1. On January 1, 20X1, Entity A and Entity B, both public entities, incorporated Entity C by investing P3,000,000 and P2,000,000 for a capital interest ratio of 60:40. The contractual agreement of the incorporating entities provided that the decisions on relevant activities of Entity C will require unanimous consent of both entities. Moreover, Entity A and Entity B will have rights to the net assets of Entity C. The financial statements of Entity C provided the following data for 20X1: Entity C reported a net income of P1,000,000 for 20X1 and paid cash dividends of P400,000 on December 31, 20X1. During 20X1, Entity C sold inventory to Entity A with a gross profit of P50,000. 80% of those inventories were resold by Entity A to third persons during 20X1. The remainder was resold to third persons during 20X1. On July 1, 20X1, Entity C sold a piece of machinery to Entity B at a loss of P20,000. At the time of sale, the machinery has remaining useful life of two (2) years. Required: Determine the following: The investment income to be reported by Entity A for the year ended December 31, 20X1. b. The balance of Investment in Entity C to be reported by Entity B on December 31, 20X1. а.

1. On January 1, 20X1, Entity A and Entity B, both public entities, incorporated Entity C by investing P3,000,000 and P2,000,000 for a capital interest ratio of 60:40. The contractual agreement of the incorporating entities provided that the decisions on relevant activities of Entity C will require unanimous consent of both entities. Moreover, Entity A and Entity B will have rights to the net assets of Entity C. The financial statements of Entity C provided the following data for 20X1: Entity C reported a net income of P1,000,000 for 20X1 and paid cash dividends of P400,000 on December 31, 20X1. During 20X1, Entity C sold inventory to Entity A with a gross profit of P50,000. 80% of those inventories were resold by Entity A to third persons during 20X1. The remainder was resold to third persons during 20X1. On July 1, 20X1, Entity C sold a piece of machinery to Entity B at a loss of P20,000. At the time of sale, the machinery has remaining useful life of two (2) years. Required: Determine the following: The investment income to be reported by Entity A for the year ended December 31, 20X1. b. The balance of Investment in Entity C to be reported by Entity B on December 31, 20X1. а.

