Advanced Accounting
12th Edition
ISBN: 9781305084858
Author: Paul M. Fischer, William J. Tayler, Rita H. Cheng
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Concept explainers
Question
Chapter 3, Problem 1UTI
To determine
There is various method of calculating Parent company’s investment balance at the end of the first year. Some are
- Simple Equity Method
- Sophisticated Equity Method
- Cost Method
To Calculate
Amount of investment in subsidiary company at the end of first year with various method.
Expert Solution & Answer
Answer to Problem 1UTI
| Particulars | Simple equity method | Sophisticated equity method | Cost method |
| Investment in subsidiary company |
Explanation of Solution
As the Parent company purchased
Calculation of Amortization amount per year
As per the information given in the question equipment is undervalued by
So investment value in subsidiary is
| Particulars | Simple equity method | Sophisticated equity method | Cost method |
| Investment in subsidiary company | |||
| - | In this method also subsidiary income is also considered while calculating investment balance at the end of first year | For cost method only parent company income and investment. |
Conclusion:
| Particulars | Simple equity method | Sophisticated equity method | Cost method |
| Investment in subsidiary company |
Want to see more full solutions like this?
Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!
Students have asked these similar questions
How much is the investment income for the current year?
How much is the investment income to be reported at the end of the current year?
At the beginning of current year, Courage Company acquired 25% of the outstanding shares of an
investee at a total cost of P8,400, 000. At the time, the carrying amount of the net assets of Courage
Company totaled P28, 800, 000.
The investee owned equipment with 5-year remaining life and with a fair value P2, 400, 000 more
than carrying amount. The investee owned land with a fair value of Pl, 200, 000 more than carrying
amount. During the current year, the investee sold the land.
At year-end, the investee reported net income of P6, 000, 000 declared and paid a cash dividend of
P3, 600, 000 to shareholders at year-end. The fair value of the investment at year-end is P9, 000, 000.
Q1. How much is the investment income to be reported at the end of the current year?
Q2. How much is the carrying amount of the investment at year- end?
Q3. How much is the implied goodwill from acquisition?
Q4. What is the entry…
CARAT CORP. has completed its current year financial statements which reveal, in part, the following information:
*Profit for the year - P110,000
*Total Comprehensive Income - P130,000
*Other comprehensive income relates to the revaluation of land and buildings to fair value
*Dividends paid - P35,000
*Opening equity balances - share capital P300,000, retained earnings P220,000, asset revalution surplus P60,000
*No more share capital was issued during the reporting period
The total equity at the end of the current year is:
Choices
a. 695,000
b. 675,000
c. 655,000
d. 580,000
Chapter 3 Solutions
Advanced Accounting
Ch. 3 - Prob. 1UTICh. 3 - Prob. 2UTICh. 3 - Prob. 3UTICh. 3 - Prob. 4UTICh. 3 - Prob. 5UTICh. 3 - Prob. 6UTICh. 3 - Prob. 7UTICh. 3 - Prob. 1ECh. 3 - Prob. 2ECh. 3 - Prob. 3.1E
