Ella Ltd purchased 20% of the shares of Monica Ltd on 1 January 20x2 for cash of $500,000. This purchase resulted in Ella Ltd having significant influence over Monica Ltd. Additional information is provided below: For the year ended 31 December 20X2, Monica Ltd reported profit of $400,000. Monica Ltd's total dividends paid out to all shareholders during 20x2 amounted to $250,000. This was paid from profits made in 20x2. Billy Ltd is 50% owned by Ella Ltd and is Ella's subsidiary. During 20x2, Monica sold $100,000 of inventories to Billy Ltd and made profit of $40,000. As at 31 December 20X2, all of the inventories were still held by Billy Ltd. Required: a) Prepare journal entries for Ella Ltd in 2002 to account for its investment in Monica Ltd using the Equity Method. Use the Reclassification Method to account for the profit and dividends that Ella shares from Monica. (Using the provided journal entry template to enter your answer; workings/calculations or narrations are NOT required.) b) Calculate the carrying amount of investment in Monica Ltd (the balance of investment in associates account) as at 31 December 20x2. Show workings.

Ella Ltd purchased 20% of the shares of Monica Ltd on 1 January 20x2 for cash of $500,000. This purchase resulted in Ella Ltd having significant influence over Monica Ltd. Additional information is provided below: For the year ended 31 December 20X2, Monica Ltd reported profit of $400,000. Monica Ltd's total dividends paid out to all shareholders during 20x2 amounted to $250,000. This was paid from profits made in 20x2. Billy Ltd is 50% owned by Ella Ltd and is Ella's subsidiary. During 20x2, Monica sold $100,000 of inventories to Billy Ltd and made profit of $40,000. As at 31 December 20X2, all of the inventories were still held by Billy Ltd. Required: a) Prepare journal entries for Ella Ltd in 2002 to account for its investment in Monica Ltd using the Equity Method. Use the Reclassification Method to account for the profit and dividends that Ella shares from Monica. (Using the provided journal entry template to enter your answer; workings/calculations or narrations are NOT required.) b) Calculate the carrying amount of investment in Monica Ltd (the balance of investment in associates account) as at 31 December 20x2. Show workings.

