Problem 18-1 (Heaven Company)

Requirement no.1
Net Income - 2020 3,000,000
Less: Unrealized Profit on Dec. 31, 2020 inventory (900K - 600K) (300,000)
Adjusted Net Income 2,700,000

Adjusted Net Income 2,700,000

Investor's share 20%
Share in Profit - 2020 540,000

Requirement no. 2
Net Income - 2021 4,000,000
Realized Profit on Dec. 31, 2020 inventory 300,000
Less: Unrealized Profit on Dec. 31, 2021 inventory (750K - 500K) (250,000)
Adjusted Net Income 4,050,000

Adjusted Net Income 4,050,000

Investor's share 20%
Share in Profit - 2021 810,000
Requirement no.3
2020
1-Jan Investment in Associate 6,000,000
Cash 6,000,000

31-Dec Investment in Associate 540,000

Investment Income 540,000

Cash (1,000,000*20%) 200,000

Investment in Associate 200,000

2021
31-Dec Investment in Associate 810,000
Investment Income 810,000

Cash (1,500,000*20%) 300,000

Investment in Associate 300,000

Requirement no.4
Acquisition Cost 6,000,000
Share in Profit - 2020 540,000
Share in Cash Dividend - 2020 (1000K*20%) (200,000)
Share in Profit - 2021 810,000
Share in Cash Dividend - 2021 (1500K*20%) (300,000)
Carrying amount - Dec.31, 2021 6,850,000
 PROBLEM 18-2
REQ. 1
Net Income in 2020
Unrealized profit on sale of equipment sold on 1/1/20 ( 800,000- 500,000)
Realized profit on equipment sold on 1/1/20 ( 300,000 x 10%)
Adjusted Net Income

Investor's Share for 2020 ( 1,730,000 x 40% )

REQ. 2
Net Income in 2021
Realized profit on equipment sold on 1/1/20 ( 300,000 x 10%)
Unrealized profit on sale of equipment sold on 7/1/2021 ( 900,000 - 500,000)
Realized profit on equipment sold on 7/1/2021 ( 400,000/ 5yrs x 1/2)

Unrealized Profit on ending inventory on 12/ 31 / 2021 (2,800,000- 2,000,000)

Adjusted Net Income

Investor's Share for 2020 ( 1,870,000 x 40% )

 REQ 3
2,000,000 2020
-300,000 to record acquired 40%
30,000 1-Jan Investment in associate 5,000,000
1,730,000 Cash

692,000 to record investor share 2020

31-Dec Investment in associate 692,000
Investment Income
3,000,000
30,000 to record cash dividend
-400,000 Cash ( 800,000 x 40% ) 320,000
40,000 Investment in associate

-800,000 2021
1,870,000 to record investor share 2021
31-Dec Investment in associate 748,000
748,000 Investment Income

to record cash dividend

Cash ( 1,000,000 x 40% ) 400,000
Investment in associate
 REQ 4
Acquisition Cost 5,000,000
Investment income 2020 692,000
Cash dividend 2020 -320,000
5,000,000 Investment income 2021 748,000
Cash dividend 2021 -400,000
Carrying Amount 12/31/21 5,720,000

692,000

320,000

748,000

400,000
PROBLEM 18-3 (IFRS) Interlude Company

Requirement 1
Determine the goodwill arising from the acquisition.

Acquisition cost
Less: Net assets acquired (6,000,000 x 30%)
Excess of cost
Less: Undervaluation of equipment (3,000,000 x 30%)
Goodwill

Requirement 2
Determine the investment income for the current year.

Net income for 2020

Less: Unrealized profit on ending inventory (December 31, 2020)
Adjusted net income

Investor's share on profit (3,400,000 x 30%)

Less: Amortization of undervaluation of equipment (900,000/5)
Net Investment income
 Requirement 3
Prepare journal entries for the current year.
2020
3,200,000 Jan.1 To record the acquisition of 30% interest:
- 1,800,000 Investment in associate 3,200,000
1,400,000 Cash
- 900,000
500,000 Dec.31 To record the share in 2020 net income:
Investment in associate 1,020,000
Investment income (3,400,000 x 30%)

To record the amortization of undervaluation of equipment:

