On January 2, 2017, Normal Inc. acquired 15% interest in Laco Co. by paying P1,500,000 for 7,500 ordinary shares. On this date, the net assets of Laco Co. totaled P9 million. The investment was classified as a financial asset at fair value through other comprehensive income. The fair values of Laco Co.'s identifiable assets and liabilities approximate their book values. On August 1, 2017, Normal received dividends of P4 per share from Laco Co. Fair value of the shares on December 31, 2017 was P190. Net income reported by Laco for the year ended amounted to P1,500,000. On July 1, 2018, Normal Inc. paid P1 million to purchase 5,000 additional shares of Laco Co. from another shareholder. On February 1, 2018, cash dividends of P5 were received while dividends of P6 were received on August 1, 2018. Net income reported for the year ended amounted to P1,500,000 with P800,000 being earned for the six months ended December 31, 2018. 1. What amount of investment income should be reported on Normal's income statement for the year ended December 31, 2017? 2. What is the ending balance of the investment account on December 31, 2017?
On January 2, 2017, Normal Inc. acquired 15% interest in Laco Co. by paying P1,500,000 for 7,500 ordinary shares. On this date, the net assets of Laco Co. totaled P9 million. The investment was classified as a financial asset at fair value through other comprehensive income. The fair values of Laco Co.'s identifiable assets and liabilities approximate their book values. On August 1, 2017, Normal received dividends of P4 per share from Laco Co. Fair value of the shares on December 31, 2017 was P190. Net income reported by Laco for the year ended amounted to P1,500,000. On July 1, 2018, Normal Inc. paid P1 million to purchase 5,000 additional shares of Laco Co. from another shareholder. On February 1, 2018, cash dividends of P5 were received while dividends of P6 were received on August 1, 2018. Net income reported for the year ended amounted to P1,500,000 with P800,000 being earned for the six months ended December 31, 2018. 1. What amount of investment income should be reported on Normal's income statement for the year ended December 31, 2017? 2. What is the ending balance of the investment account on December 31, 2017?
Cornerstones of Financial Accounting
4th Edition
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Jay Rich, Jeff Jones
ChapterA2: Investments
Section: Chapter Questions
Problem 26E
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Transcribed Image Text:On January 2, 2017, Normal Inc. acquired 15% interest in Laco Co. by paying P1,500,000 for 7,500
ordinary shares. On this date, the net assets of Laco Co. totaled P9 million. The investment was
classified as a financial asset at fair value through other comprehensive income. The fair values
of Laco Co.'s identifiable assets and liabilities approximate their book values. On August 1, 2017,
Normal received dividends of P4 per share from Laco Co. Fair value of the shares on December
31, 2017 was P190. Net income reported by Laco for the year ended amounted to P1,500,000.
On July 1, 2018, Normal Inc. paid P1 million to purchase 5,000 additional shares of Laco Co. from
another shareholder. On February 1, 2018, cash dividends of P5 were received while dividends
of P6 were received on August 1, 2018. Net income reported for the year ended amounted to
P1,500,000 with P800,000 being earned for the six months ended December 31, 2018.
1. What amount of investment income should be reported on Normal's income statement for the year
ended December 31, 2017?
2. What is the ending balance of the investment account on December 31, 2017?
m
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