On January 1, 2021, ABC Co. acquired 80% interest in XYZ, Inc. by292,000issuing 5,000 shares with fair value of P60 per share and par valueof P40 per share. XYZ's shareholders' equity as of January 1, 2021comprises the following:Total liabilities120,000680,000Share capitalShare premium200,000(at carrying amounts)260,000Share capitalRetained earningsTotal equity200,000Retained440,00096,000earnings176,000296,0001,380,000Total equity376,000On January 1, 2021, the fair values of the assets and liabilities ofXYZ, Inc. were determined by appraisal, as follows:ТOTALLIABILITIES1,672,000496,000CarryingFair valueAND EQUITYXYZ, Inc.amountsFair valuesincrementCash20,00020,000Statements of profit or lossFor the year ended December 31, 2021Accounts receivable48,00048,000Inventory92,000124,00032,000XYZ, Inc.ABC Co.Equipment200,000240,00040,000Sales1,200,000480,000Cost of goods soldAccumulated(660,000)(288,000)(40,000)(48,000)(8,000)depreciationGross profit540,000192,000Accounts payable(24,000)(24,000)Depreciation expense(160,000)(40,000)Net assets296,000360,00064,000Distribution costs(128,000)(72,000)Interest expenseProfit for the year(12,000)The remaining useful life of the equipment is 4 years. During 2021,no dividends were declared by either ABC or XYZ. There were also240,00080,000no inter-company transactions. The group determined thatgoodwill is impaired by P4,000. ABC's and XYZ's individualfinancial statements at year-end are shown below:Statements of financial position As at December 31, 2021On acquisition date, ABC Co. elected to measure non-controllinginterest as its proportionate share in XYZ, Inc.'s net identifiableassets.ABC Co.XYZ, Inc.ASSETSCash92,000228,000Accounts300,00088,000receivableInventory420,00060,000Investment in300,000subsidiaryEquipment800,000200,000Accumulated(240,000)(80,000)depreciationTOTAL ASSETS1,672,000496,000

A Consolidated Balance sheet is a Balance sheet of the group of companies prepared by the parent…

On January 1, 2021, ABC Co. acquired 80% interest in XYZ, Inc. by issuing 5,000 shares with fair value of P60 per share and par value of P40 per share. XYZ's shareholders' equity as of January 1, 2021 comprises the following: 292,000 Total liabilities 120,000 680,000 Share capital Share premium 200,000 (at carrying amounts) 260,000 Share capital Retained earnings Total equity 200,000 Retained 440,000 96,000 earnings 176,000 296,000 1,380,000 Total equity TOTAL 376,000 On January 1, 2021, the fair values of the assets and liabilities of XYZ, Inc. were determined by appraisal, as follows: XYZ, Inc. LIABILITIES 1,672,000 496,000 Carrying Fair value AND EQUITY Fair values increment amounts Cash 20,000 20,000 Statements of profit or loss Accounts receivable 48,000 48,000 For the year ended December 31, 2021 ABC Co. 1,200,000 Inventory 92,000 124,000 32,000 XYZ, Inc. 480,000 200,000 240,000 40,000 Equipment Accumulated Sales Cost of goods sold Gross profit (660,000) (288,000) 192,000 (40,000) (48,000) (8,000) depreciation 540,000 Accounts payable (24,000) 296,000 (24,000) (160,000) (40,000) (72,000) Depreciation expense Net assets 360,000 64,000 Distribution costs (128,000) The remaining useful life of the equipment is 4 years. During 2021, no dividends were declared by either ABC or XYZ. There were also Interest expense Profit for the year (12,000) 240,000 80,000 On acquisition date, ABC Co. elected to measure non-controlling interest as its proportionate share in XYZ, Inc.'s net identifiable no inter-company transactions. The group determined that goodwill is impaired by p4,000. ABC's and XYZ's individual financial statements at year-end are shown below: Statements of financial position As at December 31, 2021 ABC Co. assets. XYZ, Inc. ASSETS Cash 92,000 228,000 Accounts 300,000 88,000 receivable Inventory 420,000 60,000 Investment in 300,000 subsidiary Equipment 800,000 200,000 Accumulated (240,000) (80,000) depreciation TOTALASSETS 1,672,000 496,000

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 14RE