Ch. 3 - Prob. 3.2ECh. 3 - Prob. 3.3ECh. 3 - Prob. 3.4ECh. 3 - Prob. 3.5ECh. 3 - Equity method, second year, eliminations, income...Ch. 3 - Prob. 4.2ECh. 3 - Prob. 5.1ECh. 3 - Prob. 5.2ECh. 3 - Prob. 5.3ECh. 3 - Prob. 5.4ECh. 3 - Prob. 5.5ECh. 3 - Prob. 6.1ECh. 3 - Prob. 6.2ECh. 3 - Prob. 7.1ECh. 3 - Prob. 7.2ECh. 3 - Prob. 7.3ECh. 3 - Prob. 7.4ECh. 3 - Prob. 7.5ECh. 3 - Prob. 8.1ECh. 3 - Prob. 8.2ECh. 3 - Prob. 9ECh. 3 - Prob. 10.1ECh. 3 - Prob. 10.2ECh. 3 - Prob. 10.3ECh. 3 - Prob. 11ECh. 3 - Prob. 3B.1.1AECh. 3 - Prob. 3B.1.2AECh. 3 - Prob. 3B.1.3AECh. 3 - Prob. 3B.2.1AECh. 3 - Prob. 3B.2.2AECh. 3 - Prob. 3B.3AECh. 3 - Prob. 3.1.1PCh. 3 - Prob. 3.1.2PCh. 3 - Prob. 3.1.3PCh. 3 - Prob. 3.2.1PCh. 3 - Prob. 3.2.2PCh. 3 - Prob. 3.3.1PCh. 3 - Prob. 3.3.2PCh. 3 - Prob. 3.3.3PCh. 3 - Prob. 3.3.4PCh. 3 - Prob. 3.4.1PCh. 3 - Prob. 3.4.2PCh. 3 - Prob. 3.5.1PCh. 3 - Prob. 3.5.2PCh. 3 - Prob. 3.5.3PCh. 3 - Prob. 3.6.1PCh. 3 - Prob. 3.6.2PCh. 3 - Prob. 3.6.3PCh. 3 - Prob. 3.7.1PCh. 3 - Prob. 3.7.2PCh. 3 - Prob. 3.7.3PCh. 3 - Prob. 3.8.1PCh. 3 - Prob. 3.8.2PCh. 3 - Prob. 3.9.1PCh. 3 - Prob. 3.9.2PCh. 3 - Prob. 3.10.1PCh. 3 - Prob. 3.10.2PCh. 3 - Prob. 3.11.1PCh. 3 - Prob. 3.11.2PCh. 3 - Prob. 3.12.1PCh. 3 - Prob. 3.12.2PCh. 3 - Prob. 3.13.1PCh. 3 - Prob. 3.13.2PCh. 3 - Prob. 3.15.1PCh. 3 - Prob. 3.15.2PCh. 3 - Prob. 3.16.1PCh. 3 - Prob. 3.16.2PCh. 3 - Prob. 3.17.1PCh. 3 - Prob. 3.17.2PCh. 3 - Prob. 3.18.1PCh. 3 - Prob. 3.18.2PCh. 3 - Prob. 3A.1.1APCh. 3 - Prob. 3A.1.2APCh. 3 - Prob. 3A.2APCh. 3 - Prob. 3A.3APCh. 3 - Prob. 3B.1APCh. 3 - Prob. 3B.2APCh. 3 - Prob. 3B.3.1APCh. 3 - The trial balances of Campton Corporation and Dorn...Ch. 3 - The trial balances of Campton Corporation and Dorn...
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.Similar questions
- How much is the cost of investment? how much is the goodwill to be reported on January 31, 2022?arrow_forwardParent and its 70% owned Subsidiary report the following at December 31 of the current year: Parent Net Income, P300,000; Parent Dividends, P20,000. Subsidiary Net Income, P250,000; Subsidiary Dividends, P20,000. On January 3, of the current year, Parent sold equipment to Subsidiary with a remaining 5-year life reporting a gain on sale of P20,000. The gain is included in the net income reported by the Parent. 1. Determine the equity holders of parent’s net income and the non-controlling interest net income. 2. Determine the equity holders of parent's net income.arrow_forwardNasty is a wholly owned subsidiary of Ugly. Inventories in their individual statements of financial position at the year end are shown as: Ugly $40,000 Nasty $20,000 Sales by Ugly to Nasty during the year were invoiced at $15,000 which included a profit by Ugly of 25% on cost. Two thirds of these goods were included in inventories at the year end. At what value should inventories appear in the consolidated statement of financial position?arrow_forward
- Alford Company and its 80 percent-owned subsidiary, Knight, have the following income statements for 2021: Knight $ (230,000) Alford $ (500,000) 300,000 40,000 140,000 10,000 20,000 20,000 (30,000) (36,200) $ (206, 200) Revenues Cost of goods sold Depreciation and amortization Other expenses Gain on sale of equipment Equity in earnings of Knight Net income 0 0 $ (60,000) Additional Information for 2021 • Intra-entity inventory transfers during the year amounted to $90,000. All intra-entity transfers were downstream from Alford to Knight. • Intra-entity gross profits in inventory at January 1 were $6,000, but at December 31, they are $9,000. • Annual excess amortization expense resulting from the acquisition is $11,000. • Knight paid dividends totaling $20,000. • The noncontrolling interest's share of the subsidiary's income is $9,800. . During the year, consolidated inventory rose by $11,000 while accounts receivable and accounts payable declined by $8,000 and $6,000, respectively. Net…arrow_forwardHow much is the balance of "investment in associate" at the end current year?arrow_forward1. What is the Consolidated Net Income for 2020? 2. What is the Consolidated Net Income for 2021?arrow_forward
