4-14. On January 1, Year 1, Richmonde Corporation acquired 10% of the outstanding voting shares of Pen, Inc. for P900,000. These shares were designated as equity investments at fair value through other comprehensive income. On January 2, Year 2, Richmonde gained the ability to exercise significant influence over financial and operating policies of Pen by acquiring an additional 20% of Pen's outstanding shares for P2,600,000. The two purchases proportionate to the value assigned to Pen's net assets, which were made at prices equaled their carrying amounts. For the years ended December 31, Year 1 and Year 2, Pen reported the following: Dividends paid Profit for the year Year 1 P2,000,000 6,000,000 Year 2 P3,000,000 6,500,000 The fair values of the investments on December 31, Year 1 and December 31, Year 2 were P1,380,000 and P5,100,000, respectively. REQUIRED: (a) (b) Prepare journal entries to record the above data. Determine the investment carrying value at December 31, Year 2.
4-14. On January 1, Year 1, Richmonde Corporation acquired 10% of the outstanding voting shares of Pen, Inc. for P900,000. These shares were designated as equity investments at fair value through other comprehensive income. On January 2, Year 2, Richmonde gained the ability to exercise significant influence over financial and operating policies of Pen by acquiring an additional 20% of Pen's outstanding shares for P2,600,000. The two purchases proportionate to the value assigned to Pen's net assets, which were made at prices equaled their carrying amounts. For the years ended December 31, Year 1 and Year 2, Pen reported the following: Dividends paid Profit for the year Year 1 P2,000,000 6,000,000 Year 2 P3,000,000 6,500,000 The fair values of the investments on December 31, Year 1 and December 31, Year 2 were P1,380,000 and P5,100,000, respectively. REQUIRED: (a) (b) Prepare journal entries to record the above data. Determine the investment carrying value at December 31, Year 2.
Cornerstones of Financial Accounting
4th Edition
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Jay Rich, Jeff Jones
ChapterA2: Investments
Section: Chapter Questions
Problem 25E
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