HANDOUT 2.

1 INVESTMENT IN EQUITY INTRUMENTS – DIVIDENDS AND SHARE SPLITS AND SHARE RIGHT

Problem 1. On January 27, 2025, ECO COMPANY acquired 80,000 ordinary shares with par value of P10, of BETA COMPANY for
cash price of P1,000,000. Later on, May 1, 2025, ECO COMPANY acquired 60,000 preference shares with par value of P50 and rate
of dividend of 8%. On November 30, 2025, BETA COMPANY declared cash dividends of P2.25 per for ordinary share and to all
preference shares for all the shareholders on record on December 15, 2025. The dividends will be paid on January 4, 2026. Prepare
journal entries on acquisition of shares and dividends.

Problem 2. On the beginning of this year, XAVIER CORP holds 150,000 shares of ENTITY A with a carrying amount of P3,150,000
and accounted as FVPL. It was announced on August 1, 2025 that ENTITY A declared dividends of P1.25 per shares that will be paid
on September 24, 2025. The date of record will be August 28, 2025. Using the scenarios below, prepare journal entries as necessary:
a. the investment was sold for P4,000,000 on August 12, 2025.
b. the investment was sold for P3,850,000 on September 10, 2025.

Problem 3. CUBA CORP received a property dividend from one of its holdings of equity security accounted as FVOCI. The fair value
of the equipment was P8,500,000 while it was recorded on the books of the investee at cost of P12,000,000. Prepare journal entries.

Problem 4. At the beginning of this year, MIMA CORP have an investment in equity security with a carrying amount of P980,000. A
liquidating dividend of P600,000 were received on May 1 and another P750,000 were received on October 24. Prepare journal entries.

Problem 5. On October 24, 2024, ILHOON Company bought 120,000 ordinary shares for P8 per share accounted as FVPL. Later to this
date, on December 1, 2024, the investee issues 10% share dividends with a fair value of P10. The fair value of the share on December
31, 2024 was P13 per share.
Prepare relevant journal entries using the following independent scenarios:
a. ILHOON Company sold the 10,000 shares for P12 per share on December 15, 2024.
b. a cash dividend was received in lieu of the share dividends amounting to P150,000.

Problem 6. MELODY Corp purchased 200,000 ordinary shares of CUBE company for consideration of P2,400,000, accounted as
FVOCI last January 15, 2025. On April 3, 2025, 40,000 preference shares were received by MELODY Corp from CUBE Company as
share dividends. As of that date, the ordinary and preference shares have a fair value of P15 and P25 per share, respectively. As of
December 2025, the fair value of ordinary shares is P17.50 while the preference share is P22. Determine the relevant journal entries.

Problem 7. On October 1, 2024, AKASHIC Company acquired 5,000 shares of FVOCI securities of SHAR Corp at P100,000 plus
brokerage fees of P10,000. On the same year, November 14, SHAR Corp ordinary share was split on 4-for-2 basis. Available fair market
value as of date of share split was P20 per share. On December 1, SHER Corp made a special assessment of P5 per share on all ordinary
shareholders. AKASHIC Company paid the assessment. On the year end 2024, the fair value of the shares amount to P23 per share.
1. Compute for the total number of shares at year end,
2. Computed for the total unrealized gain or loss to be presented in OCI for the current year
3. Prepare all the necessary entries for the current year.

Problem 8. On June 15, 2024, ESTE Company owns 20,000 shares with a cost of 1,000,000 of CLYDE Company’s stocks. During the
same period, CLYDE Company issued stock rights to existing shareholders. ESTE received 20,000 rights entitling the entity to purchase
a total of 5,000 new shares at P54. Subscription period expires at August 1, 2024 and the market value of the stock rights is P6 per rights.
On July 20, ESTE exercised 60% of the stock rights and the rest expires. Prepare the necessary journal entries if stock rights is accounted:
1.) separately; 2.) not separately

Problem 9. On January 2, QC Company purchased 5,000 shares of P100 par value ordinary shares at P110 per share of VAL Corp. On
March 2, VAL Corp issued stock rights to its shareholders. The holder needs four stock rights to purchase one ordinary at par. The
market value of the share on the same date was P140 per share. There was no quoted price for the rights. Compute for the theoretical
value for the rights assuming:
a. the stock is selling right-on
b. the stock is selling ex-right

Problem 10. MIX Company had the following transaction in chronological order:
1. Purchased 80,000 shares, par P10 at P40 per share as long-term investment.
2. Received a stock dividend of one share for every four owned in lieu of cash dividend.
A share has quoted price of P25 per on that date.
3. Received a cash dividend of P5 per share.
4. Received stock rights to purchase one share at P30 for every five rights held. The stock right has a market value of P5.
5. Sold 40,000 rights at P7 each
6. Exercised the remaining stock rights and sold the 80,000 at P35 per share.
7. Paid for special assessment amounting to P15 per share.
Prepare journal entries to record the transaction assuming that the stock rights are accounted separately. Determine the balance of the
investment and number of shares on MIX’s portfolio.

-agccpa