on January 2, 2020, Gamu Company purchased as a long term investment 10,000 ordinary shares of llagan Corporation for P70 per share,which represents a 1% interest. On July 1, llagan Corporation declared its annual dividend on its ordinary shares of P5 per share payableon August 1 to shareholder's of record at July 25, 2020. On July 20, 2020 Gamu needed additional cash for operations and sold all 10,000shares llagan for P100 per share.For the year ended December 31, 2020, Gamu should report on its income statement a gain on disposal ofPreviousJMextNot savedSubmit Quiz

Solution: Cost of investment = 10000*P70 = P700,000 Sale value of investment = 10000*P100 =…

n January 2, 2020, Gamu Company purchased as a long term investment 10,000 ordinary shares of llagan Corporation for P70 per share, hich represents a 1% interest. On July 1, llagan Corporation declared its annual dividend on its ordinary shares of P5 per share payable n August 1 to shareholder's of record at July 25, 2020. On July 20, 2020 Gamu needed additional cash for operations and sold all 10,000 hares llagan for P100 per share. For the year ended December 31, 2020, Gamu should report on its income statement a gain on disposal of

n January 2, 2020, Gamu Company purchased as a long term investment 10,000 ordinary shares of llagan Corporation for P70 per share, hich represents a 1% interest. On July 1, llagan Corporation declared its annual dividend on its ordinary shares of P5 per share payable n August 1 to shareholder's of record at July 25, 2020. On July 20, 2020 Gamu needed additional cash for operations and sold all 10,000 hares llagan for P100 per share. For the year ended December 31, 2020, Gamu should report on its income statement a gain on disposal of

