PROBLEM 16-1 ACCLAIM COMPANY

Jul. 15 Cash 25,000

Dividend income (5k shares x 5) 25,000

Memo - received 1,000 shares representing 20% stock

Dec. 15
dividend on 5,000 original shares held

Dec. 28 Cash (3k shares x 60) 180,000

Investment in shares 133,000
Gain on sale of investment 47,000

Lot no. 1 (2,400 shares) 100,000

Lot no. 2 (600/3,600 x 198,000) 33,000
Cost of investment 133,000

PROBLEM 16 - 2 DISTRAUGHT COMPANY

1 Investment in Aye- Ordinary shares 2,000,000

(40k x 50) 2,000,000
Cash

2 Memo - received 200k Aye Ordinary shares as a result of 5 for 1 split of

40k original shares

3 Investment in Aye - Preference shares 125,000

Investment in Aye - Ord. shares 125,000

Market
Fraction Cost
value
Ordinary shares (200k x 15) 3,000,000 30/32 1,875,000
Preference shares (20k x 10) 200,000 2/32 125,000
3,200,000 2,000,000

4 Investment in Bee - Ord. shares 300,000

Dividend income (200k/4 x 6) 300,000

5 Cash (80k x 15) 1,200,000

 Investment in Aye - Ord. shares 750,000
Gain on sale of investment 450,000

PROBLEM 16-3 EFFECTIVE COMPANY

1 Investment in ANA - Ord. shares 300,000
Cash 300,000

2 Investment in Benguet - Ord. shares 120,000

Dividend income (2k x 60) 120,000

3 Investment in ANA - Ord. shares 420,000

Cash 420,000

4 Cash 60,000
Dividend income (12% x 200 x 5k x 1/2) 60,000

5 Memo - received 20,000 new ANA ord. shares as a result of a 2 for 1

split of 10,000 orig. shares

6 Cash (680k - 34k) 646,000

Investment in ANA - Ord. shares (8k/20k x
288,000
720k)
Gain on sale of investment 358,000

Shares Cost
SMC Pref. shares 5,000 1,200,000
Benguet Ord. shares 10,000 1,000,000
Benguet Ord. shares 2,000 120,000
ANA Ord. shares 12,000 432,000
29,000 2,752,000

PROBLEM 16-4 VIABLE COMPANY

1 Investment in shares
Cash

2 10,000 rights
3 Initial measurement of rights (10k x 10) 100,000

4 Share rights 100,000

Investment in shares 100,000

5 Investment in shares 400,000

Cash (10k/5 x 150) 300,000
Share rights 100,000

6 Cash (10k x 15) 150,000

Share rights 100,000
Gain on sale of rights 50,000

7 Loss on share rights 100,000

Share rights 100,000

PROBLEM 16-5 VIVACIOUS COMPANY

1

Theoretical value = 125 - 100 5.00 per

4+1 share

a Share rights (25k x 5) 125,000

Investment in shares 125,000

b Investment in shares 750,000

Share rights 125,000
Cash (25k/4 x 100) 625,000

2
Theoretical value = 125 - 100 6.25 per
4 share

a Share rights (25k x 6.25) 156,250

Investment in shares 156,250

b Investment in shares 781,250

Share rights 156,260
Cash 625,000
PROBLEM 16-6 MOON COMPANY

1 Share rights (40k x 10) 400,000

Investment in shares 400,000

2 Investment in shares 1,500,000

Share rights (30k x 10) 300,000
Cash (15k shares x 80) 1,200,000

3 Cash (6k x 12) 72,000

Share rights (6k x 10) 60,000
Gain on sale of rights 12,000

4 Loss on stock rights (4k x 10) 40,000

Share rights 40,000

Shares Cost
First acquisition (3M - 400k) 40,000 2,600,000
New acquisition 15,000 1,500,000
55,000 4,100,000

PROBLEM 16-7 EARTH COMPANY

1 Investment in shares 3,200,000

Cash 3,200,000

2 Memo - Received 20k shares as share dividend on 90k original shares.

Share now held is 100k

3 Cash (100k x 5) 500,000

Dividend income 500,000

4 Share rights (100k x 5) 500,000

Investment in shares 500,000

5 Cash (40k x 7) 280,000

Share rights (40k x 5) 200,000
Gain on sale on rights 80,000
6 Investment in shares 660,000
Share rights (60k x 5) 300,000
Cash (60k/5x30) 360,000

7 Cash (80k 35) 2,800,000

Investment in shares (80k/100k x 2.7M) 2,160,000
Gain on sale of investment 640,000

Shares Cost
Original acquisition 20,000 540,000
New acquisition 12,000 660,000
32,000 1,200,000

PROBLEM 16-8 BENEVOLENT COMPANY

2020
Aug.1 Investment in shares 60,000
Cash 60,000

Oct. 1 Investment in shares 560,000

Cash 560,000

2021
Jul. 1 Investment in cash 480,000
Cash 480,000

Aug. 1 Cash 500,000

Investment in shares 340,000
Gain on sale of investment 160,000

2022
Feb. 1 Received 5,500 shares representing 50% share dividend on
10k remaining shares held. Shares now held is 15k

Nov. 1 Share rights 150,000

Investment in shares 150,000
 Lot 2 - 6,000 rights (6k x 10) 60,000
Lot 3 - 9,000 (9k x 10) 90,000
Cost of rights received 150,000

