Chapter 3, Problem 29P

On January 2, 2017, Normal Inc. acquired 15% interest in Laco Co. by paying P1,500,000 for 7,500 ordinary shares. On this date, the net assets of Laco Co. totaled P9 million. The investment was classified as a financial asset at fair value through other comprehensive income. The fair values of Laco Co.'s identifiable assets and liabilities approximate their book values. On August 1, 2017, Normal received dividends of P4 per share from Laco Co. Fair value of the shares on December 31, 2017 was P190. Net income reported by Laco for the year ended amounted to P1,500,000. On July 1, 2018, Normal Inc. paid P1 million to purchase 5,000 additional shares of Laco Co. from another shareholder. On February 1, 2018, cash dividends of P5 were received while dividends of P6 were received on August 1, 2018. Net income reported for the year ended amounted to P1,500,000 with P800,000 being earned for the six months ended December 31, 2018. 1. What amount of investment income should be reported on…

Parrot Company purchased 90% of the outstanding voting shares of Sieger Company at the beginning of 2018 for $650,000. At the time of purchase, Song Company's total stockholders' equity amounted to $625,000. Income and dividend distributions for Sieger Company from 2018 through 2020 are as follows (please see the table below). Please use the complete equity method to record the Parrot company's investment. The difference between book value of equity acquired and the value implied by the purchase price was attributed solely to an excess of market over book values of depreciable assets, with a remaining life of 5 years. $ 2018 2019 2020 Net income (Iloss) 63,500 52,500 -55,000 Dividend Distribution 25,000 50,000 35,000 $ 2018 2019 2020 -55,000 35,000 Net income (Ioss) 63,500 52,500 Dividend Distribution 25,000 50,000

On 1 October 2018, KING acquired 30,000 of VAM's 100,000 shares in exchange for 75,000 of its own shares. The market value of KING's shares at the date of this share exchange was $3.20 per share. VAM's net profit for the financial year ended 31 March 2019 was $200,000. $40,000 of this profit was made by VAM from 1 April 2018 to 30 September 2018. VAM is the only associate of KING. What amount will be shown as 'investment in associate' in the consolidated statement of financial position of KING as at 31 March 2019? Please provide explaination. A) $288,000 B) $300,000 C) $156,000 D) $252,000 E) None of the above

On July 1, 2015, Cleopatra Corporation acquired 25% of the shares of Marcus, Inc. for P1,000,000. At the date, the equity of Marcus was P4,000,000. with all the identifiable assets and liabilities being measured at amounts equal to fair value. The table below shoes the profits and losses made by Marcus during 2015 to 2019: Year 2015   200,000 2016   2,000,000 2017   2,500,000 2018   160,000 2019   300,000   How much will the investment in associate account be debited/credited in 2018? A. 1,060,000 Cr B. No entry C. 40,000 Dr D. 1,035,000 Cr

On January 1, 2018, the Moody Company entered into a transaction for 100% of the outstanding common stock of Osorio Company. To acquire these shares, Moody issued $400 in long-term liabilities and also issued 40 shares of common stock having a par value of $1 per share but a fair value of $10 per share. Moody paid $20 to lawyers, accountants, and brokers for assistance in bringing about this acquisition. Another $15 was paid in connection with stock issuance costs. Prior to these transactions, the balance sheets for the two companies were as follows:     Moody   Osorio Cash $ 180     $ 40   Receivables   810       180   Inventories   1,080       280   Land   600       360   Buildings (net)   1,260       440   Equipment (net)   480       100   Accounts payable   (450 )     (80 ) Long-term liabilities   (1,290 )     (400 ) Common stock ($1 par)   (330 )         Common stock ($20 par)           (240 ) Additional paid-in capital   (1,080 )     (340 ) Retained…

Below are Lebnas Corp.’s 2019 income statement and comparative balance sheet at 12/31/2019 and 12/31/2018.  Additional information:                                                    On December 31, 2018, Lebnas acquired 25% of Island ’s common stock for $609,000. On that date, the carrying value of Island’s assets and liabilities, which approximated their fair values, was $2,435,000. Island reported income of $319,000 for the year ended December 31, 2019. No dividend income was received by Lebnas on Island’s common stock during the year 2019.   During 2018, Lebnas loaned $797,500 to POI , an unrelated company. POI made the first semi-annual principal repayment of $72,500, plus interest at 10%, on December 31, 2018. POI is current on the loan as of December 31, 2019.   On January 2, 2019, Lebnas sold equipment costing $145,000, with a carrying amount of $44,950 for cash.   On December 31, 2019, Lebnas entered into a finance lease for a new The present value of the annual rental…

prepare of the related journal entries.   On 1 January 2017, FIBERBOATS acquired 100% of BELL Corporation. FIBERBOATS issued 50,000 shares of its BD0.600 par ordinary shares, with a market price of BD0.400 on the date the acquisition was announced and BD0.800 on the date the acquisition was completed, for all of BELL Corporation ordinary shares. The book value of net assets of BELL Corporation at the date of acquisition was BD10,000. On that date, the fair value of BELL Corporation assets and liabilities equalled their respective carrying amounts with the exception of property, plant and equipment (PPE) that exceeded its book value by BD120,000. The fair value of BELL’s identifiable intangibles (in-process research and development) is BD70,000. The in-process research and development will be amortized over 5 years.

On April 1, 2019, Tagaytay Company purchased 25,000 ordinary shares of Sulo Co. at P180 per share, a price that approximates book value as of that date. At the time of the purchase, Sulo had 100,000 ordinary shares outstanding. Tagaytay had no ownership interest in Sulo before the purchase. The first quarter statement ending March 31, 2019 of Sulo recorded earnings of P480,000. For the year ended December 31, 2019, Sulo reported profit of P2,400,000. Sulo paid Tagaytay dividends of P60,000 on June 1 and again P60,000 on December 31, 2019. During 2020, Sulo reported profit of P2,000,000 and paid dividends of P2,000,000 to its shareholders. On January 1, 2021, Tagaytay sold 10,000 ordinary shares of Sulo for P200 per share. For the year ended December 31, 2021, the reported profit of Sulo was P2,500,000 and dividends of P60,000 were paid to Tagaytay. The market value of Sulo shares remained unchanged during the year 2021. How much is the gain of Tagaytay Company on the sale of 10,000…

Cullumber Company acquired 28% of the outstanding common stock of Grinwold Inc. on January 1, 2020, by paying $1,555,400 for 55,550 shares. Grinwold declared and paid a $0.50 per share cash dividend on June 30 and again on December 31, 2020. Grinwold reported net income of $859,200 for the year. (a) Your Answer Correct Answer Prepare the journal entries for Cullumber Company for 2020, assuming Cullumber cannot exercise significant influence over Grinwold. (Use the cost method.) (Credit account titles are automatically indented when the amount is entered. Do not indent manually. Record journal entries in the order presented in the problem.) (b) Your answer is partially correct. Date Jan. 1 June 30 Dec. 31 Solution List of Accounts Jan. 1 (c2) Date June 30 eTextbook and Media Dec. 31 Dec. 31 Account Titles and Explanation V Stock Investments Your answer is correct. Cash Prepare the journal entries for Cullumber Company for 2020, assuming Cullumber can exercise significant influence over…