PROBLEM 36 Eddie Company acquired 30% of ABC Corporations share for P8,000.000 on July 1, 2020. ABC Corporation's identifiable net assets on the date of acquisition are P20,000.000. The fair value of the corporation's net assets is the same as its carrying amount except for the following: a Equipment is undervaluedby P2,000.000. b. Inventory's fair value is P2,000.000 greater than its canying amount. The equipment has a remaining life of 4 years and depreciated using the straight-line method. At the end of 2020, all inventories at the acquisition date are entirely sold. On November 30, ABC Corporation pays a P2,000.000 dividend to its shareholders. During the year, ABC Corporation reported a net income of P5,000.000, 40% of these were earnedin the first half of the year. The fair value of ABC Corporation's shares held by Guillen at the end of 2020 is P8,250.000. On January 1, 2021, Eddie Company sold half of its ownership from ABC Corporation for P5,000.000, During 2021, ABC Corporation reported a net income of P6,000.000 and paid a dividend of P3,000,000. The fair value of the ABC Corporation's shares held by Guillen at the end of 2021 is P5,100.000. Requirements: 1. Prepare the necessaryjournal entries to record the above transactions? 2. Whatis the carrying value of the investmenton December 31, 2020? December 31,2021?
PROBLEM 36 Eddie Company acquired 30% of ABC Corporations share for P8,000.000 on July 1, 2020. ABC Corporation's identifiable net assets on the date of acquisition are P20,000.000. The fair value of the corporation's net assets is the same as its carrying amount except for the following: a Equipment is undervaluedby P2,000.000. b. Inventory's fair value is P2,000.000 greater than its canying amount. The equipment has a remaining life of 4 years and depreciated using the straight-line method. At the end of 2020, all inventories at the acquisition date are entirely sold. On November 30, ABC Corporation pays a P2,000.000 dividend to its shareholders. During the year, ABC Corporation reported a net income of P5,000.000, 40% of these were earnedin the first half of the year. The fair value of ABC Corporation's shares held by Guillen at the end of 2020 is P8,250.000. On January 1, 2021, Eddie Company sold half of its ownership from ABC Corporation for P5,000.000, During 2021, ABC Corporation reported a net income of P6,000.000 and paid a dividend of P3,000,000. The fair value of the ABC Corporation's shares held by Guillen at the end of 2021 is P5,100.000. Requirements: 1. Prepare the necessaryjournal entries to record the above transactions? 2. Whatis the carrying value of the investmenton December 31, 2020? December 31,2021?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Transcribed Image Text:PROBLEM 36
Eddie Company acquired 30% of ABC Corporations share for P8,000.000 on July 1,
2020. ABC Corporation's identifiable net assets on the date of acquisition are
P20,000.000. The fair value of the corporation's net assets is the same as its carrying
amount except for the following:
a Equipment is undervaluedby P2,000.000.
b. Inventory's fair value is P2,000.000 greaterthan its canrying amount.
The equipment has aremaining life of 4 years and depreciated using the straight-line
method. At the end of 2020, all inventories at the acquisition date are entirely sold.
On November 30, ABC Corporation pays a P2,000.000 dividend to its shareholders.
During the year, ABC Corporation reported a net income of P5,000.000, 40% of these
were earnedin the first half of the year. The fair value of ABC Corporation's shares held
by Guillen at the end of 2020 is P8,250,000.
On January 1, 2021, Eddie Company sold half of its ownership from ABC Corporation
for P5,000.000. During 2021, ABC Corporation reported a net income of P6,000,000 and
paid a dividend of P3,000,000. The fair value of the ABC Corporation's shares held by
Guillen at the end of 2021 is P5,100.000.
Requirements:
1. Prepare the necessaryjournal entries to record the above transactions?
2. What is the carrying value of the investment on December 31, 2020? December 31,2021?
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