Answered: At the beginning of current year,…

At the beginning of current year, Cynosure Company purchased 30% of the ordinary shares of another entity for P3,500,000

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter13: Investments And Long-term Receivables

Section: Chapter Questions

Problem 8MC

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At the beginning of current year, Cinnamon Company purchased 40% of the ordinary shares of another entity for P3,000,000 when the net assets acquired amounted to P6,000,000.At acquisition date, the carrying amounts of the identifiable assets and liabilities of the investee were equal to their fair value, except for the equipment for which the fair value was P1,500,000 greater than carrying amount and inventory whose fair value was P500,000 greater than cost.The equipment has a remaining life of 4 years and the inventory was all sold during the current year.The investee reported net income of P4,000,000 and paid P1,000,000 dividends during the current year.Required;1. Prepare journal entries for the current year2. compute the investment income for the current year.
At the beginning of the current year, an entity acquired 40% of the outstanding ordinary shares of another entity for P7,000,000 when the net assets of the investee amounted to P10,000,000. At acquisition date, the carrying amounts of the identifiable assets and liabilities of the investee were equal to fair value, except for land whose fair value was P2,000,000 greater than carrying amount and inventory whose fair value was P1,500,000 greater than cost. The land was sold in the current year and one-half of the inventory was sold during the current year. During the current year, the investee reported net income of P8,000,000, issued 10% share dividend and paid cash dividend on P2,500,000. What is the investment income for the current year? a. 3,200,000 b. 2,100,000 c. 2,900,000 d. 2,400,000 What is the carrying amount of the investment in associate at year-end? a. 8,900,000 b. 8,100,000 c. 9,200,000 d. 8,400,000
On January 1, 2021, April Company purchased 40% of the outstanding shares of another entity for P5,000,000 when the net assets of the investee amounted to P10,000,000. At acquisition date, the carrying amount of the identifiable assets and liabilities of the investee were equal to their fair values, except for equipment for which the fair value was P2,000,000 greater than its carrying amount and inventory whose fair value was P1,000,000 greater than its cost. The equipment has a remaining life of 4 years and the inventory was all sod during 2021. The investee reported net income of P6,000,000 for 2021 and paid no dividends during 2021. What is the maximum amount which could be included in April Company’s income before tax to reflect April’s equity in earnings of the investee?
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On January 1, 2018, ICT Company purchased 80% of ESP Company's stock for P975,000. On this date, the carrying amount of ESP Company's net assets were P1,000,000. The fair value of ESP Company's identifiable assets and liabilities were the same as their carrying amount except for plant assets (net) which were P100,000 in excess of the carrying amount. For the year ended, ESP Company had a net income of P190,000 and paid cash dividends totaling P125,000. Parent opted to measure NCI proportionate to its share on ESP's identifiable net assets. In the December 31, 2018 consolidated balance sheet, NCI should be reported at:
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On 1 July 2022, Dean Ltd acquired the remaining 80% of the issued shares of Lewis Ltd for shares in Dean Ltd with a fair value of $1 000 000. At that date, the financial statements of Lewis Ltd showed the following information. All the assets and liabilities of Lewis Ltd were recorded at amounts equal to their fair values at the acquisition date, except some equipment recorded at $50 000 below its fair value with a related accumulated depreciation of $80 000. Assume the equipment has not been revalued in the subsidiaries accounts. Also, Dean Ltd identified at acquisition date a contingent liability related to a lawsuit where Lewis Ltd was sued by a former supplier and attached a fair value of $40 000 to that liability. The previous held interest by Dean Ltd in Lewis Ltd (ie 20% of the issued shares) was recognised by in Dean Ltd.’s accounts at the fair value at acquisition date of $250 000. Dean Ltd incurred $15 000 in acquisition related costs including $10 000 in share issue costs.…
