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Problem 1:

Following are the investment transactions

of Jack Company to Jill Corporation:
 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
Jack paid P35,000 for the brokers’ fee and
 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.
 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
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
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
 On December 31, 2015, Jill reported Net
Income of P2,500,000. Fair value of Jill’s
ordinary shares and Piper’s Ordinary
Shares were P132.50, and P12.50

 On March 31, 2016, Jack received the
Piper’s ordinary shares. On this date;
Piper’s OS are selling at P13/share.
 On July 1, 2016, Jack acquired from
other shareholder of Jill, additional shares
at P135 per share to increase its
investment to 25% and paid brokers fees
of P45,000.
 On October 1, 2016, Jack bought at
special price of P450,000, merchandise
from Jill. This merchandise normally sells
at P500,000, giving Jill a gross profit of
 On December 1, 2016, Jack received 500
new ordinary shares in lieu of P2 cash
dividend declared by Jill. On the same
date, Jack also received from Piper,
additional shares representing 10% stock
dividend. On this date Jill’s and Piper’s
ordinary shares are selling at P138 and
P12.75 respectively.
 On December 31, 2016, Jill reported a
net income of P3,870,000, and the fair
value per share of Jill’s OS and Piper’s OS
were P138.50 and P12.80 respectively.
Required: Journal entries assuming that
Jack Company classifies the investment as
a) Financial Asset at FV and b) Financial
Asset at FV through OCI.
Problem 2:
On December 31, 2014, Joan Corporation has the
following equity securities in its investment
 Jerry Corporation’s quoted ordinary shares
representing 15% of the 200,000 shares
outstanding with a par value of acquired on April
1, 2012 at their fair value of P112 plus
transaction of P140,000.
 10% of JJ Incorporated, P50 par value,
unquoted ordinary share. These investments
were acquired on Sep 1, 2011 at a total cost of
P550,000, on the same day JJ Incorporation
outstanding share were 100,000 shares and
10,000 shares of ordinary and 12%, P100 par
value cumulative preference shares
Transactions and other information related to the
investments were as follows:
Jerry Corporation:
 On November 15, 2012, Jerry declared 20%
stock rights to issue additional at P10 premium
per share. On this date the Jerry’s ordinary
share is selling P113. Joan exercised the stock
rights on January 15, 2013.
 Purchases of Jerry from Joan Corporation is
estimated at 40% of its total purchases. On
December 31, Jerry reported Purchases from
Joan, Unsold goods from purchases from Joan,
Income reported, Dividends declared and paid
and Fair Value of Jerry’s ordinary share as
Unsold Net Fair
Yea Purchas as of Income Dividen Valu
r es Decemb ds e
er 31
201 5,200,00 442,000 2,850,0 1,350,0 115
2 0 00 00
201 5,395,00 669,500 3,100,0 1,600,0 118
3 0 00 00
201 5,200,00 585,000 2,900,0 1,400,0 123
4 0 00 00
201 6,799,00 458,900 3,430,0 1,930,0 135
5 0 00 00
Jerry’s profit margin rate is 35%, while Joan’s
profit rate to Jerry is 30% on cost.
 Joan Corporation has been the major supplier
of Jerry since 2011. Early January 2013 and
during the general shareholders meeting, Joan
Corporation was able to acquire a seat in the
board of directors.
 On October 1, 2014, Joan sold to Jerry an
equipment costing P1,500,000, with a carrying
value of P750,000 and a remaining useful life of
5 years for P1,200,000 receiving P200,000 cash
and a non-interest bearing promissory note
discounted at 12% and payable at P500,000
each on October 1, 2015, and October 1, 2016.
JJ Incorporated
 On December 1, 2012, JJ Inc. declared 20%
share dividend to shareholder of record on
December 15, 2012, payable on December 29,
 On January 5, 2015, received from JJ Inc. 240
preference share representing share dividends
declared on December 15, 2014. On this date
JJ ordinary share and preference share can be
purchased at P58.50 and P105.50.
 January 15, 2015, Joan acquired additional
15% of the outstanding ordinary of JJ Inc. for
P1,000,000. On this date the fair value of the
old 10% interest is P720,000 and the carrying
value of the net asset of JJ Inc. is P6,500,000.
Any excess of cost over carrying value is
attributable to an undervalued depreciable asset
with an average useful life of 5 years.
 Net Income and dividend declared and paid by
JJ Inc. were as follows:

Year Net Dividends

2011 750,000 700,000
2012 925,000 700,000
2013 800,000 0
2014 1,150,000 1,500,000
2015 1,300,000 1,000,000
1) Compute for the annual income from 2012 to
2015 to be reported in the Profit or Loss related
to investment from:
a) Jerry Corporation
b) JJ Incorporated
2) Compute for the carrying value of the
investment in Jerry Corporation annually from
December 31, 2012 to December 31, 2015.
3) Prepare the journal entries related to a)
Investment to Jerry Corporation and b)
Investments to JJ Incorporated for the year
2014 and 2015.
Problem 3:
On October 1, 2016, XXL Company acquired 10% of XXS
Corporation 100,000, P100 par value issued and
outstanding ordinary shares and 5,000 shares of the
20,000 issued and outstanding P200 par value 10%
cumulative preference share at P125 and P230
respectively and paid P24,000 for the brokers’ fee and
commission. On December 31, 2016 XXS declared and
paid dividends of P2 per share to the ordinary
shareholder, and reported net income of P2,500,000.
1. Prepare Journal entries for 2016 assuming the
Preference shares are designated as financial asset
at FV thru OCI and that the fair value at December
31, 2016 were P130 and P225 for the ordinary and
preference respectively.
2. Prepare Journal entries for 2016 and 2017
assuming the investments were both designated as
financial assets at thru OCI and that the fair values
on December 31, 2016 of P130 and P225 for
ordinary and preference shares respectively and
that no available fair values on December 31, 2017.
In addition, XXL acquired for cash an additional 15%
of the ordinary shares of XXS on April 1, 2017 at
their fair value of P135 and paying P25,000 for the
transaction costs. On October 1, 2017 XXL received
10% stock dividend from XXS and by the end of
2017, XXL received the regular dividend from
preference shares and P3 per share for the ordinary
shares. XXS reported net income for 2017 of