On January 1, 2021, Pancake Co. bought 250,000 ordinary shares of House Co. for P3,000,000, representing 25% of the outstanding shares of House, and allowing Pancake to exercise significant influence over House. Pancake has determined that the book value of House's net assets approximates its fair value. During 2021, House earned a net income of P4,000,000. The entity also declared and paid total cash dividends of P1,000,000 during the year. At the end of the year, there was objective evidence of impairment for the shares. The recoverable amount was determined to be at P2,900,000.

On January 1, 2021, Pancake Co. bought 250,000 ordinary shares of House Co. for P3,000,000, representing 25% of the outstanding shares of House, and allowing Pancake to exercise significant influence over House. Pancake has determined that the book value of House's net assets approximates its fair value. During 2021, House earned a net income of P4,000,000. The entity also declared and paid total cash dividends of P1,000,000 during the year. At the end of the year, there was objective evidence of impairment for the shares. The recoverable amount was determined to be at P2,900,000.

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

On January 1, 2019, Long Corporation acquired 30% of the outstanding common shares of FeeleyCorporation for $300,000, purchased 25% of the outstanding common shares of Holmes for $82,500,and obtained significant influence in both situations.During 2019, Feeley reported a loss of $70,000 and paid dividends of $40,000; Holmes reported incomeof $45,000 and paid dividends of $28,000. On January 2, 2020, Long sold all the Holmes shares for$90,000.During 2020, Feeley reported a net loss of $10,000 and did not declare and pay dividends. The fair valueof the Feeley common shares at December 31, 2020 was $240,000. Long Corporation is not sure if theywill keep or sell their Investment in Feeley based on Feeley’s performance over the past two years.Instructions:1. Prepare the journal entries to record the events above for 2019 and record the sale of the Holmesshares on January 2, 2020. Assume Long recorded both investments under the equity method.2. Determine the balance for Long’s investment in…
In your audit of JJC Corporation you have found the following information: On January 1, 2022, JJC acquired 30% of Chiyo Company’s voting shares for P10,000,000.The fair value of Chiyo’s net identifiableassets is the same as per its book value. During 2022, Chiyo earned P6,000,000 and paid dividends of P2,500,000. Chiyo reported earnings of P7,000,000 for the six months ended June 30, 2023 and P9,000,000 for the year ended December 31, 2023. On July 1, 2023, JJC sold half of the investment in Chiyo for P7,000,000cash resulting to loss of significant influence. Chiyo paid dividends of P3,000,000 on October 1, 2023. On July 1, 2023, the investment is measured at fair value through other comprehensive income. The Fair Value of the retained Investment is P7,000,000 on July 1, 2023 and P7,300,000 on December31, 2023. Requirement c)How much is the investment balance to be presented byJJCin December 31, 2023? d)How much is the dividend income to be presented in Income statement in Dec. 31,…
Lagro Co. was incorporated on July 1, 2021, with P200,000 from the issuance of stock and borrowed funds of P30,000. During the first year of operations, net income was P10,000. On December 15, Lagro paid an P800 cash dividend. No additional activities affected owners' equity in 2021. At December 31, 2021, Lobo's liabilities had increased to P37,600. In Lagro's December 31, 2021, balance sheet, total assets should be reported at Choices; P239,200. P240,000. P246,800. P276,800.
On January 1, 2021, Alamar Corporation acquired a 36 percent interest in Burks, Inc., for $198,000. On that date, Burks’s balance sheet disclosed net assets with both a fair and book value of $353,000. During 2021, Burks reported net income of $84,000 and declared and paid cash dividends of $24,000. Alamar sold inventory costing $27,000 to Burks during 2021 for $35,000. Burks used all of this merchandise in its operations during 2021. Prepare all of Alamar’s 2021 journal entries to apply the equity method to this investment 1. Record the acquisition of a 36 percent interest in Burks
Matthew, Inc., owns 30 percent of the outstanding stock of Lindman Company and has the ability to significantly influence the investee's operations and decision making. On January 1, 2021, the balance in the Investment in Lindman account is $382,000. Amortization of excess fair value associated with the 30% ownership is $10,500 per year. In 2021, Lindman earns an income of $156,000 and declares cash dividends of $39,000. Previously, in 2020, Lindman had sold inventory costing $54, 600 to Matthew for $78,000. Matthew consumed all but 20 percent of this merchandise during 2020 and used the rest during 2021. Lindman sold additional inventory costing $59, 400 to Matthew for $90,000 in 2021. Matthew did not consume 40 percent of these 2021 purchases from Lindman until 2022. What amount of equity method income would Matthew recognize in 2021 from its ownership interest in Lindman? What is the equity method balance in the Investment in Lindman account at the end of 2021?
