On January 1 of the current year, Yellow Company purchased 40% of the outstanding ordinary shares of Orange company paying P2,560,000 when the carrying amount of the net assets of Orange equaled P5,000,000. The difference was attributed to equipment which had a carrying amount of P2,200,000 and a fair value of P3,600,000. The remaining useful life of the equipment was 4 years. During the current year, Orange company, reported net income of P1,600,000 and paid cash dividends of P1,000,000. What amount should be reported as investment income for the current year? O 640,000 O 400,000 O 500,000 560,000

On January 1 of the current year, Yellow Company purchased 40% of the outstanding ordinary shares of Orange company paying P2,560,000 when the carrying amount of the net assets of Orange equaled P5,000,000. The difference was attributed to equipment which had a carrying amount of P2,200,000 and a fair value of P3,600,000. The remaining useful life of the equipment was 4 years. During the current year, Orange company, reported net income of P1,600,000 and paid cash dividends of P1,000,000. What amount should be reported as investment income for the current year? O 640,000 O 400,000 O 500,000 560,000

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

On January 1, Year 1, Big Corporation acquired 40% interest in Small Company for $300,000. At the date of acquisition, Small Company's equity (net assets) had a book value of $550,000 and a fair value of $600,000. The difference between the book value and the fair value relates to equipment being depreciated over the remaining useful life of 10 years. During Year 1, Small Company had net income of $900,000 and paid a $40,000 dividend. Required: 3. Record the journal entry to depreciate the fair value difference 4. Determine the investment-related amounts to be reported at year-end on Big Corporation's balance sheet
How much is the investment income to be reported at the end of the current year? At the beginning of current year, Courage Company acquired 25% of the outstanding shares of an investee at a total cost of P8,400, 000. At the time, the carrying amount of the net assets of Courage Company totaled P28, 800, 000. The investee owned equipment with 5-year remaining life and with a fair value P2, 400, 000 more than carrying amount. The investee owned land with a fair value of Pl, 200, 000 more than carrying amount. During the current year, the investee sold the land. At year-end, the investee reported net income of P6, 000, 000 declared and paid a cash dividend of P3, 600, 000 to shareholders at year-end. The fair value of the investment at year-end is P9, 000, 000. Q1. How much is the investment income to be reported at the end of the current year? Q2. How much is the carrying amount of the investment at year- end? Q3. How much is the implied goodwill from acquisition? Q4. What is the entry…
On January 1, Year 1, RAK, Inc. acquired a 25% interest in Tech Corp. for $375,000. At the date of acquisition, the net assets had a fair value in excess of shareholders' equity of $200,000. The fair value in excess of book value is the result of equipment with a remaining useful life of four years. For the year ended December 31, Year 1. Tech hadnet income of $60,000 and RAK received a dividend of $10,000 from Tech. At December 31, Year 1, Tech had shareholders' equity of $820,000. What amount would RAK show as investment in Tech Corp. at the end of Year 1? $380,000 $375.000 $367,500 $357,500
At the start of the current year, SBC Corp. purchased 30% of Sky Tech Inc. for $45 million. At the time of purchase, the carrying value of Sky Tech's net assets was $75 million. The fair value of Sky Tech's depreciable assets was $15 million in excess of their book value. For this year, Sky Tech reported a net income of $75 million and declared and paid $15 million in dividends.The total amount of additional depreciation to be recognized by SBC over the remaining life of the assets is:
At the start of the current year, SBC Corp. purchased 30% of Sky Tech Inc. for $51 million. At the time of purchase, the carrying value of Sky Tech's net assets was $80 million. The fair value of Sky Tech's depreciable assets was $20 million in excess of their book value. For this year, Sky Tech reported a net income of $80 million and declared and paid $20 million in dividends. The total amount of additional depreciation to be recognized by SBC over the remaining life of the assets is: Multiple Choice O $6.0 million. $20 million. $30 million. None of these answer choices are correct.