4,000,000 Investment income (900,000/5) 180,000
- 600,000 Investment in associate
3,400,000
To record the share in 2020 dividend:
1,020,000 Cash (1,500,000 x 30%) 450,000
- 180,000 Investment in associate
840,000
To record the share in revaluation surplus:
Investment in associate 600,000
Revaluation surplus (2,000,000 x 30%)

Requirement 4
Determine the carrying amount of the investment in the associate on D

Acquisition cost 3,200,000

Investment income 1,020,000
Amortization of undervaluatio - 180,000
Cash dividend - 450,000
Revaluation surplus 600,000
Carrying amount- December 4,190,000
 3,200,000

1,020,000

ion of equipment:

180,000

450,000

600,000

ment in the associate on Dec. 31, 2020.

 PROBLEM 18-4
JAM COMPANY
Required:
a. Compute the goodwill arising from acquisition on January 1, 2020.

Cost 7,400,000 [Jan.1 na 5M + 'yung reclassified na 2.4M]

FV of NA 6,000,000 [FV na 20M x 30% na share]
Goodwill/(Gain) 1,400,000

b. Prepare journal entries for 2020.

2020
Jan. 1 Inv. in Associate 5,000,000
Cash 5,000,000

May 1 Memo entry - received 500 shares as 10% share dividend on 5,000 ordinary shares of Dale Company. Shares now h

Nov. 1 Cash (5,500 x P20) 110,000

Dividend Income 110,000 [5k shares + 500 (10% share dividend) = 5,500]

Dec. 31 Inv. in Associate (6M x 30%) 1,800,000

Inv. Income 1,800,000

entry for dividends:

Cash (75k shares x P20) 1,500,000 25k shares + 50k shares
Inv. in Associate 1,500,000

Remeasurement: kasi 2M lang yung CA

Inv. in OS - Fox 400,000
Gain on Remeasurement to equity 400,000
( 2.4M -2M)
Reclassification:
Inv. in Associate 2,400,000
IES 2,400,000

c. Present the investments in equity securities on December 31, 2020.

NCA:
Investment in ES (Note) 2,850,000
Investment in Associate - Fox Company 7,700,000 [5M + 2.4M + 1.8M - 1.5M] - add & subtract yung

Note - Investment in Equity Securities

Dale Company, 5,500 ordinary shares 1,250,000
Ever Company, 10,000 ordinary shares 1,600,000
TOTAL COST 2,850,000
ale Company. Shares now held, 5,500.

% share dividend) = 5,500]

s + 50k shares

1.5M] - add & subtract yung mga Inv. in Assoc.

Problem 18-5 Fame Company

1. Goodwill

Total Cost (11,000,000+6,000,000) 17,000

Less:Carrying amount (40,000,000*30%) 12,000
Excess of Cost 5,000,000
Less: Carrying amount in Equipment (5,000,000*30%) 1,500,000
Goodwill 3,500,000

2. Journal Entries

2020
Jan-01 Financial Assets - FVOCI 5,000,000
Cash 5,000,000

Dec-31 Financial Assets - FVOCI 500,000

Unrealized gain - OCI 500,000

2021
Dec-31 Financial Assets - FVOCI 500,000
Unrealized gain - OCI 500,000

2022
Jan-01 Unrealized gain 1,000,000
Retained earnings 1,000,000

Jan-01 Investment in Associate ###

Cash ###

Jan-01 Investment in Associate 6,000,000

Financial asset - FVOCI 6,000,000

Dec-31 Investment in Associate 2,700,000

Investment Income (30%*9,000,000) 2,700,000

Dec-31 Cash (30%*40,000,000) 1,200,000

Investment in Associate 1,200,000

Dec-31 Investment Income 300,000

Investment Income (1,500,000/5) 300,000
Problem 18-6 Hazel Company
2020
To record acquired investment
1-Jan Investment in associate 8,000,000
Cash 8,000,000

To record share in 2020

31-Dec Investment in associate 1,500,000
Investment Income (30% x 5,000,000) 1,500,000

