On January 1, 20x1, ABET Co. purchased 25% interest in the ordinary shares of ENCOURAGE, Inc. for P8,000,000. ENCOURAGE's assets and liabilities approximate their fair values except for inventories with carrying amount of P2,000,000 and fair value of P400,000 and depreciable asset with carrying amount of P12,000,000 and fair value of P20,000,000. The remaining useful life of the depreciable asset is 10 years. ENCOURAGE's net assets have a book value of P20,000,000. ENCOURAGE reported P4,800,000 profit in 20x1 and declared and paid dividends of P2,000,000 On December 31, 20x1. How much are the (1) implied goodwill on the investment; (2) share in the associate's profit in 20x1; and (3) carrying amount of the investment on Dec. 31, 20x1?
On January 1, 20x1, ABET Co. purchased 25% interest in the ordinary shares of ENCOURAGE, Inc. for P8,000,000. ENCOURAGE's assets and liabilities approximate their fair values except for inventories with carrying amount of P2,000,000 and fair value of P400,000 and depreciable asset with carrying amount of P12,000,000 and fair value of P20,000,000. The remaining useful life of the depreciable asset is 10 years. ENCOURAGE's net assets have a book value of P20,000,000. ENCOURAGE reported P4,800,000 profit in 20x1 and declared and paid dividends of P2,000,000 On December 31, 20x1. How much are the (1) implied goodwill on the investment; (2) share in the associate's profit in 20x1; and (3) carrying amount of the investment on Dec. 31, 20x1?
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
Chapter13: Investments And Long-term Receivables
Section: Chapter Questions
Problem 8MC
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Question
100%
Choose the answer
Choices:
a. 6,600,000; 1,200,000; 8,900,000
b. 0; 1,400,000; 8,00,000
c. 1,400,000; 1,400,000; 8,900,000
d. 1,400,000; 1,000,000; 8,320,000
Transcribed Image Text:On January 1, 20x1, ABET Co. purchased 25% interest in the ordinary shares of
ENCOURAGE, Inc. for P8,000,000. ENCOURAGE's assets and liabilities approximate
their fair values except for inventories with carrying amount of $2,000,000 and fair
value of $400,000 and depreciable asset with carrying amount of $12,000,000 and
fair value of $20,000,000. The remaining useful life of the depreciable asset is 10
years. ENCOURAGE's net assets have a book value of $20,000,000. ENCOURAGE
reported $4,800,000 profit in 20x1 and declared and paid dividends of $2,000,000
On December 31, 20x1. How much are the (1) implied goodwill on the investment;
(2) sha in the associate's profit in 20x1; and (3) carrying amount of the investment
on Dec. 31, 20x1?
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