On July 1, 2019, CaviteCorporation purchased 40% of the outstanding ordinary shares of another entity for P500,000 when the net assets of the investee amounted to P1,000,000. At acquisition date, the carrying amounts of the identifiable assets and liabilities of the investee were equal to their fair value, except for equipment for which the fair value was P200,000 greater than carrying amount and inventory whose fair value was P100,000 greater than the cost. The equipment has a remaining life of 5 years and the inventory was all sold during 2019. The investee reported net income of P550,000 for 2019 and paid dividends amounting to P800,000. Required: What is the maximum amount which could be included in income before tax to reflect the investor’s equity in earnings of the investee for 2019?
At the beginning of 2018, Esterlina Corporation purchased 40% of the ordinary shares outstanding of Mary Grace Incorporated for P15, 000,000 when the netassets of Mary Grace Incorporated amounted to P30,000,000. At the acquisition date, the carrying amounts of the identifiable assets and liabilities of Mary Grace Incorporated were equal to their fair value, except for the following: a. Equipment whose fair value was P7,000,000 greater than its carrying amount. b. Inventory whose fair value was P2,500,000 greater than its carrying amount. The equipment has a remaining life of 4 years, and the inventory was all sold during 2013. Mary Grace Incorporated has two classes of shares: Ordinary shares (par value, P100), 300,000 shares outstanding, 15% cumulative preference shares (par value, P50), 100,000 shares outstanding The investee reported the following net income (inclusive of enter-company transactions) and payment of cash dividend: Net Income Dividend payment 2018 20,000,000 5,000,000…
At the beginning of 2018, Esterlina Corporation purchased 40% of the ordinary shares outstanding of Mary Grace Incorporated for P15, 000,000 when the netassets of Mary Grace Incorporated amounted to P30,000,000. At the acquisition date, the carrying amounts of the identifiable assets and liabilities of Mary Grace Incorporated were equal to their fair value, except for the following: a. Equipment whose fair value was P7,000,000 greater than its carrying amount. b. Inventory whose fair value was P2,500,000 greater than its carrying amount. The equipment has a remaining life of 4 years, and the inventory was all sold during 2013. Mary Grace Incorporated has two classes of shares: Ordinary shares (par value, P100), 300,000 shares outstanding, 15% cumulative preference shares (par value, P50), 100,000 shares outstanding. The investee reported the following net income (inclusive of enter-company transactions) and payment of cash dividend: 2018 Net Income Dividend payment 20,000,000 5,000,000…
At the beginning of 2018, Esterlina Corporation purchased 40% of the ordinary shares outstanding of Mary Grace Incorporated for P15, 000,000 when the netassets of Mary Grace Incorporated amounted to P30,000,000. At the acquisition date, the carrying amounts of the identifiable assets and liabilities of Mary Grace Incorporated were equal to their fair value, except for the following: a. Equipment whose fair value was P7,000,000 greater than its carrying amount. b. Inventory whose fair value was P2,500,000 greater than its carrying amount. The equipment has a remaining life of 4 years, and the inventory was all sold during 2013. Mary Grace Incorporated has two classes of shares: Ordinary shares (par value, P100), 300,000 shares outstanding, 15% cumulative preference shares (par value, P50), 100,000 shares outstanding. The investee reported the following net income (inclusive of enter-company transactions) and payment of cash dividend: 2018 20,000,000 5,000,000 2019 35,000,000 8,000,000…
At the beginning of the current year, FFF Company acquired 20% of the outstanding ordinary shares of Vee Company for P8,000,000. This investment gave FFF the ability to exercise significant influence over Vee. The carrying amount of the acquired shares was P6,000,000. The excess of cost over carrying amount was attributed to a depreciable asset which was undervalued on Vee's statement of financial position and which had a remaining useful life of 10 years. The investee reported net income of P1,800,000 and paid cash dividends of P400,000 and thereafter issued 5% share dividend during the current year. What is the carrying amount of the investment in associate at year-end?