ABC and XYZ (the parties) entered into an agreement to establish a separate vehicle (DEF) and share joint control over the separate vehicle. The assets and liabilities of DEF are considered as assets and liabilities of DEF and not the assets and liabilities of ABC and XYZ. Upon formation of DEF, DEF issued 70% of its shares equally to ABC and XYZ and the remaining 30% are issued to other investors. Summary transactions for the first two years of operations of DEF are as follows: Proceeds from issuance of shares Revenues Various costs and operating expenses Dividends declared (to be paid in 2024) 2022 P110,000,000 12,000,000 16,000,000 2023 8,000,000 11,000,000 2. How much is the investment income for 2022? 1. How much is the carrying amount of the investment in DEF to be presented in the books of ABC as of December 31, 2022? 4,000,000 4. How much is the investment income for 2023? 3. How much is the carrying amount of the investment in DEF to be presented in the books of ABC as of December 31, 2023?
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- Dane, Inc., owns Carlton Corporation. For the current year, Dane reports net income (without consideration of its investment in Carlton) of $185,000 and the subsidiary reports $105,000. The parent had a bond payable outstanding on January 1, with a carrying amount of $209,000. The subsidiary acquired the bond on that date for $196,000. During the current year, Dane reported interest expense of $18,000 while Carlton reported interest income of $19,000, both related to the intra-entity bond payable. What is consolidated net income?a. $289,000b. $291,000c. $302,000d. $304,000Tom Bhd, Dick Bhd and Harry Bhd decided to enter into a joint arrangement and form aseparate vehicle, Stooge Sdn Bhd. Tom Bhd holds 25%, Dick Bhd owns 35% and HarryBhd owns 40% of the equity shares in Stooge. The investors agree that decisions can bemade with 80% consent and the profit of Stooge will be distributed to each investoraccording to their respective shareholding in Stooge. Each investor has equalrepresentation on the board of directors of Stooge Sdn. Bhd. However they are unsure asto the nature of the joint arrangement Required:a. Advise Tom, Dick and Harry as to whether the joint arrangement is a joint operation ora joint venture, in accordance with MFRS 11 Joint Arrangements.b. Assuming that Tom Bhd, Dick Bhd and Harry Bhd each has to prepare the consolidatedfinancial statements, explain the accounting treatment for the investment in the jointarrangement.Shareholders of the two companies agree that a single class of shares be issued, that their contributions be measured by net assets plus allowances for goodwill, and that 10% be considered as a normal tate of return. Earnings in excess of the normal rate of return shall be capitalized at 20% in calculating goodwill. It was also agreed that authorized capital stock of the new corporation shall be 20.000 shares with a par value of P100 per share. The amount of goodwill credited to Co. A, and the total contribution of Co. B (net assets plus goodwill is a.P100,000, P400,000b.P100,000, P600,000c.P150,000 PS00,000d. P200,000, P600,000
- On January 1, 20x1, John Corp. acquired the identifiable net assets of Jose Corp. by paying cash of ₱1,500,000 and issuing 10,000 ordinary shares with par and fair value of ₱100 and ₱120 per share, respectively. The identifiable assets of Jose had book values of ₱3,200,000 and fair values of ₱4,000,000 and its liabilities have book values equal to its fair values amounting to ₱1,500,000. As per agreement, John Corp. agreed to pay additional amount equal to 20% of the 20x1 year-end profit that exceeds ₱500,000 on January 2, 20x2. On the date of acquisition Jon estimated that the fair value of contingent consideration is ₱15,000. Assume the actual profit of ABC on December 31, 20x1 is ₱600,000. What is the gain (loss) on extinguishment of contingent consideration liability.Man merged with San Corporation in a business combination in which San issued 30,000 shares of its $5 par (current fair value $20 a share) common stock to stockholders of Man in exchange for all their outstanding common stock. The journal entry for the merger includes: a. Debit to investment in common stock of Man company $ 600,000. b. Debit to investment in common stock of Man company $ 450,000. c. Debit to investment in common stock of Man company $ 150,000. d. Debit to investment in common stock of Man company $ 300,000.Choose the correct. Dane, Inc., owns Carlton Corporation. For the current year, Dane reports net income (without consideration of its investment in Carlton) of $185,000 and the subsidiary reports $105,000. The parent had a bond payable outstanding on January 1, with a carrying amount of $209,000. The subsidiary acquired the bond on that date for $196,000. During the current year, Dane reported interest expense of $18,000 while Carlton reported interest income of $19,000, both related to the intra-entity bond payable. What is consolidated net income?a. $289,000b. $291,000c. $302,000d. $304,000
