On January 2, 2022, S Company acquired 80% of the stocks of L Company for P2,000,000. On this date, L Company had P1,000.000 of Share Capital and P800,000 of Retained Earnings. The carrying values of the identifiable assets and liabilities of L are equal to their fair values. During the year. L ships merchandise to S costing P800.000 at 25% above cost. At the end of the year, records show the following: S Company L Company Inv. beg 350,000 120,000 Inv. end 200,000 5,500,000 2,500,000 3,250,000 1,680,000 400,000 Sales Purchases Operating Exp. Dividends paid 650,000 300,000 500,000 350,000
On January 2, 2022, S Company acquired 80% of the stocks of L Company for P2,000,000. On this date, L Company had P1,000.000 of Share Capital and P800,000 of Retained Earnings. The carrying values of the identifiable assets and liabilities of L are equal to their fair values. During the year. L ships merchandise to S costing P800.000 at 25% above cost. At the end of the year, records show the following: S Company L Company Inv. beg 350,000 120,000 Inv. end 200,000 5,500,000 2,500,000 3,250,000 1,680,000 400,000 Sales Purchases Operating Exp. Dividends paid 650,000 300,000 500,000 350,000
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
Chapter13: Investments And Long-term Receivables
Section: Chapter Questions
Problem 19E
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Transcribed Image Text:On January 2, 2022, S Company acquired 80% of the stocks of L
Company for P2,000,000. On this date, L Company had P1,000.000 of
Share Capital and P800,000 of Retained Earnings. The carrying values of
the identifiable assets and liabilities of L are equal to their fair values.
During the year. L ships merchandise to S costing P800.000 at 25%
above cost.
At the end of the year, records show the following:
S Company L Company
Inv. beg
350,000
120,000
Inv. end
400,000
5,500,000 2,500,000
3,250,000 1,680,000
200,000
Sales
Purchases
Operating Exp.
Dividends paid
650,000
300,000
500,000
350,000
The ending inventory of S includes merchandise from L amounting to
P50,000. The reported impairment of goodwill in 2022 is P20,000. The
parent opted to measure NCI at fair value.
In 2021, S Company sold inventory costing P50,000 to $ Company (90%-
owned) for P100,000. By the end of the year, L sold 80% of the inventory.
The elimination entries in 2022 would include:
a. Credit to Cost of Sales, P100,000
b. Credit to Inventory, P10,000.
c. Debit to Cost of Sales, P10,000
d. Debit to Retained Earnings, P10,000.
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