On January 1, 2021, American Corporation purchased 30% of the outstanding voting shares of Short Supplies common stock for $231,000 cash. On that date, Short's book value and fair value were both $770,000. The equity method is deemed appropriate for this investment. Short's net income reported on December 31, 2021, was $73,000. During 2021, Short also paid cash dividends in the amount of $20,500. Required:Compute the amount that would be reported for the investment on American Corporation's financial statements at December 31, 2021.
An investor company purchased 60,000 of the 500,000 outstanding shares of the investee company's common stock on January 1, 2021. During 2021, the investee company reported earnings for the year of $459,000, and declared and paid an $0.52 per share cash dividend during 2021. If the investor company uses the fair value method of accounting for its investment in the investee company, it should report Dividend Revenue from the investee for 2021 in the amount of $_______. (If there is no Dividend Revenue, then enter 0. Do not round your answer for any part of the computation.)
On January 1, 2020, Windsor Company purchased 6,100 shares of Kusher Company stock for $439,200. Windsor's investment represents 30 percent of the total outstanding shares of Kusher. During 2020, Kusher paid total dividends of $152,000 and reported net income of $456,000. What revenue does Windsor report related to this investment and what is the amount to be reported as an investment in Kusher stock at December 31? Revenue $ Investment in Kusher stock at December 31 $
Matthew, Inc., owns 30 percent of the outstanding stock of Lindman Company and has the ability to significantly influence the investee’s operations and decision making. On January 1, 2021, the balance in the Investment in Lindman account is $408,000. Amortization of excess fair value associated with the 30% ownership is $9,500 per year. In 2021, Lindman earns an income of $181,500 and declares cash dividends of $60,500. Previously, in 2020, Lindman had sold inventory costing $40,200 to Matthew for $67,000. Matthew consumed all but 30 percent of this merchandise during 2020 and used the rest during 2021. Lindman sold additional inventory costing $44,800 to Matthew for $80,000 in 2021. Matthew did not consume 40 percent of these 2021 purchases from Lindman until 2022. What amount of equity method income would Matthew recognize in 2021 from its ownership interest in Lindman? What is the equity method balance in the Investment in Lindman account at the end of 2021?
On January 1, 2022, Mojito Corporation purchased 20% (20,000 shares) of the outstanding stock of Dulcinea Corporation for $153,000. During 2022, Dulcinea Corporation paid total dividends of $45,000 and earned $80,000 in net income. At the end of 2022, Dulcinea Corporation’s stock had a fair market value of $155,000. Required: Prepare the journal entries that Mojito would make during 2022 assuming that they do NOT have significant influence over Dulcinea as a result of their stock ownership (i.e. fair value method). Prepare the journal entries that Mojito would make during 2022 assuming that they do have significant influence over Dulcinea as a result of their stock ownership (i.e. equity method).
Fizer Pharmaceutical paid $78 million on January 2, 2021, for 6 million shares of Carne Cosmetics common stock. The investment represents a 25% interest in the net assets of Carne and gave Fizer the ability to exercise significant influence over Carne's operations. Fizer received dividends of $2 per share on December 21, 2021, and Carne reported net income of $28 million for the year ended December 31, 2021. The fair value of Carne's common stock at December 31, 2021, was $28.50 per share. . The book value of Carne's net assets was $192 million. . The fair value of Carne's depreciable assets exceeded their book value by $48 million. These assets had an average remaining useful life of twelve years. . The remainder of the excess of the cost of the investment over the book value of net assets purchased was attributable to goodwill. Required: Complete the table below and prepare the appropriate journal entries related to the investment during 2021. Complete this question by entering your…
On January 1, 2022, Nichols Enterprises paid $100,000 for 6,200 shares of Elliott Electronics common stock. The ownership in Elliott Electronics is 10%. Nichols Enterprises does not have significant influence over Elliott Electronics. Elliott reported net income of $61,000 for the year ended December 31, 2022. The fair value of the Elliott stock December 31,2022 was $55 per share. What amount will be reported in the balance sheet of Nichols Enterprises for the investment in Elliott at December 31, 2022? Multiple Choice $341,000. $296,000. $281,000. $266,000.