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

Please help me
Please do it asap.
DEF purchased 15,000 shares in KMH Co on 1 August 20X6 at a cost of $6.50 each. Transaction costs on the purchase amounted to $1,500. At the year-end 30 September 20X6, these shares are now worth $7.75 each. What is the gain to be recognised and where it will be recorded according to two cases: (1) Shares held for sales (2) Shares held to collect contractual cash flows and sell them. Select the correct gain and the place it will be recorded.
Odom Ltd purchased a 30% shareholding in Bryant Ltd on 1 Jan 20X7 for $60 000. This purchase resulted in Odom Ltd having significant influence over Bryant Ltd. Bryant's assets were recorded at fair values and its owners' equity, totalling $180 000, was: Share capital $80 000 Reserves $60 000 Retained profits $40 000 During 20X7 Bryant Ltd reported profit of $100 000, from which a dividend of $60 000 was paid. Also, during the year, Bryant revalued its assets upwards by $50 000, and sold inventories to Willams Ltd which is the subsidiary of Odom. Bryant made a profit of $4,000. Half of the inventories were still held by Willams by the year-end. Odom Ltd has an 80% equity interest in Willams Ltd. Required: Prepare journal entries for Odom Ltd to account for its investment in Bryant Ltd using the Equity Method. Use the Reclassification Method to account for the profit and dividends that Odom shares from Bryant. (Using the provided journal entry template to enter your answer;…
Light Inc. had the following activities during the current year: • Acquired 4,000 shares of Dark Inc. for P5.200,000. • Sold an investment in Lonely Inc. for P7.000,000 when the carrying value was P6.600,000. • Acquired a P10,000,000, 4-year certificate of deposit from a bank. During the year, interest of 175.,000 was paid to Light Inc. • Collected dividends of P240.000 on share dividends. How much should be reported as cash inflows from operating activities?
On January 1, Vienna Corporation purchased 40% of the outstanding common stock of the Marietta Corporation for $137,500. During the year, Marietta Corporation reported net income of $50,000 and paid cash dividends of $25,000.The balance of the Investment in the Marietta Corporation account on the books of Vienna Corporation at year-end is: Select one: A. $147,500 B. $135,000 C. $100,000 D. $110,000
Fairbanks Corporation purchased 400 ordinary shares of Sherman Inc. as a tradinginvestment for £13,200. During the year, Sherman paid a cash dividend of £3.25 per share. Atyear-end, Sherman shares were selling for £34.50 per share.Prepare Fairbanks' journal entries to record:(a) the purchase of the investment,(b) the dividends received, and(c) the fair value adjustment.
Cosmos Corporation had the following long-term investment transactions. Year 1 January 2 Purchased 5,000 shares of Visual, Inc. for $42 per share. October 15 Received Visual, Inc. cash dividend of $2 per share. December 31 Visual reported a net loss of $66,000 for the year. Year 2 February 2 Sold 5% of the shares of Visual Inc for $7000. Prepare the journal entries Cosmos Corporation should record for these transactions and events.
Kramer Corporation had the following long-term Investment transactions. Prepare the journal entries Kramer Corporation should record for these transactions and events. Jan 2 Purchased 5,000 shares of Optic, Inc. for $42 per share plus $7,000 in fees and commission. These shares represent a 35% ownership of Optic. Oct 15 Received Optic, Inc. cash dividend of $2 per share. Dec 31 Optic reported a net income of $66,000 for the year.
Melville Inc. purchased 2,000 common shares (20%) of Raymore Ltd. on January 1, Year 5 for $42,000. Additional information on Raymore for the two years ending December 31, Year 6, is as follows: Year Net Income Dividends Paid Market Value per Share atend of period Year 5 $ 25,000 $ 13,000 $22.00 Year 6 28,000 14,000 22.60 At December 31, Year 6, Raymore had some inventory that was purchased from Melville. Melville had recorded a gross profit of $1,300 on the sale of this inventory. This gross profit should be deducted from Melville's Year 6 profit and investment account under the equity method. On January 1, Year 7, Melville sold its investment in Raymore for $47,000. Required: (a) Calculate the balance in the investment account at December 31, Year 6 under each of the cost and equity methods. (Omit $ sign in your response.) Investment account at end of Year 6 under cost method $ Investment account at end of Year 6 under equity method $…
Calculate share of profit of the members of the parent entity and of minority interests if Alpha Ltd acquired 80% of the shares in X Ltd and 70% of the shares in Y Ltd. The profits recovered by each of the companies of the current year are as follows Net Profit for the current year(m) Alpha Ltd 100 X Ltd 40 Y Ltd -10 A.Profit for members of parent entity is $125m and profit for minority interest is $15m. B. Profit for members of parent entity is $100m and profit for minority interest interest is $30m. C. Profit for members of parent entity is $125m and profit for minority interest is $25m. D. Profit for members of parent entity is $130m and profit for minority interest is $0. E. None of the options provided. 2.The individual discount model is considered amongst analysts as most appropriate for share valuation under which of the following situations: A.When valuing shares from the perspective of a small shareholder and…
On July 1, X6, Influence Ltd. paid $100,000 to acquire 1,000 common voting shares of Associés Ltd., representing a 30% interest. Associé Ltée declares dividends of $1 per share on December 1, X6. The JV of Associate's shares as of December 31, X6, is $115. The profit generated by Associate during the last 6 months of X6 amounts to $240,000. Determine the gain or loss on the disposition of the shares by assuming that Influence Ltée sells 500 shares of Associé Ltée on December 31, X6 for an amount of $200 per share. Question 4 options: $14,000 $50,000 none of the above $14,500 $42,500