On January 1, 2022, Green Corporation purchased 25% of the outstanding voting common stock of Gold Company for $500,000. The book value of Gold Company as a whole was $1,700,000. The excess of cost over book value is attributable to a license (intangible asset) to be amortized over fifteen years. For the year ended December 31, 2022, Gold reported net income of $300,000 and paid cash dividends of $12,000. What is the carrying value of Green's investment in Gold at December 31, 2022? O $417,000. O $567,000. O $572,000. O $550,000.
At the beginning of the year SassyCat acquired 30% of the outstanding common stock of LazyMouse for $1,200,000. The book value of the net assets of LazyMouse at the time of the acquisition was $4,500,000. Any excess cost over the underlying book value was assigned to a patent that was undervalued on LazyMouse's balance sheet. The patent has a remaining useful life of 5 years. For the year, LazyMouse reported net income of $300,000 and paid cash dividends of $90,000. Question 1 At the end of the year the balance of the LazyMouse investment on the books of SassyCat should be ? (enter whole dollars without dollar signs)
On January 1, 2019, Orange Co. purchased 40% of the outstanding ordinary shares of New Company equaled P12,500,000. The difference was attributed to equipment which had a carrying amount of P3,000,000 and a fair market value of P5,000,000 and to building which had a carrying amount of P2,500,000 and a fair value of P4,000,000. The remaining useful life of the equipment and building was 4 years and 12 years, respectively. During 2020, New Company reported net income of P5,000,000 and paid dividends of P2,500,000. What is the acquisition cost of Orange Co.?
As a long-term investment, Painters’ Equipment Company purchased 20% of AMC Supplies Ltd’s 400,000 shares for OMR480,000 at the beginning of the financial year of both companies. On the purchase date, the fair value and the book value of AMC’s net assets were equal. During the year, AMC earned net income of OMR250,000 and distributed cash dividends of OMR0.250 per share. At year-end, the fair value of the shares is OMR505,000. Required: 1.Assume no significant influence was acquired. Prepare the appropriate journal entries from the purchase through the end of the year. (Cost Method) 2.Assume significant influence was acquired. Re-enact the appropriate journal entries from the purchase through the end of the year to report the investment balance in the consolidated financial statements of Painters’ Equipment Company. (Equity Method)
Pirate Corporation purchased 100 percent ownership of Ship Company on January 1, 20X5, for $271,000. On that date, the book value of Ship’s reported net assets was $209,000. The excess over book value paid is attributable to depreciable assets with a remaining useful life of 10 years. Net income and dividend payments of Ship in the following periods were as shown below: Year Net Income Dividends 20X5 $ 25,000 $ 16,000 20X6 45,000 26,000 20X7 25,000 42,000 Required: Prepare journal entries on Pirate Corporation’s books relating to its investment in Ship Company for each of the three years, assuming it accounts for the investment using the equity method.
On January 1, 20x1, ALLEVIATE Co. acquired 30,000 ordinary shares representing 30% interest in LESSEN Co.'s net assets for $12,000,000. At the time of acquisition, LESSEN's net assets had a fair value of $40,000,000 and a carrying amount of $32,000,000. The difference between the fair value and the carrying amount is attributable to a building which has a remaining useful life of 10 years. In 20x1, LESSEN reported profit of $4,000,000 and paid cash dividends of $2,400,000. LESSEN's shares were selling at $400 per share on December 31, 20x1. On July 1, 20x2, ALLEVIATE sold 60% of its investment in LESSEN at the prevailing market price of $480 per share. The retained interest does not give ALLEVIATE significant influence over LESSES; thus, ALLEVIATE reclassified the remaining investment to held for trading securities. LESSEN reported interim profit of $2,000,000 for the six months ended June 30, 20x2. LESSEN reported total profit of $4,800,000 in 20x2 and declared $4,000,000 cash…
Beef Company acquired 70% of Broccoli on January 1. On that date, the fair value of equipment with 3-year remaining life was P90,000 more than the book value. During the year Broccoli reported net income of 210,000. The non-controlling interest in net income for the year was P63,000. P33,000 P54,000 P72,000