On August 15, 2019, Orion Co. purchased 100,000 ordinary shares of Hercules Co. at P25 per share. Costs directly attributable to the purchase of the shares amounted to P100,000. At the end of the year, Hercules's shares had a fair value of P28 per share. At the end of 2020, Hercules's shares had a fair value of P27 per share. On August 15, 2021, Orion sold all of its shares in Hercules Co. at P29 per share, the fair value of Hercules's shares on this date. Prepare the journal entries in the books of Orion given the following independent assumptions: 1. SEPARATE JOURNAL ENTRIES for shares classified as Financial Asset at Fair Value through Profit or Loss (P/L) & Fair Value through Other Comprehensive Income (OCI
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- On June 30, 2020, Cape Company purchased 25% of the outstanding ordinary shares of Bit Co. at a total cost of P2,100,000. The book value of Bit Co.’s net assets on acquisition date was P7,200,000. For the following reasons, Cape was willing to pay more than book value for Bit Co. stock: Bit Co. has depreciable assets with a current fair value of P180,000 more than their book value. These assets have a remaining useful life of 10 years. Bit co. owns a tract of land with a current fair value of P900,000 more than its carrying amount. All other identifiable tangible and intangible assets of Bit Co. have current fair values that are equal to their carrying amounts. Bit reported net income of P1,620,000, earned evenly during the current year ended December 31, 2020. Also in the current year, it declared and paid cash dividends of P315,000 to its ordinary shareholders. Market value of Bit Co.’s ordinary shares at December 31, 2020 is P9 million. Cape Company’s financial year-end…Thaddeus Company purchased 30% of Norris Company’s ordinary share capital on January 1, 2020. The following events occurred after the purchase: Norris sold goods costing P500,000 for P750,000 to Thaddeus in 2020. At December 31, 2020, the goods remained unsold by Thaddeus. In 2021, Thaddeus sold such goods to its customers. On January 2, 2020, Norris also sold machinery with a carrying amount of P3,000,000 for P4,200,000 to Thaddeus. The machinery’s remaining life was 6 years. Norris reported net income of P3,500,000 and P2,500,000 in 2020 and 2021 respectively. What amount of equity in earnings of Norris should Thaddeus report in 2021?On August 1, 2020, Coronado Corporation purchased 20% of the outstanding voting shares in WLT Corporation for $1.290,000. At the time of purchase, WLT's net assets were undervalued by $72,200 and had a remaining useful life of 12 years. Both companies had a December 31 year-end. At the end of 2020, WLT reported a net income of $350,000. Also, on December 31, 2020, the fair value of the investment in WLT shares was $1,414,000. On January 10, 2021, WLT paid a cash dividend. Coronado's ownership entitles it to $23,400 of the dividend. Prepare the journal entries on the books of Coronado Corporation to record the transactions described above, assuming that the 20% interest in WLT does not represent significant influence, and that Coronado elected to account for its investment following the fair value through net income (FV-NI) model. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. Record journal entries in the order presented in the…
- Denber Co. acquired 60% of the common stock of Kailey Corp. on September 1, 2019. For 2019, Kailey reported revenues of $810,000 and expenses of $630,000, not including its investment in Denber, and all reflected evenly throughout the year. The annual amount of amortization related to this acquisition was $15,000. What is the amount of the noncontrolling interest's share of Kailey's income for 2019? a. $72,000. b. $22,000. c. $66,000. d. $24,000. e. $48,000.On August 1, 2020, Swifty Corporation purchased 20% of the outstanding voting shares in WLT Corporation for $1,290,000. At the time of purchase, WLT’s net assets were undervalued by $74,700 and had a remaining useful life of 12 years. Both companies had a December 31 year-end. At the end of 2020, WLT reported a net income of $350,000. Also, on December 31, 2020, the fair value of the investment in WLT shares was $1,413,000. On January 10, 2021, WLT paid a cash dividend. Swifty’s ownership entitles it to $21,800 of the dividend.Prepare the journal entries on the books of Swifty Corporation to record the transactions described above, assuming that the 20% interest in WLT does not represent significant influence, and that Swifty elected to account for its investment following the fair value through net income (FV-NI) model. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. Record journal entries in the order presented in the problem. If…On January 2, 2020, Kesha Corporation bought 10 percent of Bart Corporation's share capital for P500,000 and classified it as FVOCI investment. Bart's net income for the years ended December 31, 2020, and 2021, were P100,000 and P800,000, respectively. On January 2021, Bart declared a dividend of P50,000. No dividends were declared in 2020. On December 31, 2021, the fair value of the Bart stock owned by Kesha had increased to P800,000. How much should Kesha Corporation show on its 2021 income statement as total income from this investment?
