Problems - Equity Security.doc

Problems - Equity Security.doc - Problem 1 Following are...

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Problem 1: Following are the investment transactions of Jack Company to Jill Corporation: 2015 On April 1, 2015, Jack Company acquired 5,000 of Jill Corporation 100,000, P100 par value issued and outstanding ordinary shares at a fair value of P130 in addition
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Jack paid P35,000 for the brokers’ fee and commission. On July 1, 2015, Jack bought from Jill an equipment costing P1,500,000, for P1,250,00. This equipment was acquired by Jill on January 1, 2009, and it is being depreciated using straight-line method over 15-year useful life.
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On October 1, 2015, Jill issued stock rights to shareholder, giving the shareholder right to purchase one ordinary shares at P125 for every 4 rights exercise, on that date the Jill ordinary shares are selling at P135. On the same day Jack exercise the rights. On October 31, 2015, Jack accepted the offer of Piper, a shareholder of Jill, his
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stock rights to acquire additional 1,000 share of Jill Corporation and paid P2 per right, subsequently, Jack exercised the stock rights, at this date Jill OS are selling at P134. On December 1, 2015, Jill Corporation declared a property dividend to its shareholder of record at December 31, 2015, receiving on March 31, 2016, one
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share of Piper Ordinary Share, a financial asset of Jill, for every 5 shares held. On this date, Piper’s Ordinary Shares are carried in the books of Jill at P10 per share, even though they are selling at P12. On December 31, 2015, Jill reported Net Income of P2,500,000. Fair value of Jill’s ordinary shares and Piper’s Ordinary
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Shares were P132.50, and P12.50 respectively. 2016 On March 31, 2016, Jack received the Piper’s ordinary shares. On this date; Piper’s OS are selling at P13/share.
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