28. On January 1, 2020, Walang Kayo Co. purchased investment securities for P1,500,000. The securities are classified as investment in equity securities at fair value through profit or loss. At December 31, 2016, the securities had a fair value of P2,100,000 but not yet been sold. The company also recognized a P400,000 restructuring charge during the year. The restructuring charge is composed of an impairment write down of manufacturing facility. Tax rules do not allow a deduction for the write down unless the facility is sold. The facility was not sold by the end of the year. After including the unrealized gain on the equity investment @FVPL and the restructuring charge, the accounting income before tax for the year was P5,000,000. The income tax rate for the current and future years is 30%. What is Walang Kayo’s current tax expense? A. P1,440,000 B. P1,500,000 C. P1,560,000 D. P1,920,000

28. On January 1, 2020, Walang Kayo Co. purchased investment securities for P1,500,000. The securities are classified as investment in equity securities at fair value through profit or loss. At December 31, 2016, the securities had a fair value of P2,100,000 but not yet been sold. The company also recognized a P400,000 restructuring charge during the year. The restructuring charge is composed of an impairment write down of manufacturing facility. Tax rules do not allow a deduction for the write down unless the facility is sold. The facility was not sold by the end of the year. After including the unrealized gain on the equity investment @FVPL and the restructuring charge, the accounting income before tax for the year was P5,000,000. The income tax rate for the current and future years is 30%. What is Walang Kayo’s current tax expense? A. P1,440,000 B. P1,500,000 C. P1,560,000 D. P1,920,000

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter13: Investments And Long-term Receivables

Section: Chapter Questions

Problem 1MC

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LO.4, 7 In December 2019, Carl Corporation sold land it held as an investment. The corporation received 50,000 in 2019 and a note payable (with adequate interest) for 150,000 to be paid in 2021. Carl Corporations cost of the land was 80,000. The corporation has a 90,000 net capital loss carryover that will expire in 2019. Should Carl Corporation report the sale in 2019 or use the installment method to report the income as payments are received?
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Hamilton Companys balance sheet on January 1, 2019, was as follows: Korbel Company is considering purchasing Hamilton (a privately held company) and discovers the following about Hamilton: a. No allowance for doubtful accounts has been established. A 10,000 allowance is considered appropriate. b. Marketable securities are valued at cost. The current market value is 60,000. c. The LIFO inventory method is used. The FIFO inventory of 140,000 would be used if the company is acquired. d. Land, included in property, plant, and equipment, which is recorded at its cost of 50,000, is worth 120,000. The remaining property, plant, and equipment is worth 10% more than its depreciated cost. e. The company has an unrecorded trademark that is worth 70,000. f. The companys bonds are currently trading for 130,000. g. The pension liability is understated by 40,000. Required: 1. Compute the amount of goodwill if Korbel agrees to pay 500,000 cash for Hamilton. 2. Next Level What are the reasons that the book value of Hamiltons net identifiable assets differ from their market value? 3. Prepare the journal entry to record the acquisition on the books of Korbel assuming Hamilton is liquidated. 4. If Korbel agrees to pay only 400,000 cash, how much goodwill exists? 5. If Korbel pays only 400,000 cash, prepare the journal entry to record the acquisition on its books, assuming Hamilton is liquidated.
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