PROBLEM 32Guillen Company acquired 30% of ABC Corporations share for P8,000,000 on July 1,2020. ABC Corporation's identifiable net assets on the date of acquisition areP20,000,000. Guillen believes that the investee has known goodwill and the fair valueof the corporation's net assets is the same as its carrying amount except for thefollowing:a Equipment is undervalued by P2.000.000.b. Inventory's fair value is P2,000.000 greater than its carrying amount.The equipment has a remaining life of 4 years and depreciated using the straight-linemethod. At the end of 2020, all inventories at the acquisition date are entirely sold.On November 30, ABC Corporation pays a P2,000.000 dividend to its shareholders.During the year, ABC Corporation reported a net income of P5,000,000, 40% of thesewere earned in the first half of the year. The fair value of ABC Corporation's shares heldby Guillen at the end of 2020 is P8,250.000.Requirements:1. Prepare the necessary jourmal entries to record the above transactions.2 Compute the carrying value of the investment in associates on December 31, 2020.3. Suppose that on November 30, 2020, ABC Corporation revalued its Land thatresulted in a revaluation surplus of P5,000.000. Prepare jourmal entry in thebook of Guillen Company to record the changes in the equity of ABCCorporations as a result of the revaluation.4. Using the information in requirement no. 3, compute the carrying value of theinvestment in associates on December 31, 2020.

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Requirements: 1 Prepare the necessary joumal entries to record the above transactions. 2 Compute the carying value of the investment in associates on December 31, 2020. 3. Suppose that on November 30, 2020, ABC Corporation revalued its Land that resulted in a revaluation surplus of P5,000.000. Prepare joumal entry in the book of Guillen Company to record the changes in the equity of ABC Corporations as a result of the revaluation. 4. Using the information in requirement no. 3, compute the carrying value of the investment in associates on December 31, 2020.

Requirements: 1 Prepare the necessary joumal entries to record the above transactions. 2 Compute the carying value of the investment in associates on December 31, 2020. 3. Suppose that on November 30, 2020, ABC Corporation revalued its Land that resulted in a revaluation surplus of P5,000.000. Prepare joumal entry in the book of Guillen Company to record the changes in the equity of ABC Corporations as a result of the revaluation. 4. Using the information in requirement no. 3, compute the carrying value of the investment in associates on December 31, 2020.

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

ChapterA2: Investments

Section: Chapter Questions

Problem 23E

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PROBLEM 32Guillen Company acquired 30% of ABC Corporations share for P8,000,000 on July 1, 2020. ABC Corporation’s identifiable net assets on the date of acquisition are P20,000,000. Guillen believes that the investee has known goodwill and the fair value of the corporation's net assets is the same as itscarrying amount except for the following: a. Equipment is undervalued by P2,000,000.b. Inventory’s fair value is P2,000,000 greater than its carrying amount. The equipment has a remaining life of 4 years and depreciated using the straight-line method. At the end of 2020, all inventories at the acquisition date are entirely sold. On November 30, ABC Corporation pays a P2,000,000 dividend to its shareholders. During the year,ABC Corporation reported a net income of P5,000,000, 40% of these were earned in the first half ofthe year. The fair value of ABC Corporation's shares held by Guillen at the end of 2020 is P8,250,000. Requirements:1. Prepare the necessary journal entries to record…
PROBLEM 35At the beginning of 2018, Esterlina Corporation purchased 40% of the ordinary shares outstanding of Mary Grace Incorporated for P15,000,000 when the net assets of Mary Grace Incorporated amounted to P30,000,000. At the acquisition date, the carrying amounts of the identifiable assets and liabilities of Mary Grace Incorporated were equal to their fair value, except for the following: a. Equipment whose fair value was P7,000,000 greater than its carrying amount.b. Inventory whose fair value was P2,500,000 greater than its carrying amount. The equipment has a remaining life of 4 years, and the inventory was all sold during 2013. Mary Grace Incorporated has two classes of shares: Ordinary shares (par value, P100), 300,000 shares outstanding, 15% cumulative preference shares (par value, P50), 100,000 shares outstanding. The investee reported the following net income (inclusive of enter-company transactions) and payment of cash dividend: 2018…
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15 On January 1, 2020, Pfizer Corp. acquired 80% of Vaxx Corp.’s common stock for P160,000 cash. The fair value of the non-controlling interest at the date was determined to be P40,000. Data from the balance sheets of the two companies included the following accounts as of the date of acquisition: On the date of the business combination, the book values of Vaxx Corp’s net assets and liabilities approximated fair value except for inventory, which has a fair value of P45,000, and land, which had a fair value of P60,000. (using full goodwill approach). Pfizer Corporation Vaxx Corporation Cash 60,000 20,000 Accounts receivable 80,000 30,000 Inventory 90,000 40,000 Land 100,000 40,000 Buildings and equipment 200,000 150,000 Less: Accumulated depreciation (80,000) (50,000) Investment in Vaxx Corp. stock 160,000 - Total Assets 610,000 230,000 Accounts payable 110,000 30,000…
Problem 17-2 (TAA) At the beginning of current year, Cynosure Company purchased 30% of the ordinary shares of another entity for P3,500,000 when the net assets acquired amounted to P7,000,000 At acquisition date, the carrying amounts of the identifiable assets and liabilities of the investee were equal to their fair value, except for equipment for which the fair value was P1,500,000 greater than carrying amount and inventory whose fair value was P500,000 greater than cost. The equipment has a remaining life of 4 years and the inventory was all sold during the current year. The investee reported net income of P4,000,000 and paid P1,000,000 dividends during the current year. Required: 1. Prepare journal entries for the current year. 2. Compute the investment income for the current year.
QUESTION 20 On January 1, 20X9, Pirate Corporation acquired 80 percent of Sea-Gull Company's common stock for $160,000 cash. The fair value of the noncontrolling interest at that date was determined to be $40,000. Data from the balance sheets of the two companies included the following amounts as of the date of acquisition: Pirate Corp. Sea-Gull Corp. Cash $ 60,000 $ 20,000 Accounts Receivable 80,000 30,000 Inventory 90,000 40,000 Land 100,000 40,000 Buildings and Equipment 200,000 150,000 Less: Accumulated Depreciation (80,000 ) (50,000 ) Investment in Sea-Gull Corp. 160,000 Total Assets $ 610,000 $ 230,000 Accounts Payable $ 110,000 $ 30,000 Bonds Payable 95,000 40,000 Common Stock 200,000 40,000 Retained Earnings 205,000 120,000 Total Liabilities…
57) A Co. acquired 60% of the outstanding ordinary shares of B Co. on January 2, 2021. A acquired it at book value which is the same as its fair value at the date of acquisition. Income statements of A and B for 2022 were as follows: A Net sales Cost of sales 525,000 P350,000 B P875,000 210,000 Gross profit 350.000 105,000 Operating expenses 140.000 52.500 87,500 Operating income Dividend income 245,000 56.000 Net income P301.000 P87.500 There was an upstream of sales of P112,000 in 2021 and P168,000 in 2022. The buying affiliate reported inventory on December 31, 2021 amounting to P70,000 of which 20% comes from the selling affiliate and inventory on December 31, 2022 amounting to PS4,000 of which 30% comes from the selling affiliate. A uses 30% markup on cost and B uses 25% markup on cost for their selling prices. A and B declared and paid dividends in 2022 amounting to P84,000 and P70,000 respectively. On January 1, 2022, B…