Honesty Company, an SME, acquired 30% interest of the equity of Integrity Company for P500,000 plus a transaction cost of P10,000 on January 1, 2022. At the end of the year, Integrity reported a profit of P400,000 and declared dividends of P150,000. The dividends were paid on January 15, 2023. Published price quotation does not exist for Integrity. Using appropriate valuation techniques, Honesty determined the fair value of its investment in Integrity at December 31, 2022 as P560,000. Costs to sell are estimated at 3% of the fair value of the investment. Answer the following subquestion relating to this one problem:  a. Using the Cost Model, how much is Carrying Value of the Investment at December 31, 2022? b. Using the Equity Model, how much is the amount to be reported by Honesty in the profit or loss for 2022? _________________&

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
Question

Honesty Company, an SME, acquired 30% interest of the equity of Integrity Company for P500,000 plus a transaction cost of P10,000 on January 1, 2022. At the end of the year, Integrity reported a profit of P400,000 and declared dividends of P150,000. The dividends were paid on January 15, 2023.

Published price quotation does not exist for Integrity. Using appropriate valuation techniques, Honesty determined the fair value of its investment in Integrity at December 31, 2022 as P560,000. Costs to sell are estimated at 3% of the fair value of the investment.

Answer the following subquestion relating to this one problem: 

a. Using the Cost Model, how much is Carrying Value of the Investment at December 31, 2022?

b. Using the Equity Model, how much is the amount to be reported by Honesty in the profit or loss for 2022?

_________________&

Expert Solution
steps

Step by step

Solved in 3 steps

Blurred answer
Knowledge Booster
Accounting for Intangible assets
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education