KEEPER Auditing Firm audits FIRE Company that has a fiscal year ending June 30. KEEPER asked...

 

Transcribed Image Text:

KEEPER Auditing Firm audits FIRE Company that has a fiscal year ending June 30. KEEPER asked for the summary of FIRE's transactions in the capital stocks of STRENGTH Company. They provided the transactions presented below, except for several cash dividends that have no bearing on the situation. In all transactions, STRENGTH Company uses the specific certificate identification method. The transactions in the Investment of STRENGTH Company common stock are as follows: Sept 06, 200A Purchased 500 shares of STRENGTH Company common, par P100 per share, at a total cost of P48,500. July 15, 200C Converted 500 shares of STRENGTH Company preferred stock into 500 shares of STRENGTH Company common, in accordance with the conversion privilege. The preferred shares originally cost P49,000, and the market price at conversion date was P95 per share. The market price of the common stock on July 15, 200C, was P101 per share. The transactions had no commercial substance. Aug. 07, 200E Received additional shares of STRENGTH Company common in a two-for-one stock split, in which the par value was reduced from P100 to P50 per share. Sept. 06, 200E Purchased 1,000 share of STRENGTH Company common at a total cost of P53,000. Dec. 04, 200E Exercised the option to receive FIRE share of common for every 10 shares held, in lieu of a cash dividend of P5.40 for every share held. The market price of a share was P54. Received stock dividend equal to 20 percent of the common shares held. Dec. 02, 200F Apr. 04, 200G Received warrants representing the right to purchase at par FIRE share of STRENGTH Company common for each ten shares of common owned. On that date of the issuance of the warrants, the market price of the stock ex-rights was P58, and the market price of the rights was P2 each. Apr. 15, 200G FIRE Company exercised the 1,000 rights applicable to the shares purchased on September 6, 200E, and sold all remaining rights. The net proceeds from the sale of the rights were P1.80 per right. June 12, 200G Sold 600 shares of STRENGTH Company common for P32,400 net. The shares were identified as 500 of those purchased on September 6, 2005, and 100 of those purchased April 15, 200G. 1. The proper valuation of the Gain on sale of the rights is: 2. The proper valuation of the Gain on sale of the stocks is: 3. The audited balance of investment in common stock at December 31, 200G is: BUTTERCUP CORP. invested its excess cash in equity securities during 201A: the business model these investments is to profit from trading on price changes. As of December 31, 201A, the equity investment portfolio consisted of the following: Fair Value Cost P45,000 P63,000 120,000 P126,000 216,000 P180,00 AAA, Inc. BBB Corporation CCC Corp. Quantities 1000 shares 2000 shares 2000 shares 4. In the December 31, 201A statement of financial position, what amount should be reported the carrying value of the investments? 5. In the 201A income statement, what amount should be reported as unrealized gain or loss? KEEPER Auditing Firm audits FIRE Company that has a fiscal year ending June 30. KEEPER asked for the summary of FIRE's transactions in the capital stocks of STRENGTH Company. They provided the transactions presented below, except for several cash dividends that have no bearing on the situation. In all transactions, STRENGTH Company uses the specific certificate identification method. The transactions in the Investment of STRENGTH Company common stock are as follows: Sept 06, 200A Purchased 500 shares of STRENGTH Company common, par P100 per share, at a total cost of P48,500. July 15, 200C Converted 500 shares of STRENGTH Company preferred stock into 500 shares of STRENGTH Company common, in accordance with the conversion privilege. The preferred shares originally cost P49,000, and the market price at conversion date was P95 per share. The market price of the common stock on July 15, 200C, was P101 per share. The transactions had no commercial substance. Aug. 07, 200E Received additional shares of STRENGTH Company common in a two-for-one stock split, in which the par value was reduced from P100 to P50 per share. Sept. 06, 200E Purchased 1,000 share of STRENGTH Company common at a total cost of P53,000. Dec. 04, 200E Exercised the option to receive FIRE share of common for every 10 shares held, in lieu of a cash dividend of P5.40 for every share held. The market price of a share was P54. Received stock dividend equal to 20 percent of the common shares held. Dec. 02, 200F Apr. 04, 200G Received warrants representing the right to purchase at par FIRE share of STRENGTH Company common for each ten shares of common owned. On that date of the issuance of the warrants, the market price of the stock ex-rights was P58, and the market price of the rights was P2 each. Apr. 15, 200G FIRE Company exercised the 1,000 rights applicable to the shares purchased on September 6, 200E, and sold all remaining rights. The net proceeds from the sale of the rights were P1.80 per right. June 12, 200G Sold 600 shares of STRENGTH Company common for P32,400 net. The shares were identified as 500 of those purchased on September 6, 2005, and 100 of those purchased April 15, 200G. 1. The proper valuation of the Gain on sale of the rights is: 2. The proper valuation of the Gain on sale of the stocks is: 3. The audited balance of investment in common stock at December 31, 200G is: BUTTERCUP CORP. invested its excess cash in equity securities during 201A: the business model these investments is to profit from trading on price changes. As of December 31, 201A, the equity investment portfolio consisted of the following: Fair Value Cost P45,000 P63,000 120,000 P126,000 216,000 P180,00 AAA, Inc. BBB Corporation CCC Corp. Quantities 1000 shares 2000 shares 2000 shares 4. In the December 31, 201A statement of financial position, what amount should be reported the carrying value of the investments? 5. In the 201A income statement, what amount should be reported as unrealized gain or loss?