 (FA-FVOCI, disposal, transaction cost on purchase)
DLSU Corp. has the following securities in its financial asset at fair value through other comprehensive
income portfolio on December 31, 2022:
Security Shares Carrying Value

Green Corp. 5,000 P220,000
White Corp. 15,000 540,000
Animo Corp. 1,500 225,000
All of the above securities were bought in 2022. In 2023, DLSU had the following transactions relating to
its investments:
Apr. 1 Sold the 5,000 ordinary shares of Green Corp. for P70 per share
May 1 Bought 2,400 ordinary shares of Archer Corp. at P75 plus broker’s fee of
P5,200
DLSU’s portfolio of FAFVOCI securities appeared as follows on December 31, 2023:
Security Shares Cost Fair value

White Corp. 15,000 P540,000 P530,000
Archer Corp. 2,400 180,000* 158,000
Animo Corp. 1,500 225,000 240,000
*The P5,200 broker’s fee was recorded as expense.
1. How much is the realized gain or loss on the sale of Green Corp. ordinary shares on April 1, 2023 to
be reported in profit or loss?
2. The 2,400 ordinary shares of Archer Corp. purchased on May 1, 2023, should be initially measured at
how much?
3. DLSU’s December 31, 2023, statement of financial position should report financial assets at fair value
through other comprehensive income at what amount?
PROBLEM 3 (Equity Method, Goodwill, Amortization of Excess)
Green Inc. purchased 40% of White Inc.’s outstanding ordinary shares on January 2, 2023, for
P250,000,000. The book value of White’s net assets at the purchase date totaled P450,000,000. Book
values and fair values were the same for all financial statement items except for inventory and buildings,
for which fair values exceeded book values by P12,500,000 and P112,500,000, respectively. All
inventories on hand at the purchase date was sold during 2023. The buildings have average remaining
useful lives of 20 years. White Inc. reported net income of P120,000,000 for the year ended December 31,
2023, and paid cash dividends of P40,000,000. The fair value of Green’s investment in associate was
P300,000,000 at December 31, 2023.
1. Of the amount paid for the acquisition of White Inc.’s ordinary shares, how much is attributable to
goodwill?
2. How much is the investment balance at December 31, 2023?
3. How much investment income will Green Inc. report on its 2023 profit or loss statement?
2
Problem 4 (FA-FVPL, Dividends-on)
Archer Corporation declared P20 cash dividend on its ordinary shares with a par value of P80 on June 15,
2023 and will be given to shareholders on record as of June 30, 2023. Dividend will be distributed on July
10, 2023.
On June 20, 2023, Animo Company purchased 7,000 shares of Archer Company at P120 per share. These
shares are classified as financial assets at fair value through profit or loss. Brokerage related to this
transaction amounted to P8,000.
On November 15, 2023, Animo Company sold half of the shares for P140 per share. At the end of the
year, the shares were selling at P105.
1. How much is the initial cost of the investment?

2. How much is the dividend income to be reported for the year?
3. How much is the gain (loss) on the sale?
4. How much is the unrealized gain or loss for the year?
Problem 5 (Share Split)
Emilio company acquired 100,000 shares from DLSU Company for a total cost of P5,000,000.
1. How much is the cost per share on the date of purchase?

2. Assuming that investee company declared a 2 for 1 share split, how much will be the new cost per
share?
3. Assuming that investee company declared a 1 for 4 reverse share split, how much will be the new
cost per share?
May 2023

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HOMEWORK ON EQUITY SECURITIES

PROBLEM 1(FA-FVOCI, share dividend, cash dividend, disposal)

White Co. ordinary shares Debit Credit

Animo Co. ordinary shares Debit Credit

Security Feb. 14 Apr. 30 July 26 Sept. 28 Dec. 31

Security Shares Carrying Value

DLSU’s portfolio of FAFVOCI securities appeared as follows on December 31, 2023:

Security Shares Cost Fair value

*The P5,200 broker’s fee was recorded as expense.

PROBLEM 3 (Equity Method, Goodwill, Amortization of Excess)

1. How much is the initial cost of the investment?

Problem 5 (Share Split)

1. How much is the cost per share on the date of purchase?

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