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

PROBLEM EAST Corporation purchased 50,000 out of the 200,000 ordinary shares of FAR Corporation on January 1, 2020 at P165 per share given EAST the right to exercise significant influence over FAR Corporation. Any excess of fair value over carrying value was attributed to land. FAR Corp reported P680,000 profit in 2020 and P1,000,000 in 2021. Dividends were paid and EAST received P210,000 in 2020 and P240,000 in 2021. Market values at year end: 2020 P160 and 2021 P175. On Jan 2, 2022, EAST Corporation sold 20,000 of its shares at P175 and exercised the option to account for its remaining investment as an available for sale securities classified at FVOCI. FAR Corporation reported profit of P3,720,000 and gave EAST dividends of P800,000 to all its shareholders. Required: Entries in 2020, 2021, 2022. Give the a) investment balance as at December 31, 2021, and b) Effect on net income in 2021. Give the a) investment balance as at December 31, 2022, and b) effect on net income in 2022.
domestic
On January 1, 2021, Ildiko Corporation purchased a 35% interest in the common shares of Rance Ltd. for $60,000. Rance Ltd. reported profit and paid dividends as follows: 2020-profit $40,000; dividends paid $50,000 2021 - profit $88,000; dividends paid $70,000. Assume that Ildiko Corporation uses the equity method to account for its investment in Rance Ltd. The balance in the "Investment Income" account on Ildiko's Income Statement for the year ended December 31, 2021 is $62,800 O $61,750 O $5,250 $43,750
APPLES Corporation bought 2,000 shares of Oranges Corporation on January 2, 2023 at ₽150 per share and paid₽ 2,250 as brokerage fee and ₽ 1,500 non-refundable tax. The investment is measured at fair value through othercomprehensive income. Prior to the date of acquisition, information revealed that on December 8, 2022, Oranges Corporation declared a ₽10 cash dividend to shareholders on record as of January 31, 2023 payable on April 30, 2023. There were no other transactions in 2023 affecting the investment in Oranges Corporation. What is the historical or acquisition cost of the investment account?A. ₽ 283,750B. ₽ 300,000C. ₽ 302,250D. ₽ 0303.750
On January 1, 2020 Prateroon Company purchased all the net assets of Stranemon Company consisting of: > Issuance of 20,000 unissued shares of its P10 par value ordinary share capital. As of this date, the shares of Prateroon were selling at P40 per share. > Issuance of bonds with a face value of P300,000 but are currently at 110. > A contingent payment of P200,000 cash on January 1, 2020, if the average income of Stranemon Company during the two-year period (2020-2021) exceeds P250,000 per year. Prateroon estimates that there is a 20% chance or probability that the P200,000 payment will be required. > Issuance of 5,000 additional shares on January 1, 2022 to the former shareholders of Stranemon Company if the average income cover the next two years (2020-2021) equalled or exceeded P350,000. The additional 5,000 shares expected to be issued are valued at P75,000. Professional fees of P9,000 were also paid by Prateroon to its external auditors to finalize the business combination. As of…
ALOY Company acquires 100% of the voting stock of BENNET Company on January 1, 2021 for P400,000 cash. A contingent payment of P16,500 will be paid on April 15, 2022 if BENNET Company generates cash flows from operations of P27,000 or more next year. ALOY Company estimates that there is a 20% probability that BENNET Company will generate at least P27,000 next year and uses an interest rate of 5% to incorporate the time value of money. The fair value of P16,500 at 5%, using a probability weighted approach is P3,142. What will ALOY Company record as the acquisition price on January 1, 2021?
Pearson Corporation purchased a 20% interest in Dish Company common stock on January 1, 2019 for $300,000. This investment was accounted for using the complete equity method and the correct balance in the Investment in Dish account on December 31, 2021 was $440,000. The original excess purchase transaction included $60,000 for a patent amortized at a rate of $6,000 per year. In 2022, Dish Corporation had net income of $4,000 per month earned uniformly throughout the year and paid $20,000 of dividends in May. If Pearson sold one-half of its investment in Dish on August 1, 2022 for $500,000, how much gain was recognized on this transaction? A) $190,540B) $280,950 C) $610,000D) $438,100
Ed Company acquired the assets and assumed the liabilities of Sheeran Inc. on June 30, 2022. The consideration transferred by the acquirer were as follows: Cash amounting to P2,000,000.Issued 10,000 ordinary shares at P10 par with a market price of P15.Issued 5 year interest bearing bonds payable with a face value of P3,000,000 with a nominal rate of 10% and effective interest of 12%. (use two decimal places for the present value factor) Acquisition related costs incurred were as follows: Legal fees amounting to P120,000, 70% of which is not yet paid.Share issue costs paid amounted to P15,000.Bond Issue costs paid amounting to P120,000. The Balance Sheet of the two entities before acquisition were as follows: Taylor Company Swift Inc. Total Assets 16,500,000 5,235,000 Total Liabilities 2,500,000 500,000 Ordinary Shares 5,000,000 1,250,000 Share premium 1,500,000 750,000 Retained Earnings 6/30/22 7,500,000 2,735,000 It…
January 1, 2020, ABC Ltd. elects to make a long-term investment and purchases 5,000 shares of XY Company for $5.50 per share. This represents 25% of the voting shares and results in significant influence. The net income for XY Company in 2020 is $50,000. XY Company declared and paid $5,000 in dividends on December 31, 2020. In 2021, XY Company had an operating loss of $30,000 and no dividends were declared. In 2021, it was determined that goodwill was impaired by 20%. XY Company had the following assets and liabilities at cost and fair market value at January 1, 2020:   Cost Market  Cash  15,000 15,000 Accounts Receivable  10,000 10,000 Inventory  10,000 8,000 Capital Assets, net  100,000 130,000   135,000 163,000 Liabilities  69,500 69,500 Assume that the capital assets have 10 years of life remaining at January 1, 2020 and are amortized using the straight-line method. Required 1: Prepare a goodwill schedule (also known as a purchase price discrepancy schedule) for…
On January 1, 2019, Matcha Company purchased 25% of the outstanding ordinary shares of Milk Tea Company at P165 per share. Milk Tea Company had 200,000 ordinary shares outstanding at the time of purchase. Matcha received cash dividend from Less of P210,000 on August 1, 2019 and P240,000 on December 31, 2020. Milk Tea Company reported profit of P680,000 in 2019 and P1,000,000 in year 2020. Market values of each share on December 31, 2019 and December 31, 2020 were P160 and P175, respectively. On January 2, 2021, Matcha Company sold 20,000 shares of its equity investment at Milk Tea Company for P175 per share. Because of the decrease in ownership shares in Milk Tea Company, Matcha exercised its option to measure the remaining securities at fair value through other comprehensive income on January 2, 2021. For year 2021, Milk Tea Company reported profit of P3,720,000 and paid Matcha company, dividends of P120,000. Market value of Milk Tea Company shares on December 31, 2021 was P180 per…
At December 31, 2020 year-end, Lapwing Corporation's investment in Ground Inc. was $200,000 consisting of 80% of Ground's $250,000 stockholders' equity on that date. On April 1, 2021, Lapwing sold 20% interest (one-fourth of its holdings) in Ground for $65,000. During 2021, Ground had net income of $75,000 (earned uniformly) and on July 1, 2021, Ground paid dividends of $40,000. Lapwing uses the equity method to account for the investment. Required: 1. What is the gain or loss on sale of the 20% interest? 2. Record the journal entries for Lapwing for the year ending December 31.
On January 31, 2022, Parent Company purchased all the identifiable net assets of Sub Company by transferring cash of P1,200,000 and issuing 100,000 shares with par value of P20 and fair value of P32. Parent will pay additional amount depending on the net income achieved by Sub at year-end: Net Income @ year-end 50,000,000 Consideration to be transferred 1,000,000 2,000,000 3,000,000 Case 1 75,000,000 100,000,000 Book value of Parent and Sub at the date of acquisition were as follows: Parent 1,000,000 1,600,000 2,400,000 Sub 800,000 1,400,000 800,000 Cash Accounts receivable Inventory Buildings 5.000,000 10,000,000 2,800,000 5,800,000 1,000,000 1,200,000 800,000 Total assets Accounts payable Common stock, P2 par Share premium Retained earnings Total liabilities and equities 2,400,000 2,000,000 1,600,000 4,000,000 10,000,000 2,800,000 5,800,000 At the date of acquisition, Parent assessed that Sub will reach at least 60,000,000 of net income for 2022. Book value of the identifiable net…