Moss Company owned 20% of Dubro Company’s preference share capital and 80% of the ordinary share capital on December 31, 2016. The investor reported net income ₱600,000 for the year ended December 31, 2016. 10% cumulative preference share capital 1,000,000 Ordinary share capital 7,000,000 What is the equity in earnings of the investee for 2016?
1. At the beginning of the current year, Occidental Company purchased 40% of the outstanding ordinary shares of Manapla Company for ₱3,500,000 when the net assets of Manapla amounted to ₱7,000,000.
At acquisition date, the carrying amount of the identifiable assets and liabilities of Manapla were equal to their fair value, except for equipment for which the fair value was ₱1,500,000 greater than carrying amount and inventory whose fair value was ₱500,000 greater than cost.
The equipment has a remaining life of 4 years and the inventory was all sold during the current year.
Manapla Company reported net income of ₱4,000,000 and paid no dividends during the year.
What is the maximum amount of the “equity in earnings of the investee”?
a. 1,350,000
b. 1,250,000
c. 1,600,000
d. 1,700,000
2. At the beginning of the current year, Bing Company purchased 30,000 shares of Latt Company’s 200,000 outstanding ordinary shares for ₱6,000,000. On that date, the carrying amount of the acquired shares on Latt’s book was ₱4,000,000.
Bing attributed the excess of cost over carrying amount to patent. The patent has remaining useful life of 10 years.
During the current year, Bing’s officers gained a majority on Latt’s board of directors.
Latt Company reported earnings of ₱5,000,000 for the current year and declared and paid dividend of ₱3,000,000 at year-end.
What is the carrying amount of the investment in associate at year-end?
a. 6,000,000
b. 6,100,000
c. 6,300,000
d. 6,750,000
3. On July 1, 2016, Miller Company purchased 25% of Wall Company’s outstanding ordinary shares and no
Miller appropriately carried this investment at equity and the balance in Miller’s investment account was ₱1,900,000 on December 31, 2016.
Wall Company reported net income of ₱1,200,000 for the year ended December 1, 2016, and paid dividend totaling ₱480,000 on December 31, 2016.
How much did Miller pay for the 25% interest in Wall?
a. 1,720,000
b. 2,020,000
c. 1,870,000
d. 2,170,000
4. Moss Company owned 20% of Dubro Company’s
10% cumulative preference share capital 1,000,000
Ordinary share capital 7,000,000
What is the equity in earnings of the investee for 2016?
a. 420,000
b. 480,000
c. 484,000
d. 400,000
5. On January 1, 2016, Marissa Company acquired 25% of the outstanding shares of an investee at a total cost of ₱7,000,000. At the time, the carrying amount of the net assets of the investee totaled ₱24,000,000.
The investee owned equipment with 5-year remaining life and with a fair value of ₱2,000,000 more than carrying amount. The investee owned land with a fair value of ₱1,000,000 more than carrying amount.
The investee earned net income of ₱5,000,000 evenly during the current year. The investee declared and paid a cash dividend of ₱3,000,000 to shareholders at year-end. The fair value of the investment at yearend is ₱7,500,000.
What is the investment income for 2016?
a. 1,250,000
b. 1,150,000
c. 900,000
d. 650,000
What is the carrying amount of the investment on December 31, 2016?
a. 7,400,000
b. 7,500,000
c. 7,000,000
d. 8,150,000
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