An entity purchased 40% of another entity's shares for P9.5 million. The investee reported net income of P10 million and paid dividends. The question asks about the investment income for the current year (P2.3 million) and carrying amount of the investment at year-end (P10.7 million).
An entity purchased 40% of another entity's shares for P9.5 million. The investee reported net income of P10 million and paid dividends. The question asks about the investment income for the current year (P2.3 million) and carrying amount of the investment at year-end (P10.7 million).
An entity purchased 40% of another entity's shares for P9.5 million. The investee reported net income of P10 million and paid dividends. The question asks about the investment income for the current year (P2.3 million) and carrying amount of the investment at year-end (P10.7 million).
An entity purchased 40% of another entity's shares for P9.5 million. The investee reported net income of P10 million and paid dividends. The question asks about the investment income for the current year (P2.3 million) and carrying amount of the investment at year-end (P10.7 million).
Manila FINANCIAL ACCOUNTING AND REPORTING VALIX/VALIX/ESCALA/SANTOS/DELA CRUZ
INVESTMENT IN ASSOCIATE 1. At the beginning of current the year, an entity purchased 40% of the outstanding ordinary shares of another entity for P9,500,000 when the net assets of the investee amounted to P15,000,000. At acquisition date, the carrying amounts of the identifiable assets and liabilities of the investee were equal to their fair value, except for equipment whose fair value was P3,000,000 greater than carrying amount, land whose fair value was P2,500,000 greater than cost and inventory whose fair value was P2,000,000 greater than cost. The equipment had a remaining life of 4 years. The land was sold and the inventory was one-half sold during the current year. The investee reported net income of P10,000,000, paid P4,000,000 cash dividend and issued 10% share dividend during the current year. 1. What is the investment income for current year? a. 2,800,000 b. 2,300,000 c. 1,600,000 d. 4,400,000 2. What is the carrying amount of the investment in associate at year-end? a. 12,300,000 b. 10,200,000 c. 10,700,000 d. 13,900,000 2. At the beginning of current year, an entity acquired a 30% interest in an investee at a cost of P3,500,000. The equity of the investee on the date of acquisition was P6,000,000, consisting of P4,000,000 share capital and P2,000,000 retained earnings. All the identifiable assets and liabilities of the investee were recorded at fair value on the date of acquisition. During the current year, the investee reported net income of P4,000,000 and paid dividend of P1,500,000. The equity of the investee at year-end showed the following: Share capital 4,000,000 Retained earnings 3,500,000 Retained earnings appropriated 1,000,000 Revaluation surplus 2,000,000 The revaluation surplus arose from a revaluation of land made at the end of current year. The retained earnings appropriated arose from a transfer of unappropriated retained earnings to retained earnings appropriated for contingencies. 1. What is the investment income for the current year? a. 1,200,000 b. 1,650,000 c. 3,200,000 d. 2,000,000 2. What is the carrying amount of the investment in associate at year-end? a. 3,500,000 b. 4,700,000 c. 4,250,000 d. 4,850,000 3. At the beginning of current year, an entity acquired 40% of the ordinary shares of an associate. On such date, assets and liabilities of the investee were recorded at fair value and acquisition showed that goodwill of P1,000,000 was acquired. The investee reported net income of P8,000,000 for the current year. In December, the investee sold inventory costing P3,000,000 to the investor for P5,000,000. One-half of the inventory remained unsold by the investor at year-end. At the beginning of current year, the investee sold an equipment to the investor with carrying amount of P6,000,000 for P8,500,000. The remaining life of the equipment is 5 years. What amount of investment income should be reported for current year? a. 1,800,000 b. 2,000,000 c. 1,600,000 d. 2,400,000
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4. On January 1, 2020, an entity acquired a 40% interest in an associate for P7,000,000. On this date, the carrying amounts of the net assets of the associate were equal to fair value. The cumulative net loss of the entity totaled P20,000,000 from 2020 through 2022. On January 1, 2021, the entity made cash advances of P2,000,000 to the associate. On December 31, 2022, it is not expected that the entity will provide further financial support for the associate. The entity reported P4,000,000 net loss for 2023 and P3,500,000 net income for 2024. 1. What amount should be reported as loss from investment in 2023? a. 1,600,000 b. 1,000,000 c. 4,000,000 d. 0 2. What amount should be reported as income from investment in 2024? a. 1,400,000 b. 1,000,000 c. 600,000 d. 800,000 5. An entity owned 60% of another entity’s preference shares and 20% of ordinary shares. The investee’s share capital outstanding at year-end included P5,000,000 of 10% cumulative preference shares and P10,000,000 of ordinary shares. The investee reported net income of P8,000,000 for the current year. No dividend was declared for both preference and ordinary shares during the current year. What amount should be reported as investment income for the current year? a. 1,600,000 b. 1,500,000 c. 1,800,000 d. 1,700,000 6. On January 1, 2022, an entity acquired a 10% interest in an investee for P3,000,000. The investment was accounted for under the cost method. During 2022, the investee reported net income of P4,000,000 and paid dividend of P1,000,000. On January 1, 2023, the entity acquired a further 15% interest in the investee for P8,500,000. On such date, the carrying amount of the net assets of the investee was P36,000,000 and the fair value of the 10% existing interest was P3,500,000. The fair value of the net assets of the investee is equal to carrying amount. The investee reported net income of P8,000,000 for 2023 and paid dividend of P6,000,000 on December 31, 2023. 1. What amount of income should be recognized by the investor in 2022? a. 400,000 b. 100,000 c. 300,000 d. 200,000 2. What is the implied goodwill in 2023? a. 3,000,000 b. 2,500,000 c. 1,500,000 d. 0 3. What total amount of income should be recognized by the investor in 2023? a. 2,000,000 b. 2,500,000 c. 1,500,000 d. 5,500,000 4. What is the carrying amount of the investment in associate on December 31, 2023? a. 10,500,000 b. 12,500,000 c. 13,000,000 d. 10,000,000
