Valix Finacc vol 1 Problem 10-7

Financial Accounting Volume 1 2008 Valix-Peralta
Chapter 1 Problem 10-7

1. Investment in ABC ordinary shares                                                    720,000

         Cash                                                                                                                720,000

2. Memo – Received 2,000 shares as 20% stock dividend on

                10,000 original shares.  Shares now held, 12,000.

                 

3. Cash (2,000 x 70)                                                                              140,000

         Investment in ABC ordinary shares (2,000/12,000 x 720,000)                             120,000

         Gain on sale of investment                                                                               20,000

4. Investment in ABC preference shares (5,000 x 70)                            350,000

         Investment in ABC ordinary shares (5,000/10,000 x 600,000)                             300,000

         Gain on exchange                                                                                            50,000

5. Investment in ABC ordinary shares                                                  100,000

        Cash (5,000 x 20)                                                                                               100,000