Problem 16-3 (IAA) Effective Company had the following long-term investments at the beginning of the current year: Investment in SMC preference shares, 12% P200 par, 5,000 shares Investment in Benguet ordinary shares, 10,000 shares 1,200,000 1,000,000 During the current year, the following transactions were completed: 1. Purchased 4,000 ordinary shares of ANA Company for P300,000. 2. Received 2,000 ordinary shares of Benguet Company in lieu of a cash dividend of P10 per share. On this date, Benguet ordinary share has a quoted market of P60. 3. Purchased 6,000 ordinary shares of ANA Company for P420,000. 4. Received semiannual dividend on SMC OCompany 12% preference share. 5. ANA ordinary share was split on a 2-for-1 basis. 6. Sold 8,000 ordinary shares of ANA Company at P85 less transaction costs of 5%. Use average approach. Required: a. Prepare journal entries to record the transactions. b. Prepare a summary of the portfolio of investments stating the number of shares and the corresponding cost.

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Chapter1: Financial Statements And Business Decisions
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Problem 16-3 (IAA)
Effective Company had the following long-term investments
at the beginning of the current year:
Investment in SMC preference shares, 12%
P200 par, 5,000 shares
Investment in Benguet ordinary shares, 10,000 shares
1,200,000
1,000,000
During the current year, the following transactions were completed:
1. Purchased 4,000 ordinary shares of ANA Company for
P300,000.
2. Received 2,000 ordinary shares of Benguet Company in lieu
of a cash dividend of P10 per share.
On this date, Benguet ordinary share has a quoted market
of P60.
3. Purchased 6,000 ordinary shares of ANA Company for
P420,000.
4. Received semiannual dividend on SMC Company 12%
preference share.
5. ANA ordinary share was split on a 2-for-1 basis.
6. Sold 8,000 ordinary shares of ANA Company at P85 less
transaction costs of 5%. Use average approach.
Required:
a. Prepare journal entries to record the transactions.
b. Prepare a summary of the portfolio of investments stating
the number of shares and the corresponding cost.
Transcribed Image Text:Problem 16-3 (IAA) Effective Company had the following long-term investments at the beginning of the current year: Investment in SMC preference shares, 12% P200 par, 5,000 shares Investment in Benguet ordinary shares, 10,000 shares 1,200,000 1,000,000 During the current year, the following transactions were completed: 1. Purchased 4,000 ordinary shares of ANA Company for P300,000. 2. Received 2,000 ordinary shares of Benguet Company in lieu of a cash dividend of P10 per share. On this date, Benguet ordinary share has a quoted market of P60. 3. Purchased 6,000 ordinary shares of ANA Company for P420,000. 4. Received semiannual dividend on SMC Company 12% preference share. 5. ANA ordinary share was split on a 2-for-1 basis. 6. Sold 8,000 ordinary shares of ANA Company at P85 less transaction costs of 5%. Use average approach. Required: a. Prepare journal entries to record the transactions. b. Prepare a summary of the portfolio of investments stating the number of shares and the corresponding cost.
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