Griggs Company bought 30% of Jackson Corporation in 2020. During 2020, Jackson reported net income in the amount of P400,000 and declared and paid dividends in the amount of P50,000. Griggs mistakenly accounted for the investment using the cost method instead of the equity method. What effect would this error have on the investment account and net income, respectively, for 2020? Choices: Overstated by P105,000; understated by P105,000. Understated by P105,000; understated by P105,000. Understated by P120,000; overstated by P105,000. Overstated by P120,000; overstated by P120.000.
Griggs Company bought 30% of Jackson Corporation in 2020. During 2020, Jackson reported net income in the amount of P400,000 and declared and paid dividends in the amount of P50,000. Griggs mistakenly accounted for the investment using the cost method instead of the equity method. What effect would this error have on the investment account and net income, respectively, for 2020? Choices: Overstated by P105,000; understated by P105,000. Understated by P105,000; understated by P105,000. Understated by P120,000; overstated by P105,000. Overstated by P120,000; overstated by P120.000.
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
Chapter18: Accounting For Income Taxes
Section: Chapter Questions
Problem 9MC: Brooks Company reported a prior period adjustment of 512,000 in pretax financial "income" and...
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Griggs Company bought 30% of Jackson Corporation in 2020. During 2020, Jackson reported net income in the amount of P400,000 and declared and paid dividends in the amount of P50,000. Griggs mistakenly accounted for the investment using the cost method instead of the equity method. What effect would this error have on the investment account and net income, respectively, for 2020?
Choices:
Overstated by P105,000; understated by P105,000.
Understated by P105,000; understated by P105,000.
Understated by P120,000; overstated by P105,000.
Overstated by P120,000; overstated by P120.000.
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