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

Detroit Inc reported the following ($ in thousands) as of December 31, 2021. All accounts have normal balances. Deficit (debit balance in retained earnings) $ 2,500 Common stock 3,400 Paid-in capital—share repurchase 1,900 Treasury stock (at cost) 220 Paid-in capital—excess of par 30,300 During 2022 ($ in thousands), net income was $9,100; 25% of the treasury stock was resold for $510; cash dividends declared were $700; cash dividends paid were $450. What ($ in thousands) was shareholders' equity as of December 31, 2022?
On January 7, 2022, Martin Corporation acquires two properties from a shareholder solely in exchange for stock in a transaction that qualifies under § 351. The shareholder's basis, the fair market value, and the built-in gain (loss) of each property are: Shareholder's Fair Market Built in Gain Basis Value or (Loss) Property 1 $471,800 $566,160 $94,360 Property 2 $802,060 $613,340 ($188,720) Net built-in loss ($94,360) Martin adopts a plan of liquidation later in the year and distributes Property 2 to a 45% shareholder when the property is worth $518,980. a. Compute Martin's basis in Property 1 and in Property 2 as of January 7, 2022. Martin's basis is Property 1 is a Martin's basis in Property 2 is a basis of $ basis of $ b. Compute Martin's realized and recognized loss on the liquidating distribution of Property 2. Martin has a realized loss of $ and a recognized loss of $
An investor company owns 25% of the common stock of an investee company. The investor has significant influence over the investee, and acquired its equity interest in the investee on January 1, 2021 for $1,323,000. On the date of acquisition, the investee’s stockholders’ equity was $5,292,000 and the fair values of the investee’s individual net assets were equal to their reported book values. During the year ended December 31, 2021, the investee reported net income of $126,000 and dividends of $25,200. During the year ended December 31, 2022, the investee reported net income of $151,200 and dividends of $37,800 The investor routinely sells inventory to the investee at a 30% profit margin. At December 31, 2021 and 2022, the investee held inventories purchased from the investor for $75,600 and $100,800 respectively. (All of these inventories on hand at the end of the year are sold by the investee to unaffiliated companies in the next period.) What amount of investment income from the…
In paragraph 44 of Statement of Financial Accounting Standards No. 141, “Business Combinations,” the Financial Accounting Standards Board directed that if the sum of the fair values of assets acquired and liabilities assumed in a business combination exceeds the cost of the acquired enterprise, such excess should be allocated as a pro rata reduction of amounts that otherwise would have been assigned to noncurrent assets other than specified exceptions.Instructions What support, if any, do you find for the action of the FASB? Explain.
Kent Ltd owns all the share capital of Lodh Lta. That is, Lodh Ltd is a wholly own subsidiary of Kent Ltd. Requirea: In relation to the following intro-group transactions, prepare the consolidation worksheet aajusting entries for the preparation of consolidatea financial stoatements as of 30 June 2020. AJll parts are independent unlesS specified. Assume an income tax rate of 30% and that all income on sale of assets is taxable and expenses are deductible. a. On 1 January 2020, Kent Ltd sold inventory costing $10,000 to Lodh Ltd at a transfer (sole) price $16,.000. Loah Ltd sold half of this inventory to an external party for $10,000 (i.e., naif of the inventory is remoined with Lodh Ltd at the end of the year). b. During March 2018, Lodn Lta paid a $5,500 interim oaividend. C. Kent Ltd rented a spare warehouse to Lodh Lta. The total charge for the rental was $6,000. Loah Ltd paid the whole amount to Kent Ltd during the year. a. On 1 July 2019, Kent Ltd sold an item of plant costing $15…
1. Father Corporation (FC) acquires 20% ownership interest in Son Corporation (SC) on January 1, 202X, for P1,750,000 cash, which is the fair value of the investment at that date. FC has concluded that it does not have a significant influence over SC. At the same date, the fair and carrying values of SC’s identifiable assets is P5,000,000 and P3,000,000. The identifiable assets include land, which has fair and carrying values of P4,000,000 and P3,000,000, respectively. For the year ended December 31, 202X, SC reported a profit of P3,000,000 but did not pay any dividends. Moreover, the fair value of SC’s land increases by P1,500,000. However, the carrying amount of the land remains unchanged at P3,000,000. Given below is the Statement of Financial Position (SFP) of SC, together with the fair values of the identifiable assets, at December 31, 202X: Carrying Amount Fair Value Cash and Receivables 4,000,000 4,000,000 Land 3,000,000 5,500,000…
An associate is an entity in which an investor has significant influence over the investee. Which the following indicate the presence of significant influence? (I) The investor owns 660,000 of the 3,000,000 equity voting shares of the investee. (II) The investor has representation on the board of directors of the investee. (Ill) The investor is able to insist that all of the sales of the investee are made to a subsidiary of the investor. (IV) The investor controls the votes of a majority of the board members. Choose one of the correct pair. Please provide your explaination A) (I) , (II) B) (II), (Ill), (IV) C) (I), (III), (IV) D) (I), (II), (III), (IV) E) None of the above.
Elimination of intercompany profits for variable interest entities (VIES) and voting interest entities Assume that on January 1, 2019, a Reporting Company acquires a 35 percent interest in a Legal Entity for $392,000 cash. The fair value of the 65 percent interest not acquired by the Reporting Company is $728,000. The fair value and book value of the identifiable net assets of the Legal entity equals $1,120,000. The Reporting Company has a right to 35 percent of the reported income (loss) of the Legal Entity. The Legal Entity is determined to be a VIE, and the Reporting Company is determined to be primary beneficiary. For the year ended December 31, 2019, the Reporting Company and the VIE reported the following pre-consolidation income statements assuming that the Reporting Company applies the equity method: Sales Costs of goods sold Gross profit Operating expenses Equity method income (loss) from VIE Net income Reporting Company VIE $1,232,000 $336,000 (739,200) (224,000) 492,800…
Kk.25.
Assume that both the Parent and Subsidiary adopt 31 December as their financial year-end. Further assume that the transactions were conducted on cash basis. For each of the following independent scenarios in each of the independent parts: (1) Prepare all the relevant journal entries in the separate financial statements of the respective companies. (ii) Prepare all the relevant consolidation journal entries for the preparation of the consolidated financial statements of the Parent. (iii) Compare and contrast the accounting treatment/principles that you had applied in the independent scenarios in each part in preparing the journal entries and consolidation journal entries. Part A (a) On 20 December 20x1, a 90%-owned Subsidiary sold a piece of inventory which it bought for $200,000 to its Parent for $300,000. As at 31 December 20x1, that piece of inventory was still with the Parent and the net realisable value of the inventory was $250,000 on this date. (b) On 20 December 20x1, a Parent…
6. On December 31, 2019, Stefan company purchased for 30 per share all 300,000 of Elena company’s outstanding ordinary shares. On this date, the acquiree’s statement of financial position showed net assets of P7,500,000. Additionally, the fair value of the acquiree’s identifiable assets on this date was 600,000 in excess of carrying amount. In the statement of financial position, what amount should be reported as goodwill as a result ofthe acquisition?
12 Find Corp. is a joint arrangement in which Seek Inc. has a 20% interest. Although Find Corp. is an incorporated entity, it is accounted for as a joint operation. A contractual agreement gives Seek proportionate rights (20%) to all of Finds' assets and proportionate responsibilities (20%) for all of Find's liabilities. The financial statements of both businesses as at December 31, 2020, include the following information: Seek Inc. Find Corp. INCOME STATEMENTS Sales Cost of Sales $800,000 $200,000 $400,000 $100,000 Other Expenses $200.000 $60.000 Net Income $200,000 $40,000 BALANCE SHEETS Miscellaneous Assets $600,000 $300,000 Inventory $120,000 $60,000 Investment in Find $180.000 Total Assets $900,000 $360,000 Miscellaneous Liabilities $160,000 $80,000 Common Shares $200,000 $100,000 Retained Earnings, Jan 1 $340,000 $140,000 Net Income $200.000 $40.000 Total Liabilities & Equity $900,000 $360,000 Show Transcribed Text During 2020, Seek sold merchandise totaling $120,000 to Find and…