4. Illusion Company acquired equity instrument for P4,000,000 on March 31, 2013 to be measured at fair value through other comprehensive income. The direct acquisition costs incurred amounted to P700,000. On December 31, 2013, the fair value of the instrument was P5,500,000 and the transaction costs that would be incurred on the sale of the investment were estimated at P600,000. What amount of unrealized gain should be recognized in other comprehensive income for the year ended December 31, 2013? a. 200,000 b. 900,000 c. 800,000 d.

4. Illusion Company acquired equity instrument for P4,000,000 on March 31, 2013 to be measured at fair value through other comprehensive income. The direct acquisition costs incurred amounted to P700,000. On December 31, 2013, the fair value of the instrument was P5,500,000 and the transaction costs that would be incurred on the sale of the investment were estimated at P600,000. What amount of unrealized gain should be recognized in other comprehensive income for the year ended December 31, 2013? a. 200,000 b. 900,000 c. 800,000 d.

Financial Accounting

14th Edition

ISBN:9781305088436

Author:Carl Warren, Jim Reeve, Jonathan Duchac

Publisher:Carl Warren, Jim Reeve, Jonathan Duchac

Chapter15: Investments And Fair Value Accounting

Section: Chapter Questions

Problem 28E

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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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