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 RMU 9TH EDITION
- 18. An entity, with an investment in debt securities carried as FVOCI, deemed its original business model as not applicable starting November 30, 2020, and decided to reclassify its investment as FVPL. Which of the following statements is true?[ * The reclassification shall be made on November 30, 2020; the investment is O transferred at fair value from FVOCI to FVPL; the cumulative gain or loss previously recognized in OCl is transferred to retained earnings The reclassification shall be made on January 1, 2021; the investment is transferred at fair value from FVOCI to FVPL; the cumulative gain or loss previously nsferred to profit or loss recognized in OCI is The reclassification shall be made on January 1, 2021; the investment is O transferred at fair value from FVOCI to FVPL; the cumulative gain or loss previously recognized in OCI is transferred to retained earnings The reclassification shall be made on November 30, 2020; the investment is O transferred at fair value from FVOCI to…arrow_forward1. The following information pertains to the transfer of real estate pursuant to a troubled debt restructuring by Knob Co. to Mene Corp. in full liquidation of Knob’s liability to Mene: Carrying amount of liability liquidated P150,000 Carrying amount of real estate transferred 100,000 Fair value of real estate transferred 90,000 What amount should Knob report as a gain (loss) on restructuring of payables under Philippine jurisdiction? a. P(10,000) b. P60,000 c. P0 d. P50,000arrow_forwardProblem 09-06 (Algo) [LO 9-2, 9-3] Firm M exchanged an old asset with a $17,500 tax basis and a $41,000 FMV for a new asset worth $28,500 and $12,500 cash. Required: a. If the exchange is nontaxable, compute Firm M's realized and recognized gain and tax basis in the new asset. b. How would your answers change if the new asset were worth only $17,000, and Firm M received $24,000 cash in the exchange? Complete this question by entering your answers in the tabs below. Required A Required B If the exchange is nontaxable, compute Firm M's realized and recognized gain and tax basis in the new asset. Realized gain Recognized gain Tax basis Amountarrow_forward
- Recording Entries for Impairment-AFS Determine the amount of impairment loss (if any) to record in income under the following three separate scenarios for an AFS debt investment. In all three cases, the company does not intend to sell and does not believe it is more likely than not that it will be required to sell the investment before recovery unrealized loss. Assume that the company has already adjusted the AFS investments to fair value through OCI. Scenario of any 1 2 3 Fair value 162,000126,000108,000 144,000144,000144,000 Expected credit loss27,000 27,000 27,000 ??? Amortized cost Impairment loss ??? ???arrow_forwardpls answer and provide solution and explanationarrow_forwardRecording Entries for Impairment-AFS Determine the amount of impairment loss (if any) to record in income under the following three separate scenarios for an AFS debt investment. In all three cases, the company does not intend to sell and does not believe it is more likely than not that it will be required to sell the investment before recovery of any unrealized loss. Assume that the company has already adjusted the AFS investments to fair value through OCI. Scenario Fair value $ Amortized cost $ Expected credit loss $ Impairment loss $ 1 216,000 $ 192,000 $ 36,000 $ 0$ 2 168,000 $ 192,000 $ 36,000 $ 24,000 $ 3 144,000 192,000 36,000 12,000 xarrow_forward
- A6arrow_forwardc. P15,120 d. (P15,120) 27. On January 1, 2022, Artemis Company purchased 80% of the outstanding share of Diana Corporation for P1,840,000. The book value of Diana's net assets amounted to P2,000,000. Book values approximate the fair values at acquisition date. Artemis chose the fair value method in estimating the value of NCI. At acquisition date, NCI has a fair value of P440,000. On October 31, 2022, Artemis sold 10% of the share capital to several investors for P260,000. The fair value of the 10% share at that time is P240,000. How much is the gain to be reported in the consolidated statement of income for the year ended December 31, 2022 as a result of the sale of 10% ownership? a. Р-0- b. P30,000 c. P20,000 d. P60,000arrow_forwardMa2. 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_forward
- and 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_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_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
- Individual Income TaxesAccountingISBN:9780357109731Author:HoffmanPublisher:CENGAGE LEARNING - CONSIGNMENT