P purchased 100% of the common stock of the S Company on January 1, 2003 for P500,000. On that date the stockholders' equity of S was P380,000. On the purchase date, inventory of S which was sold in 2003, was understated by P20,000. Any remaining excess of cost over book value is attributable to goodwill with a 20-year life. The reported income and dividends paid by S Company were as follows: 2003 2004 Net income P80,000 P90,000 Dividends paid P10,000 P10,000 1. Using the equity method, how much is the investment income for 2003? 2. Using the equity method, how much is the investment account as of 12/31/2003?

P purchased 100% of the common stock of the S Company on January 1, 2003 for P500,000. On that date the stockholders' equity of S was P380,000. On the purchase date, inventory of S which was sold in 2003, was understated by P20,000. Any remaining excess of cost over book value is attributable to goodwill with a 20-year life. The reported income and dividends paid by S Company were as follows: 2003 2004 Net income P80,000 P90,000 Dividends paid P10,000 P10,000 1. Using the equity method, how much is the investment income for 2003? 2. Using the equity method, how much is the investment account as of 12/31/2003?

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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