- On August 1, 2020, Oriole Corporation purchased 20% of the outstanding voting shares in WLT Corporation for $1,230,000. At the time of purchase, WLT’s net assets were undervalued by $72,200 and had a remaining useful life of 12 years. Both companies had a December 31 year-end. At the end of 2020, WLT reported a net income of $329,000. Also, on December 31, 2020, the fair value of the investment in WLT shares was $1,353,000. On January 10, 2021, WLT paid a cash dividend. Oriole’s ownership entitles it to $18,000 of the dividend.Prepare the journal entries on the books of Oriole Corporation to record the transactions described above, assuming that the 20% interest in WLT does not represent significant influence, and that Oriole elected to account for its investment following the fair value through net income (FV-NI) model. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. Record journal entries in the order presented in the problem. If…Grouper Inc. acquired 10% of the outstanding common shares of Gregson Inc. on December 31, 2019. The purchase price was $904,000 for 45,200 shares, and is equal to 10% of Gregson’s carrying amount. Gregson declared and paid a $0.80 per share cash dividend on June 15 and again on December 15, 2020. Gregson reported net income of $516,000 for 2020. The fair value of Gregson’s shares was $24 per share at December 31, 2020. Grouper is a public company and applies IFRS. Prepare the journal entries for Grouper for 2019 and 2020, assuming that Grouper cannot exercise significant influence over Gregson. The investment is accounted for using the FV-OCI model. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Date Account Titles and Explanation Debit Credit choose a transaction date…Grouper Inc. acquired 10% of the outstanding common shares of Gregson Inc. on December 31, 2019. The purchase price was $904,000 for 45,200 shares, and is equal to 10% of Gregson’s carrying amount. Gregson declared and paid a $0.80 per share cash dividend on June 15 and again on December 15, 2020. Gregson reported net income of $516,000 for 2020. The fair value of Gregson’s shares was $24 per share at December 31, 2020. Grouper is a public company and applies IFRS. What amount is reported for the investment in Gregson shares on the December 31, 2020 statement of financial position under each of these methods in Fair Value Method and Equity Method? Fair ValueMethod Equity Method Investment $enter a dollar amount $enter a dollar amount Where is the investment reported on statement of financial position? The Investment accounts under both Fair Value Method and Equity Method are likely to be included in current assets / non-current assets /…
- On December 31, 2019, P Company purchased 70% of the outstanding stocks of S Company for P271,000 including a control premium of P5,000. On that day, S Company had P100,000 of capital stock and P250,000 of retained earnings. Any difference is allocated solely to goodwill. Cost method is used to account for this investment and any goodwill is computed using Full goodwill approach. For 2020, P Company had income of P200,000 from its own operations and paid dividends of P100,000. For 2020, S Company reported an Income of P30,000 and paid dividends of P20,000. All assets and liabilities of S Company have book values approximately equal to their book values. The beginning inventory of P Company includes P6,000 of merchandise purchased from S Company on December 31, 2019 at 150% of cost. The ending inventory of P Company includes P9,000 of merchandise purchased from S Company at the same mark up. P Company uses FIFO inventory costing. Impairment test of the goodwill shows that 20% will…On December 31, 2019, P Company purchased 70% of the outstanding stocks of S Company for P271,000 including a control premium of P5,000. On that day, S Company had P100,000 of capital stock and P250,000 of retained earnings. Any difference is allocated solely to goodwill. Cost method is used to account for this investment and any goodwill is computed using Full goodwill approach. For 2020, P Company had income of P200,000 from its own operations and paid dividends of P100,000. For 2020, S Company reported an Income of P30,000 and paid dividends of P20,000. All assets and liabilities of S Company have book values approximately equal to their book values. The beginning inventory of P Company includes P6,000 of merchandise purchased from S Company on December 31, 2019 at 150% of cost. The ending inventory of P Company includes P9,000 of merchandise purchased from S Company at the same mark up. P Company uses FIFO inventory costing. Impairment test of the goodwill shows that 20% will…On October 1, 2019, Michael Company purchased 30,000 shares of Jackson Company at P180 per share that reflected book value as of that date. At the time of the purchase, Jackson had 100,000 ordinary shares outstanding. Michael had no ownership interest in Jackson before the purchase. The nine months ending September 30, 2019 of Jackson recorded profit of P2,960,000. For the year ended December 31, 2019, Jackson reported profit of P4,800,000. Jackson paid Michael dividends of P120,000 on December 31, 2019.For the year 2020. Jackson reported profit of P2,800,000 and paid dividends of P 1,700,000 to its ordinary shareholders.On January 2, 2021, Michael sold 20,000 ordinary shares of Jackson for P250 per share. For year ended December 31, 2021, the reported profit of Jackson was P4,000,000 and dividends of P40,000 was paid to Michael. Market value of the remaining shares at this time is P2,300,000. What Is the amount at which the investment is reported on the statement of financial position…