- An entity is planning to sell the business to new interests. The cumulative net earnings for the past five years amounted to P16,500,000 including expropriation loss of P1,500,000. The normal rate of return is 20%. The fair value of net assets of the entity at current year end was P10,000,000. 1. What is the purchase price if goodwill is measured by capitalizing excess earnings at 25%?2. What is the purchase price if goodwill is measured by capitalizing average annual earnings at 25%?arrow_forwardGG Co. had the following transactions with two subsidiaries, OO and RR during 2020: Sales of P105,000 to OO, Inc., with P31,500 gross profit, OO had P26,250 of this inventory on hand at year end. Purchases of raw materials totaling P420,000 from RR Corp., a wholly owned subsidiary. RR’s gross profit on the sale was P84,000. GG had P98,000 of this inventory remaining on December 31, 2020. Before eliminating entries, GG had combined current assets of P525,000. What amount should GG report in its December 31, 2020 consolidated financial position for current assets?arrow_forwardAlford Company and its 80 percent–owned subsidiary, Knight, have the following income statements for 2021: Alford Knight Revenues $ (500,000 ) $ (230,000 ) Cost of goods sold 300,000 140,000 Depreciation and amortization 40,000 10,000 Other expenses 20,000 20,000 Gain on sale of equipment (30,000 ) 0 Equity in earnings of Knight (36,200 ) 0 Net income $ (206,200 ) $ (60,000 ) Additional Information for 2021 Intra-entity inventory transfers during the year amounted to $90,000. All intra-entity transfers were downstream from Alford to Knight. Intra-entity gross profits in inventory at January 1 were $6,000, but at December 31, they are $9,000. Annual excess amortization expense resulting from the acquisition is $11,000. Knight paid dividends totaling $20,000. The noncontrolling interest's share of the subsidiary's income is $9,800. During the year, consolidated inventory rose by $11,000 while accounts…arrow_forward
- Jameson Company acquired 90% interest in Southwest Company on December 31, 20x4 for P320,000. During 20x5 Southwest had a net income of P22,000 and paid a cash dividend of P7,000. the cost method is applied that means it would give a debit balance in the Investment in Southwest Company account at the end of 20x5 of:arrow_forwardsarrow_forwardPortland Inc. (Portland) owns 80% of Seattle Inc. (Seattle) and uses the cost method to account for its investment. The 2023 income statements of both companies are shown below. Portland Seattle Gross profit $100,000 $50,000 Miscellaneous revenues (losses) (30,000) (20,000) Depreciation expense (20,000) (15,000) Income tax expense (20,000 (6,000) Net Income $30,000 $9,000 On January 1, 2023, Seattle acquired equipment for $7,000 and sold it the same day to Portland for $12,000. The equipment had a remaining useful life of 10 years on that date. Both companies are subject to an effective tax rate of 40%. Which of the following is the correct amount of consolidated net income attributable to the noncontrolling interest in Portland's 2023 consolidated income statement? Multiple Choice $2,340 $1,260 $1,200 $2,700arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,
Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSON
Intermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill Education
Financial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education
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