Dec. 1 Cash (15k 15) 225,000

Share rights 150,000
Gain on sale of share rights 75,000

Summary of Investments Shares Cost

Lot 2 (280k - 60k) 6,000 220,000
Lot 3 (480k - 90k) 9,000 390,000
Total 15,000 610,000

PROBLEM 16-9 DEARTH COMPANY

Jan. 1 Investment in King Comp. 700,000

Cash 700,000

Mar. 1 Investment in Queen Comp. 660,000

Cash 660,000

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

Dividend income 50,000

Jul. 1 Received 2,000 shares representing 20% share dividend on

10,000 Queen Company shares originally held. Shares now
held is 12,000.

Aug. 1 Investment in Princess Comp. 500,000

Cash 500,000

Oct. 1 Received 60,000 new shares representing 20% share

dividend on 10,000 Queen Comp. shares originally held.
Shares now held is 12,000

Cash 50,000
 Dividend income 50,000

Oct. 31 Memo - Received 60k stock rights from Queen Comp. to

subscribe for one new sharer at P20 for every 10 rights held

Nov. 15 Investment in Queen Comp. 120,000

Cash (6k shares x 20) 120,000

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

Dividend income 330,000

Dec. 15 Cash (10k shares x 30) 300,000

Investment in Queen Comp.
110,000
(10k/6ok x 660k)
Gain on sale of investment 190,000

Summary of Investments Shares Cost

King Comp. shares 10,000 700,000
Queen Comp. shares
Block 1 50,000 550,000
Block 2 6,000 120,000
Princes Comp. shares 10,000 500,000
76,000 1,870,000

PROBLEM 16-10 ABC COMPANY

Purchase price (40k x 100) 4,000,000

Brokerage 120,000
Total 4,120,000
Less: Purchased dividend (40k x
200,000
5)
Cost of investment 3,920,000 C
PROBLEM 16-11 QUEEN COMPANY

1 Purchase price 2,400,000

Fair value of share warrants (50k x 10) -500,000
Cost of investment in Preference shares 1,900,000
Less: Selling price -700,000
Cost of investment in Preference shares 1,200,000 C

2 Cost of investment 1,200,000

Selling price 700,000
Gain on sale 500,000 C

PROBLEM 16-12 MAXIM COMPANY

Originally shares on Oct. 1 40,000

Stock dividend on Nov. 30 (10%) 4,000
Total shares 44,000
Shares sold on Dec. 31 -4,000
Balance 40,000

Sales price 1,000,000

Cost of shares sold (4k/44k x 6.6 M) -600,000
Gain on sale 400,000 B

PROBLEM 16-13 PRESUMPTUOUS COMPANY

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

PROBLEM 16-14 WRAY COMPANY

Cash dividend from Bow Company (10% x 2M) 200,000 D

PROBLEM 16-15 NEIL COMPANY

Cash dividend from Amal (6k/300k=2% interest) 15,000 A

PROBLEM 16-16 REMINISCENT COMPANY

1 Jun. 1 Dec. 1
Original shares 20,000 30,000
Share dividend - 20% 4,000 6,000
Total shares 24,000 36,000

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

Cost of shares sold:
From June 1 - 24k shares 2,000,000
From Dec. 1 - 6k shares (6k/36k x 3.6M) 600,000 -2,600,000
Gain on sale 1,150,000 A

2 Average approach

Sale price 3,750,000

Cost of share sold (30k.60k x 5.6M) 2,800,000
Gain on sale 950,000 A

3 Dividend income (50k x 10) 500,000

Gain on sale of investment - FIFO 1,150,000
Total income from investment 1,650,000 A

PROBLEM 16-17 SCOUNDREL COMPANY

1 Cost of rights (100k x 6) 600,000 D

2 Cash payment (20k x 90) 1,800,000

Cost of rights exercised 600,000
Total cost of new investment 2,400,000 D
PROBLEM 16-18 TEMPORAL COMPANY

Initial cost of rights (50k x 20) 1,000,000

Cash paid for new shares (25k x 90) 2,250,000
Total cost of new shares 3,250,000 B

PROBLEM 16-19 HASTE COMPANY

Total cost of rights (60k x 5) 300,000

10,000 shares x 5 rights 30,000 rights

Cash paid (10k x 80) 800,000

Cost of rights exercised (50k x 5) 250,000
Total cost of 900 shares 1,050,000 B

PROBLEM 16-20 ANIMOSITY COMPANY

Shares Cost
Original investment 50,000 3,800,000
New investment acquired through stock
50,000 4,000,000
rights (50,000 x 80)
Total 100,000 7,800,000

FIFO APPROACH
Sales price (25k x 90) 2,250,000
Cost of shares sold (25k/50k x 3.8M) 1,900,000
Gain on sale 350,000 A

AVERAGE APPROACH
Sales price 2,250,000
Cost of shares sold (25k/100k x 7.8M) 1,950,000
Gain on sale 300,000