To record cash dividends

31-Dec Cash (30% x 2,000,000) 600,000
Investment in associate 600,000

2021
To record the share in 2021
30-Jun Investment in associate 1,800,000
Investment income (30% 6,000,000) 1,800,000

To record 1/2 sale

1-Jul Cash 6,000,000
Investment Income (10,700,000 x 1/2) 5,350,000
Gain sale of Investment 650,000

1-Jul Investment in associate 1,150,000

Gain from remeasurement to fair value 1,150,000

Fair Value of share retained investment 6,500,000

pp499 Less: Carrying amount (10,700,000/2 ) (5,350,000)
Gain from remeasurement to fair value 1,150,000

1-Jul Financial Asset at FVOCI (no significant influence) 6,500,000

Investment in Associate 6,500,000

To record cash dividends

1-Oct Cash ( 2,500,000 x 15%) 375,000
Dividend Income (no significant influence) 375,000

31-Dec Unrealized loss - other comprehensive income 600,000

Financial asset at FVOCI 600,000
 Fair Value Dec 31, 2021 5,900,000
Retained investment (6,500,000)
pp 506 (600,000)
 8,000,000
1,500,000
(600,000)
1,800,000

10,700,000
Prob 18-7 Mega Company acquisition of the 10% ordinary shares
1.A 200000 Investment income 2020 Investment in shares 4,000,000
2.B.1950000 Investment income 2021 Cr Cash
3.B.17050000 CA INV ASSOC 2021
1 dividends paid 2020 of 10%
Dividends paid 2020 2000000 Cash 20,000
Rate x10% Dividend Income
Investment income 2020 200000
Additional shares of 20%
2 Investment in Assoc 10,000,000
Net Income of 2021 6500000 Cash
Rate (10% +20%) x30%
Investment income 2021 1950000 remeasure the 10% exisiting interest at fair value
Investment in shares
3 Gain on remeasurement to equity
Additional shares of 20% 10000000
Reclassification of 10% 6000000 Reclassification the 10%
Share in net income 2021 1950000 Investment in Assoc 6,000,000
share in cash divend -900000 Investment in shares
CA of Invest Assoc 2021 17050000
To record the share 2021 30% share
Invesment in Assoc 1,950,000
Investment Income

To record the share in 2021 cash dividend

Cash 900000
Invement in Assoc
dinary shares 2020

4,000,000

20,000

10,000,000

ng interest at fair value Fair Value 6000000

2,000,000 Cost -4000000
surement to equity 2000000 Gain 2000000

6,000,000

1,950,000

21 cash dividend
6500000 x 30%
900000
sinend kay sir through messenger
 PROBLEM 18-9 (GRANT COMPANY)

1. What amount should be recognized as investment income for 2020 as a result of the investment?
A. 150,000
B. 450,000
C. 500,000
D. 750,000

SOLUTION:
Earnings 1,500,000
Multiply by: 30%
Share in net income, 2020 450,000

2. What is the carrying amount of the investment in December 31,2020

A. 2,000,000
B. 2,450,000
C. 2,600,000
D. 2,300,000

SOLUTION:
Acquisition cost 2,000,000
Share in net income, 2020 (1,500,000 x 30%) 450,000
Total 2,450,000
Less: Share in dividends,2020 (500,000 x 30%) -150,000
CA of the investment, Dec. 31, 2020 2,300,000

3. What total amount of income should be reported for 2021?

A. 2,250,000
B. 2,100,000
C. 1,950,000
D 2,050,000

SOLUTION: SUPPORTING COMPUTATION

Gain on sale of investment 700,000 Carrying amount- De 2,300,000
Gain from remeasurement 900,000 Share in net income u 300,000
Share in net income, 1/2 yr. ended June 30, 2021 300,000 CA- June 30,2021 2,600,000
Dividend income, October 1, 2021 150,000
Increase in fair value 200,000 Sales price 2,000,000
Total income for 2021 2,250,000 Cost of investment so ###
Gain on sale of inves 700,000

Fair value of retained 2,200,000

Carrying amount of r ###
Gain from remeasur 900,000
Fair value of retaine 2,400,000
Fair value of retained ###
Increase in FV 200,000
Share in net income f 1,000,000
Multiply by: 30%
Share in net income, 300,000

Dividend paid 1,000,000

Multiply by: 15%
Dividend income 150,000
,