Problem 1 2018 Jan 1- Nadayag Company purchased 20,000 shares of Cortez Company, P100 par at P110 per share Mar 1- Cortez Company issued rights to Nadayag Company, each permitting the purchase of 1/4 share at par. No entry was made. The bid price of the share was P140 and there was no quoted price for the rights April 1- Nadayag Company paid the new shares charging the payment to the investment account. Since Nadayag Company felt that it has been assessed by Cortez Company, the dividends received from Cortez Company in 2017 and 2018 were credited to the investment account until the debit for payment of the new share was fully offset Dec 31-Nadayag received annual dividend of P250,000 from Cortez Company 2019 Dec 31-Nadayag received annual dividend of P250,000 from Cortez Company 2020 Jan 1- Nadayag Company received 50% share dividend from Cortez Company. On the same date, the shares received as share dividend were sold at P160 per share and all proceeds were credited to income Dece 31- The shares of Cortez Company were split 2 for 1. Nadayag Company found that each new share was worth P5 more than P110 paid for the original shares. Accordingly, Nadayag Company debited the investment account with additional shares received at P110 per share and credited to income 2021 June 30-Nadayag Company sold one half of the investment at P92 per share and credited the proceeds to investment account Requirement: 1.What is the balance of the investment on December 31, 2020 as it was kept by Nadayag Company? 2. Using the average method, what is the correct balance of the investment on December 31, 2020? 3. What amout of gain on sales of investment should be reported in 2020?

Corporate Financial Accounting

14th Edition

ISBN:9781305653535

Author:Carl Warren, James M. Reeve, Jonathan Duchac

Publisher:Carl Warren, James M. Reeve, Jonathan Duchac

ChapterD: Investments

Section: Chapter Questions

Problem D.7EX

See similar textbooks

Related questions

Concept explainers

Question

Problem 1 2018 Jan 1- Nadayag Company purchased 20,000 shares of Cortez Company, P100 par at P110 per share Mar 1- Cortez Company issued rights to Nadayag Company, each permitting the purchase of 1/4 share at par. No entry was made. The bid price of the share was P140 and there was no quoted price for the rights April 1- Nadayag Company paid the new shares charging the payment to the investment account. Since Nadayag Company felt that it has been assessed by Cortez Company, the dividends received from Cortez Company in 2017 and 2018 were credited to the investment account until the debit for payment of the new share was fully offset Dec 31-Nadayag received annual dividend of P250,000 from Cortez Company 2019 Dec 31-Nadayag received annual dividend of P250,000 from Cortez Company 2020 Jan 1- Nadayag Company received 50% share dividend from Cortez Company. On the same date, the shares received as share dividend were sold at P160 per share and all proceeds were credited to income Dece 31- The shares of Cortez Company were split 2 for 1. Nadayag Company found that each new share was worth P5 more than P110 paid for the original shares. Accordingly, Nadayag Company debited the investment account with additional shares received at P110 per share and credited to income 2021 June 30-Nadayag Company sold one half of the investment at P92 per share and credited the proceeds to investment account Requirement: 1.What is the balance of the investment on December 31, 2020 as it was kept by Nadayag Company? 2. Using the average method, what is the correct balance of the investment on December 31, 2020? 3. What amout of gain on sales of investment should be reported in 2020?

Expert Solution

Step by step

Solved in 4 steps with 5 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.