Valix Finacc vol 1 Problem 10-26 to 28

Financial Accounting Volume 1 2008 Valix-Peralta
Chapter 1 Problem 10-26 to 28

Problem 10-26  Answer  B                          

Sales price (50,000 x 10)                                                                                              500,000 

Cost of rights sold (10/100 x 3,600,000)                                                                       360,000 

Gain on sale of rights                                                                                                 140,000 

                                                                    

                                                                                                             138         

Problem 10-27  Answer  B

Cost of rights (18/150 x 500,000)                                                                                  60,000

Cost paid for new shares (2,500 shares x 90)                                                               225,000

Total cost of new investment                                                                                      285,000

Cost per share (285,000 / 2,500 shares)                                                                              114

Problem 10-28  Answer  B

Cost of 2006 rights (4/100 x 180,000)                                                                            7,200

Cost of 2007 rights (4/100 x 330,000)                                                                         13,200

Total cost of rights                                                                                                    20,400

900 shares x 5 rights                                                                                            4,500 rights

Cash paid (900 x 80)                                                                                                 72,000

Cost of rights exercised

        2006 – 2,250 rights                                                                                                7,200

        2007 – 2,250 rights (2,250/3,750 x 13,200)                                                               7,920

Total cost of 900 shares                                                                                              87,120

Valix Finacc vol 1 Problem 10-21 to 25

Financial Accounting Volume 1 2008 Valix-Peralta
Chapter 1 Problem 10-21 to 25

Problem 10-21  Answer  D                         

Cash dividend (10% x 500,000)                                                                                    50,000 

 

Problem 10-22  Answer  A

Dividend income (2,000 x 60)                                                                                     120,000

Problem 10-23  Answer  C                         

Sales price (80,000 x 30)                                                                                           2,400,000 

Less: Cost of shares sold (80,000 x 40)                                                                      3,200,000

Loss on disposal                                                                                                      (   800,000)           

Problem 10-24  Answer  A

                                                                                                            June 1     December 1

Original shares                                                                                     20,000              30,000

Stock dividend – 20%                                                                            4,000                6,000

Total shares                                                                                          24,000              36,000

Sales price (30,000 x 125)                                                                                          3,750,000

Cost of shares sold:

       From June 1 – 24,000 shares                                                      2,000,000

       From December 1 – 6,000 shares (6,000 / 36,000 x 3,600,000)     600,000          2,600,000

Gain on sale                                                                                                            1,150,000                                                 

Problem 10-25  Answer  B

Cost of rights (5/100 x 8,000,000)                                                                                400,000

Valix Finacc vol 1 Problem 10-15 to 20

Financial Accounting Volume 1 2008 Valix-Peralta
Chapter 1 Problem 10-15 to 20

 Problem 10-15  Answer  A                          

 Purchase price (4,000 x P100)                                                                                      400,000   

 Brokerage                                                                                                                     12,000       

 Total                                                                                                                           412,000

 Less: Dividend purchased (4,000 x 5)                                                                            20,000

 Acquisition cost                                                                                                          392,000

                    

 Problem 10-16  Answer  D

                 

 Fair value of asset given (land)                                                                                3,000,000

Problem 10-17  Answer  D

Original shares acquired January 15                                                                            50,000

Stock dividend on March 31 (20% x 50,000)                                                                  10,000

Total shares                                                                                                                   60,000

                                         

Dividend income – cash dividend on December 15 (60,000 x 5)                                300,000

Problem 10-18  Answer  C

Dividend income – cash dividend on July 1                                                               100,000

Original shares on March 1                                                                                            20,000

Stock dividend on December 1 (10% x 20,000)                                                                2,000

Total shares                                                                                                                    22,000

Problem 10-19  Answer  B

Original shares on October 1, 2007                                                                             40,000

Stock dividend on November 30, 2008 (10%)                                                                4,000

Total shares                                                                                                                  44,000

Shares sold on December 31, 2008                                                                              (  4,000)

Balance                                                                                                                       40,000

