On January 1, 2021, PARKER Corp. acquired 40% of the outstanding ordinary shares of OSBORN Corp. for P 6,500,000. The carrying amount of net assets of OSBORN Corp. equaled P 12,500,000. Any excess of cost over carrying amount is attributable to equipment with remaining useful life of 10 years. During the year, OSBORN reported net loss of P 4,000,000 and paid dividends of P 2,500,000. Required: A. Prepare journal entries for the current year. B. Compute for the carrying amount of the investment at year-end.

On January 1, 2021, PARKER Corp. acquired 40% of the outstanding ordinary shares of OSBORN Corp. for P 6,500,000. The carrying amount of net assets of OSBORN Corp. equaled P 12,500,000. Any excess of cost over carrying amount is attributable to equipment with remaining useful life of 10 years. During the year, OSBORN reported net loss of P 4,000,000 and paid dividends of P 2,500,000. Required: A. Prepare journal entries for the current year. B. Compute for the carrying amount of the investment at year-end.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Consolidation

Consolidation in general examination implies an asset oscillating between well-defined methods of trading status. Consolidation is commonly known as market indecisiveness, which completes when the asset's values move forward or backward the trading structure.

Question

1. On January 1, 2021, PARKER Corp. acquired 40% of the outstanding ordinary shares of
OSBORN Corp. for P 6,500,000. The carrying amount of net assets of OSBORN Corp.
equaled P 12,500,000. Any excess of cost over carrying amount is attributable to equipment
with remaining useful life of 10 years. During the year, OSBORN reported net loss of P
4,000,000 and paid dividends of P 2,500,000.
Required:
A. Prepare journal entries for the current year.
B. Compute for the carrying amount of the investment at year-end.

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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 2. Record the 36 percent income earned by Alamar from this investment.