PROBLEM 1: At the beginning of current year, Negros Company acquired 40% of the outstanding ordinary shares of another entity for P5,000,000 when the net assets of the investee amounted to P10,000,000. At acquisition date, the carrying amounts of the identifiable assets and liabilities of the investee were equal to fair value, except for land whose fair value was P2,000,000 greater than carrying amount and inventory whose fair value was P1,500,000 greater than cost. The land was sold in the current year and the inventory was unsold at year-end. During the current year, the investee reported net income P8,000,000, issued 10% share dividend and paid cash dividend on P2,500,000 What amount should Negros Company report as investment income for current year? What amount should be recorded as goodwill? What amount should be recorded as gain on bargain purchase? (excess fair value) Prepare the Journal Entries

PROBLEM 1: At the beginning of current year, Negros Company acquired 40% of the outstanding ordinary shares of another entity for P5,000,000 when the net assets of the investee amounted to P10,000,000. At acquisition date, the carrying amounts of the identifiable assets and liabilities of the investee were equal to fair value, except for land whose fair value was P2,000,000 greater than carrying amount and inventory whose fair value was P1,500,000 greater than cost. The land was sold in the current year and the inventory was unsold at year-end. During the current year, the investee reported net income P8,000,000, issued 10% share dividend and paid cash dividend on P2,500,000 What amount should Negros Company report as investment income for current year? What amount should be recorded as goodwill? What amount should be recorded as gain on bargain purchase? (excess fair value) Prepare the Journal Entries

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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