NDEA Company purchased 250,000 shares of Simultaneous Corp. common stock on July 1, 2006, at P16.50 per share, which reflected book value as of that date. At the time of the purchase, Simultaneous had 1,000,000 common shares outstanding. NDEA had no ownership interest in Simultaneous prior to this purchase. Simultaneous reported net income of P840,000 for the six months ended June 30, 2006. NDEA received a dividend of P105,000 from Simultaneous on August 1, 2006, Simultaneous reported net income of P1,800,000 for the year ended December 31, 2006, and again paid NDEA Company dividends of P105,000. On January 1, 2007, NDEA sold 100,000 shares of Simultaneous Corp. common stock for P17 per share and reclassified the remaining stock as noncurrent. Simultaneous reported net income of P1,860,000 for the year ended December 31, 2007, paid NDEA Company dividends of P60,000. Questions: 22. What is the investment balance on December 31, 2006? a. P4,125,000 b. P4,140,000 c. P4,155,000 d. P4,260,000 23. What is the gain on sale of 100,000 shares on January 1, 2007? a. P50,000 b. P44,000 c. P38,000 d. P0. 24. The cumulative effect of the change from equity to cost method of accounting for the investment in common stock to be reported in the statement of changes in equity should be a. P30,000 credit b. P240,000 debit c. P30,000 debit d. P0
NDEA Company purchased 250,000 shares of Simultaneous Corp. common stock on July 1,
2006, at P16.50 per share, which reflected book value as of that date. At the time of the
purchase, Simultaneous had 1,000,000 common shares outstanding. NDEA had no
ownership interest in Simultaneous prior to this purchase. Simultaneous reported net
income of P840,000 for the six months ended June 30, 2006. NDEA received a dividend of
P105,000 from Simultaneous on August 1, 2006, Simultaneous reported net income of
P1,800,000 for the year ended December 31, 2006, and again paid NDEA Company
dividends of P105,000.
On January 1, 2007, NDEA sold 100,000 shares of Simultaneous Corp. common stock for
P17 per share and reclassified the remaining stock as noncurrent. Simultaneous reported
net income of P1,860,000 for the year ended December 31, 2007, paid NDEA Company
dividends of P60,000.
Questions:
22. What is the investment balance on December 31, 2006?
a. P4,125,000 b. P4,140,000 c. P4,155,000 d. P4,260,000
23. What is the gain on sale of 100,000 shares on January 1, 2007?
a. P50,000 b. P44,000 c. P38,000 d. P0.
24. The cumulative effect of the change from equity to cost method of accounting for the
investment in common stock to be reported in the statement of changes in equity should
be
a. P30,000 credit b. P240,000 debit c. P30,000 debit d. P0
25. The share in net income of Simultaneous to be recognized by NDEA in its income
statement for 2007 should be
a. P219,000 b. P60,000 c. P279,000 d. P0
26.What is the investment balance on December 31, 2007?
a. P2,493,000 b. P2,763,000 c. P4,125,000 d. P4,155,000
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