Elston Co. acquired 25% interest in Alley Company many years ago. The acquisition did not result to any goodwill. At the time of acquisition, the carrying amount of Alley’s net assets approximates its fair value. There have been no impairment losses on the investment. In principle, the equity method would result to a carrying amount of the investment on December 31, 2004 of _________________________
Elston Company
December 31, 2004
Assets ₱800,000
Liabilities ₱100,000
Capital stock 400,000
Total equities ₱800,000
Alley Company
Balance Sheet
December 31, 2004
Assets ₱600,000
Liabilities ₱150,000
Capital stock 370,000
Retained earnings 80,000
Total equities ₱600,000
1. Elston Co. acquired 25% interest in Alley Company many years ago. The acquisition did not result to any
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2. Elston Co. acquired 25% interest in Alley Company many years ago. The acquisition did not result to any goodwill. At the time of acquisition, the carrying amount of Alley’s net assets approximates its fair value. There have been no impairment losses on the investment. Alley Company reported profit of ₱200,000 and declared dividends of ₱40,000 in 2004. Theoretically, the carrying amount of the investment on December 31, 2003 would approximate which of the following amounts?
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3. Elston Co. acquired 25% interest in Alley Company many years ago. The acquisition did not result to any goodwill. At the time of acquisition, the carrying amount of Alley’s net assets approximates its fair value. There have been no impairment losses on the investment. The carrying amount of the investment on January 1, 2004 is ₱98,500. Alley Company declared dividends of ₱40,000 in 2004. If the proportionate share of Elston in the net assets of Alley at December 31, 2004 reflects the carrying amount of Elston’s investment, how much would have been Alley’s profit in 2004?
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