Concept explainers
Held-to-maturity security: The debt securities which are held by the investor with an intent to hold the investment till its maturity, are referred to as held-to-maturity securities.
International Financial Reporting Standards (IFRS): IFRS are a set of international accounting standards which are framed, approved, and published by International Accounting Standards Board (IASB) for the preparation and disclosure of international financial reports.
Other-than-temporary (OTT) impairment: When the market value of an investment declines to a value lower than its cost, it is referred to as OTT impairment.
Debit and credit rules:
- Debit an increase in asset account, increase in expense account, decrease in liability account, and decrease in
stockholders’ equity accounts. - Credit decrease in asset account, increase in revenue account, increase in liability account, and increase in stockholders’ equity accounts.
To mention: The journal entries to record the recovered of fair value (prior to this recorded OTT) in the books of Corporation W
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INTERMEDIATE ACCOUNTING <CUSTOM LL>
- Ma2. On May 28, 2024, Pesky Corporation acquired all of the outstanding common stock of Harman, Incorporated, for $420 million. The fair value of Harman's identifiable tangible and intangible assets totaled $512 million, and the fair value of liabilities assumed by Pesky was $150 million. Pesky performed a goodwill impairment test at the end of its fiscal year ended December 31, 2024. Management has provided the following information: Fair value of Harman, Incorporated $ 400 million Fair value of Harman’s net assets (excluding goodwill) 370 million Book value of Harman’s net assets (including goodwill) 410 million Required: Determine the amount of goodwill that resulted from the Harman acquisition. Determine the amount of goodwill impairment loss that Pesky should recognize at the end of 2024, if any. If an impairment loss is required, prepare the journal entry to record the lossarrow_forwardand revenue of P1,000,000. а. b As a receivable and deferred revenue of P1,000,000. As a disclosure of a contingent asset of P1,000,000. d As a disclosure of a contingent asset of P1,500,000. Problem 4-32 (AICPA Adapted) Tone Company is the defendant in a lawsuit filed by Witt in 2019 disputing the validity of copyright held by Tone. On December 31, 2019, Tone determined that Witt would probably be successful for an estimated amount of P400,000. Appropriately, a P400,000 loss was accrued by a charge to income for the year ended December 31, 2019. On December 31, 2020, Tone and Witt agreed to a settlement providing for cash payment of P250,000 by Tone to Witt and transfer of Tone's copyright to Witt. The carrying amount of the copyright on Tone's accounting records was P50,000 on December 31, 2020. What would be the effect of the settlement on Tone's income before tax in 2020? a. 150,000 increase b. 150,000 decrease c. 100,000 increase d. 100,000 decrease 137arrow_forwardHw.27. Entity A entered into a sale and repurchase agreement for its head office on 1 January 2022, selling the office to Bank B for $78,560,000. On the same date, the head office had a fair value of $97,800,000. Entity A will continue to use the head office for the next 2 years and has the option to buy back the property for $93,765,779, based on an effective interest rate of 9.25% per year over the next 2 years. Property prices are expected to increase over the next 2 years. REQUIRED: Measure the net amount to be shown in the Statement of Profit or Loss for the year ended 31 December 2022. 1. $7,938,979 Expense 2. $19,240,000 Expense 3. $0 4. $7,266,800 Expense 5. None of them.arrow_forward
- 16. When a debt investment at FVOCI is reclassified to amortized cost, the entity will a. Remeasure the financial asset to original cost. b. The effective rate used for amortization shall be the effective rate at the date of reclassification. c. The cumulative gain or loss previously recognized in OCI is removed from equity and adjusted against the fair value at the reclassification date. d. The cumulative gain or loss previously recognized in OCI is removed from equity and transferred to profit and loss.arrow_forwardRequired information Exercise 11-31 (Algo) Impairment; goodwill [LO11-8] [The following information applies to the questions displayed below.] In 2019, Alliant Corporation acquired Centerpoint Inc. for $370 million, of which $60 million was allocated to goodwill. At the end of 2021, management has provided the following information for a required goodwill impairment test: Fair value of Centerpoint Inc. Book value of Centerpoint's net assets (excluding goodwill) Book value of Centerpoint's net assets (including gobdwill) $282 million 250 million 310 million Exercise 11-31 (Algo) Part 1 Required: 