                                                                                                            

Sales price                                                                                                                1,000,000

Cost of shares sold (4,000/44,000 x 6,600,000)                                                          (  600,000)

Gain on sale                                                                                                               400,000

Problem 10-20  Answer  B

Shares received as property dividend (5,000/5)                                                            1,000

Dividend income (1,000 x 100)                                                                                   100,000

Valix Finacc vol 1 Problem 10-14

Financial Accounting Volume 1 2008 Valix-Peralta
Chapter 1 Problem 10-14

Jan.  2    Investment in King Corporation                                        700,000

                       Cash                                                                                                  700,000

Mar. 1    Investment in Plastic Company                                         660,000

                      Cash                                                                                                   660,000

   Apr. 1    Cash (10,000 x 5)                                                                   50,000

                      Dividend income                                                                                 50,000

July  1    Received 2,000 shares as 20% stock dividend on

              10,000 Plastic Company shares originally held. 

              Shares now held, 12,000.

Aug. 1   Investment in Makati Corporation                                     500,000

                      Cash                                                                                                   500,000

Oct.   1  Received 60,000 new shares of Plastic Company

              as a result of a 5 for 1 split of 12,000 original shares.

           1  Cash (10,000 x 5)                                                                 50,000

                      Dividend income                                                                                 50,000

         31  Stock rights (3/33 x 660,000)                                                 60,000

                      Investment in Plastic Company                                                           60,000

Nov. 15  Investment in Plastic Company                                         180,000

                      Cash (6,000 shares x 20)                                                                      120,000

                      Stock rights                                                                                           60,000

Dec.   1  Cash (66,000 shares x 5)                                                      330,000

                      Dividend income                                                                               330,000

         15  Cash (10,000 shares x 30)                                                    300,000

                      Investment in Plastic Company                                                         100,000

                          (10,000/60,000 x 600,000)                

                      Gain on sale of investment                                                                200,000

                                                                                                  

                Summary of investments                                                  Shares                Cost

                King Corporation common                                             10,000              700,000

                Plastic Company common     

                        Block 1                                                                      50,000              500,000

                        Block 2                                                                        6,000              180,000

                Makati Corporation common                                         10,000              500,000

                                                                                                         76,000            1,880,000

                Of course, the investments will simply be described as “investments in equity

                securities”  in the balance sheet.

Valix Finacc vol 1 Problem 10-13

Financial Accounting Volume 1 2008 Valix-Peralta
Chapter 1 Problem 10-13

2008

Aug. 1    Investment in equity securities                                             60,000

                       Cash                                                                                                    60,000

Oct.  1    Investment in equity securities                                           560,000

                       Cash                                                                                                  560,000

2009

July   1    Investment in equity securities                                           480,000

                       Cash                                                                                                  480,000

Aug. 1    Cash                                                                                   500,000

                       Investment in equity securities                                                           340,000

                       Gain on sale of investment                                                               160,000

                Lot 1 (1,000 shares)                                                                                     60,000

                Lot 2 (4,000/8,000 x 560,000)                                                                      280,000

                Cost of investment sold                                                                           340,000

2010

Feb.  1    Received 5,000 shares representing 50% stock dividend on

                10,000 remaining shares held.  Shares now held, 15,000.

Nov. 1    Stock rights                                                                                      95,000

                       Investment in equity securities                                                             95,000

               Lot 2 – 6,000 rights (10/80 x 280,000)                                                            35,000

               Lot 3 – 9,000 rights (10/80 x 480,000)                                                            60,000

               Cost of rights received                                                                                95,000

                                                                                                            135

2010

Dec. 1    Cash (15,000 x 10)                                                               150,000

                       Stock rights                                                                                          95,000

                       Gain on sale of stock rights                                                                 55,000

Summary of investments                                                                   Shares               Cost

Lot 2 (280,000 – 35,000)                                                                         6,000            245,000

Lot 3 (480,000 – 60,000)                                                                         9,000            420,000

Total                                                                                                            15,000            665,000