PROBLEM 33 Recede Corporation purchased 10,000 shares of DEF Company on January 1, 2020, for P120 per share. On the date of purchase, DEF Company has an outstanding ordinary share of 50,000 shares (par value P100), and an outstanding 20,000 shares, 8% cumulative preference shares (par value P200). The carrying value of DEF Company's net asset on January 1, 2020, is P7,000.000. The fair value of all identifiable assets and liabilities of DEF Company is the same as its carrying value. During the year, Recede Corporation and DEF Company have the following intercompan transactions: a On June 30, 2020, Recede Corporation sold equipment to DEF Company for PS00,000. On this date, the carrying amount of this equipment in the books of Recede Corporation amounted to P300,000. The equipment has a remaining life of 5 years on the date of sale. b. On December 1, 2020, DEF Company sold merchandise to Recede Corporation for P1,000,000, inclusive of a 40% gross profit on sales. These merchandises were still unsold at the end of 2020. DEF Company reported net income and dividend payments as follows: Net Income Dividend 2020 P2,000,000 3,500,000 P1,000,000 2021 2,000,000 Requirements: 1. Prepare the necessary joumal entries to record the above transactions. 2 How much is the investment income to be reported to the profit or loss of Recede Corporation in 2020? 2021? 3. Whatis the carrying value of the investment in associates on December 31, 2020? December 31, 2021?
PROBLEM 33 Recede Corporation purchased 10,000 shares of DEF Company on January 1, 2020, for P120 per share. On the date of purchase, DEF Company has an outstanding ordinary share of 50,000 shares (par value P100), and an outstanding 20,000 shares, 8% cumulative preference shares (par value P200). The carrying value of DEF Company's net asset on January 1, 2020, is P7,000.000. The fair value of all identifiable assets and liabilities of DEF Company is the same as its carrying value. During the year, Recede Corporation and DEF Company have the following intercompan transactions: a On June 30, 2020, Recede Corporation sold equipment to DEF Company for PS00,000. On this date, the carrying amount of this equipment in the books of Recede Corporation amounted to P300,000. The equipment has a remaining life of 5 years on the date of sale. b. On December 1, 2020, DEF Company sold merchandise to Recede Corporation for P1,000,000, inclusive of a 40% gross profit on sales. These merchandises were still unsold at the end of 2020. DEF Company reported net income and dividend payments as follows: Net Income Dividend 2020 P2,000,000 3,500,000 P1,000,000 2021 2,000,000 Requirements: 1. Prepare the necessary joumal entries to record the above transactions. 2 How much is the investment income to be reported to the profit or loss of Recede Corporation in 2020? 2021? 3. Whatis the carrying value of the investment in associates on December 31, 2020? December 31, 2021?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Transcribed Image Text:PROBLEM 33
Recede Corporation purchased 10,000 shares of DEF Company on January 1, 2020, for
P120 per share. On the date of purchase, DEF Company has an outstanding ordinary
share of 50,000 shares (par value P100), and an outstanding 20,000 shares, 8%
cumulative preference shares (par value P200). The carrying value of DEF Company's
net asset on January 1, 2020, is P7,000.000. The fair value of all identifiable assets and
liabilities of DEF Company is the same as its carrying value.
During the year, Recede Corporation and DEF Company have the following intercompany
transactions:
On June 30, 2020, Recede Corporation sold equipment to DEF Company for
PS00,000. On this date, the carrying amount of this equipment in the books of
Recede Corporation amounted to P500,000. The equipment has a remaining life
of 5 years on the date of sale.
b. On December 1, 2020, DEF Company sold merchandise to Recede Corporation
for P1,000.000, inclusive of a 40% gross profit on sales. These merchandises
were still unsold at the end of 2020.
a.
DEF Company reported net income and dividend payments as follows:
Net Income
Dividend
2020
P2,000,000
3,500,000
P1,000,000
2,000,000
2021
Requirements:
1 Prepare the necessary joumal entries to record the above transactions.
2 How much is the investment income to be reported to the profit or loss of
Recede Corporation in 2020? 2021?
3. What is the carrying value of the investment in associates on December 31,
2020? December 31, 2021?
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 4 steps with 6 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education