1. Determine the amount of the impairment loss. (Enter your answer in millions (i.e., 10,000,000 should be entered as 10)). Answer is complete but not entirely correct. Impairment loss $ 488 millionarrow_forwardExercise 11-31 (Algo) Impairment; goodwill [L011-8] [The following information applies to the questions displayed below.] In 2019, Alliant Corporation acquired Centerpoint Inc. for $370 million, of which $60 million was allocated to goodwill. At the end of 2021, management has provided the following information for a required goodwill impairment test: Fair value of Centerpoint Inc. Book value of Centerpoint's net assets (excluding goodwill) Book value of Centerpoint's net assets (including goodwill) $282 million 250 million 310 million Exercise 11-31 (Algo) Part 2 2. Determine the amount of the impairment loss assuming that the fair value of Centerpoint is $342 million. (Enter your answer in millions (i.e., 10,000,000 should be entered as 10)). X Answer is complete but not entirely correct. Impairment loss 28 Xmillionarrow_forward
- Ham Co. changed its business model in 20x2. On Jan. 1, 20x3 (reclassification date), a debt-type financial asset has a carrying amount of P200,000 and fair value of P240,000. Requirements: Provide the entry (entries) on reclassification date assuming the financial asset is reclassified from: d. FVOCI to Amortized cost (the cumulative balance of gains and losses previously recognized in OCI is P10,000). e. FVPL to FVOCI f. FVOCI to FVPL (the cumulative balance of gains and losses previously recognized in OCI is P10,000)arrow_forwardProblem 15-9 (IFRS) Judicious Company acquired an equity investment a number of yèars ago for P3,000,000 and classified it as at fair value through other comprehensive income. On December 31, 2019, the cumulative loss recognized in other comprehensive income was P400,000 and the carrying amount of the investment was P2,600,000. On December 31, 2020, the issuer of the equity instrument was in severe financial difficulty and the fair value of the equity investment had fallen to P1,200,000. What cumulative amount of unrealized lose should be reported as component of other comprehensive income in the statement of changes in equity for the year ended December 31, 2020? 1,400,000 1,800,000 1,000,000arrow_forwardProblem 15-9 (IFRS) Judicious Company acquired an equity investment a number of years ago for P3,000,000 and classified it as at fair value through other comprehensive income. On December 31, 2020, the cumulative loss recognized in other comprehensive income was P400,000 and the carrying amount of the investment was P2,600,000. On December 31, 2021, the issuer of the equity instrument was in severe financial difficulty and the fair value of the equity investment had fallen to P1,200,000. What cumulative amount of unrealized loss should be reported as component of other comprehensive income in the statement of changes in equity for the year ended December 31, 2021? a. 1,400,000 b. 1,800,000 c. 1,000,000 d. 0.arrow_forward
- FASB ASC 805, “Business Combinations,” provides principles for allocating the fair value of an acquired business. When the collective fair values of the separately identified assets acquired and liabilities assumed exceed the fair value of the consideration transferred, the difference should be:a. Recognized as an ordinary gain from a bargain purchase.b. Treated as negative goodwill to be amortized over the period benefited, not to exceed 40 years.c. Treated as goodwill and tested for impairment on an annual basis.d. Applied pro rata to reduce, but not below zero, the amounts initially assigned to specific noncurrent assets of the acquired firm.arrow_forwardHam Co. changed its business model in 20x2. On Jan. 1, 20x3 (reclassification date), a debt-type financial asset has a carrying amount of P200,000 and fair value of P240,000. Requirements: Provide the entry (entries) on reclassification date assuming the financial asset is reclassified from: a. Amortized cost to FVPL b. FVPL to Amortized cost c. Amortized cost to FVOCI d. FVOCI to Amortized cost (the cumulative balance of gains and losses previously recognized in OCI is P10,000). e. FVPL to FVOCI f. FVOCI to FVPL (the cumulative balance of gains and losses previously recognized in OCI is P10,000)arrow_forwardRequired information Problem 11-51 (LO 11-5) The following information applies to the questions displayed below.] Bourne Guitars, a corporation, reported a $157,000 net $1231 gain for year 6. Problem 11-51 Part-a a. Assuming Bourne reported $50,000 of nonrecaptured net §1231 losses during years 1-5, what amount of Bourne's net 81231 gain for year 6, if any, is treated as ordinary income? Bourne's gain treated as ordinary incomearrow_forward
- Individual Income TaxesAccountingISBN:9780357109731Author:HoffmanPublisher:CENGAGE LEARNING - CONSIGNMENT