Ace Holding Co. shows the following investments in its accounting records at January 1, 2020: Ordinary shares: San Mikel Corporation (1,000 shares) P500,000 Smarty Company (5,000 shares) 5,000,000 Parking lot (leased to Star Company) 2,500,000 Trademark 2,000,000 Total investments P10,000,000 Additional information: • Ace Holding Co. owns 1% of San Mikel Corporation and 30% of Smarty Company. During the year ended December 31, 2020, Ace Holding Co. received cash dividends of P350,000 from San Mikel Corporation and P750,000 from Smarty Company, whose 2020 net earnings were P4,000,000 and P10,000,000, respectively. • The Star Company lease which commenced on January 1, 2019 is for 5 years at an annual rental of P1,250,000. In addition, on January 1, 2019, Star Company paid a nonrefundable deposit of P400,000 as well as a security deposit of P250,000, to be refunded upon expiration of lease. Ace Holding Company received P1,250,000 rent from Star Company in 2020. • The trademark was licensed to Green Company for royalties of 10% of sales of the trademark items. Royalties are payable semiannually on March 1, for sales in July through December of the prior year, and on September 1, for sales in January to June of the same year. On March 1, 2019 and 2020, Ace Holding Co. received royalties of P500,000 and P750,000, respectively. On September 1, 2019 and 2020, Ace Holding Co. received royalties of P1,000,000 and P1,500,000 respectively. Green Company’s sales of the trademark items amounted to P4,000,000 for the last half of 2020. Requirements: Based on the above and the result of your audit, determine the following: 1. Total income from investments in equity securities 2. Rent income for 2020 3. Royalty income for 2020
Ace Holding Co. shows the following investments in its accounting records at January 1, 2020:
Ordinary shares:
San Mikel Corporation (1,000 shares) P500,000
Smarty Company (5,000 shares) 5,000,000
Parking lot (leased to Star Company) 2,500,000
Trademark 2,000,000
Total investments P10,000,000
Additional information:
• Ace Holding Co. owns 1% of San Mikel Corporation and 30% of Smarty Company. During the year ended
December 31, 2020, Ace Holding Co. received cash dividends of P350,000 from San Mikel Corporation and
P750,000 from Smarty Company, whose 2020 net earnings were P4,000,000 and P10,000,000,
respectively.
• The Star Company lease which commenced on January 1, 2019 is for 5 years at an annual rental of
P1,250,000. In addition, on January 1, 2019, Star Company paid a nonrefundable deposit of P400,000 as
well as a security deposit of P250,000, to be refunded upon expiration of lease. Ace Holding Company
received P1,250,000 rent from Star Company in 2020.
• The trademark was licensed to Green Company for royalties of 10% of sales of the trademark items.
Royalties are payable semiannually on March 1, for sales in July through December of the prior year, and
on September 1, for sales in January to June of the same year. On March 1, 2019 and 2020, Ace Holding
Co. received royalties of P500,000 and P750,000, respectively. On September 1, 2019 and 2020, Ace
Holding Co. received royalties of P1,000,000 and P1,500,000 respectively. Green Company’s sales of the
trademark items amounted to P4,000,000 for the last half of 2020.
Requirements:
Based on the above and the result of your audit, determine the following:
1. Total income from investments in equity securities
2. Rent income for 2020
3. Royalty income for 2020
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