On January 1, 20X1, Rivera Company (RC) and Caventa Company (CC) each acquired 40% of the ordinary voting shares of Tulang Company (TC) for P500,000. They then both agreed to share control of TC. In 20X1, RC purchased goods from TC for P150,000. On December 31, 20X1, P80,000 of the goods purchased remains in TC’s inventory. TC sells goods at 25% mark-up based on the sale. For the year ended December 31, 20X1, TC reported a profit of P400,000 and declared and paid dividends of P150,0000. Also, the fair value of each venturer’s investment in TC is P600,000. There is no published quotation for TC. RC and CC account for jointly controlled entities using the equity method. Required: Determine the following: 1. The amount of income RC should recognize from TC. 2. The value of RC’s investment in TC at December 31, 20X1. 3. The amount of income CC should recognize from TC. 4. The value of CC’s investment in TC at December 31, 20X1.
On January 1, 20X1, Rivera Company (RC) and Caventa Company (CC) each acquired 40% of the ordinary
voting shares of Tulang Company (TC) for P500,000. They then both agreed to share control of TC.
In 20X1, RC purchased goods from TC for P150,000. On December 31, 20X1, P80,000 of the goods purchased
remains in TC’s inventory. TC sells goods at 25% mark-up based on the sale.
For the year ended December 31, 20X1, TC reported a profit of P400,000 and declared and paid dividends of
P150,0000. Also, the fair value of each venturer’s investment in TC is P600,000. There is no published quotation
for TC.
RC and CC account for jointly controlled entities using the equity method.
Required: Determine the following:
1. The amount of income RC should recognize from TC.
2. The value of RC’s investment in TC at December 31, 20X1.
3. The amount of income CC should recognize from TC.
4. The value of CC’s investment in TC at December 31, 20X1.
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