- During the year, R and S formed C Corporation. For each of the following independent situations, indicate whether § 351 applies to the exchange. a. R contributed property worth $70,000 (basis $50,000) in exchange for 70 shares of stock, and S contributed services worth $30,000 in exchange for 30 shares of stock. b. R contributed property worth $70,000 (basis $50,000) in exchange for 70 shares of stock, and S contributed services worth $25,000 for 25 shares of stock in addition to property worth $5,000 for 5 shares of stock. c. R contributed property worth $70,000 (basis $50,000) in exchange for 70 shares of stock, and S contributed services worth $29,000 for 29 shares in addition to cash of $1,000 for 1 share.Prior to being united in a business combination, Atkins, Inc., and Waterson Corporation had the following stockholders’ equity figures:Atkins issues 51,000 new shares of its common stock valued at $3 per share for all of the outstanding stock of Waterson. Immediately afterward, what are consolidated Additional Paid-In Capital and Retained Earnings, respectively?a. $104,000 and $300,000b. $110,000 and $410,000c. $192,000 and $300,000d. $212,000 and $410,000In the following situation, discuss which entity, if any, may be a parent required to prepare consolidated financial statements under AASB 10/IFRS 10. Runner Ltd owns 80% of the shares of Beep Beep Ltd, which owns 100% of the shares of Looney Ltd. All companies prepare their own financial reports under AASB/IFRS accounting standards. Although the shares of Beep Beep Ltd are not traded on any public stock exchange, its debt instruments are publicly traded.
- On June 1, 2020, SME A acquired 35% of the equity of entities X, Y, Z for P64,000 and P58,000 and P37,000, respectively, SME A has joint control over the strategic financial and operating decisions of entities X, Y and Z. Transaction costs of 5% of the purchase price of the shares were incurred by SME A. On December 31, 2020, Entity X declared dividends of P9,000 and Entity Y, P15,000 for the year 2020. These dividends are to be paid by X and Y in 2021. Entity Z declared and paid a dividend of P24,000 for the year ended 2020. For the year ended December, 31, 2020, entities X and Y recognized loss of P30,000 and P42,000. respectively. However, entity Z recognized a profit of P18,000 for that year. Published price quotations do not exist for the shares of X, Y and Z. Using appropriate valuation techniques, SME A determined the fair values of their investments in entities X, Y and Z at December 31, 2020 as P60,000, P65,000, and P49,000, respectively. Costs to sell are estimated at 9% of…On January 1, 20x1, PATRIMONY Co. entered into a joint arrangement classified as a joint venture. For an investment of ₱2,000,000, PATRIMONY Co. obtained 30% interest in HERITAGE Joint Venture, Inc. During the year, HERITAGE Joint Venture, Inc. reported profit of ₱4,000,000 and other comprehensive income of ₱800,000, i.e., a total comprehensive income of ₱4,800,000. HERITAGE Joint Venture, Inc. declared dividends of ₱2,400,000. How much is the carrying amount of the investment in joint venture on December 31, 20x1?The balance sheets of Petrello Company and Sanchez Company as of January 1, 2014, are presented below. On that date, after an extended period of negotiation, the two companies agreed to merge. To effect the merger, Petrello Company is to exchange its unissued common stock for all the outstanding shares of Sanchez Company in the ratio of 1/2 share of Petrello for each share of Sanchez. Market values of the shares were agreed on as Petrello, $52; Sanchez, $26. The fair values of Sanchez Company’s assets and liabilities are equal to their book values with the exception of plant and equipment, which has an estimated fair value of $707,190. Petrello Sanchez Cash $498,860 $220,000 Receivables 495,790 237,690 Inventories 2,104,300 252,560 Plant and equipment (net) 3,818,630 853,200 Total assets $6,917,580 $1,563,450 Current Liabilities $1,209,800 $318,670 Common stock ($16 par value) 3,563,480 800,000 Other contributed…