Problem 17-1: ANSWER:

2020:
Investment in associate 5,000,000
Cash 5,000,000

Investment in associate 1,200,000

Investment income 1,200,000

Cash 900,000
Investment in associate 900,000

Investment income 200,000

Investment in associate 200,000

2021:
Investment in associate 1,800,000
Investment income 1,800,000

Cash 1,500,000
Investment in associate 1,500,000

Investment income 200,000

Investment in associate 200,000

Problem 17- 2: ANSWER 1:

Investment in associate 3,500,000
Cash 3,500,000
To record the investment

Investment in associate 3,500,000

Investment income (40% x 4,000,000) 3,500,000
To record share in net income:

Cash (40% x 1,000,000) 400,000

Investment in associate 400,000
To record share in cash dividend

Investment income 150,000

Investment in associate (600,000/4) 150,000
To record amortization of the excess attributable
to the equipment

Investment income 200,000

Investment in associate 200,000
To record amortization of the excess attributable
to the inventory

Investment in associate 100,000

Problem 17- 3: ANSWER:
Acquisition Cost 1,700,000
Net assets acquired (40% x 4,000,000) -1,600,000
Goodwill - not amortized 100,000

Acquisition Cost 1,700,000

Net Income (40% x 700,000) 280,000
Cash Dividend (40% x 200,000) -80,000
Revaluation Surplus (40% x 1,300,000) 520,000
Carrying Amount of Investment - Dec. 31, 2019 2,420,000

Problem 17- 4: ANSWER:

Investment associate 6,000,000
Cash 6,000,000

Investment associate 750000

Investment Income 750000

Cash 450000
Investment in associate 450000

Investment in associate 200000

Revaluation Surplus 200000

2. Share in Net Income 750000

Amortization -200000
Investmen Income 550000

3. Acquisition cost 6000000

Investment Income 550000
Share in cash Dividend (3,000,000 x 15%) -450000
Carrying amount 6100000
Interest Acquired (30,000/200,000) 15%
Acquisition cost 6000000
Carrying amount of net asset acquired 4000000
Excess of cost applicable to patent 2000000

CHAPTER 17

MULTIPLE CHOICE PROBLEMS

PROBLEM 17- 8:
ANSWER: B, 320,000
SOLUTION:
Investment Income - Dec. 31, 2020 (1,600,000 x 20%) 320,000

PROBLEM 17 - 9:
ANSWER: C, 300,000
SOLUTION:
Share in net income from April 1 to December (1,000,000
33 x 9/12 x 0.40) 300,000

PROBLEM 17 - 10:
ANSWER: B, 7,140,000
SOLUTION:
Cost: 7,000,000
Add: Share in net income (0.20 x 1,800,000) 360,000
Total 7,360,000
Less: Amortization (1,000,000/10) 100,000
Share in cash dividend (0.20 x 600,000) 120,000
Carrying amount 7,140,000

PROBLEM 17 - 11:
ANSWER: C, 750,000
SOLUTION:
Share in net income from Jul. 1, 2020 to Dec. 31,
(5,000,000
2020 x 6/12 x 0.30) 750,000
Interest acquired (30,000/100,000) 30%

PROBLEM 17 - 12:
ANSWER: A, 4,350,000
SOLUTION:
Acquisition, January 1 4,000,000
Add: Share in net income (0.10 x 5,000,000) 500,000
Total 4,500,000
Less: Share in cash dividend (0.10 x 1,500,000) (150,000)
Carrying Amount 4,350,000

PROBLEM 17 - 13:
ANSWER: D, 1,720,000
SOLUTION:
Acquisition cost (SQUEEZE) 1,720,000
Add: Share in net income (0.25 x 1,200,000) 300,000
Total 2,020,000
Less: Share in cash dividend (0.25 x 480,000) (120,000)
Carrying Amount 1,900,000

PROBLEM 17 - 14:
ANSWER: B, 2,700,000
SOLUTION:
Acquisition cost 2,560,000
Carrying amount of net assets (0.40 x 5,000,000) 2,000,000
Excess of cost over carrying amount 560,000

Excess - equipment (4.40 x 800,000) 320,000

Excess - building (0.40 x 600,000) 240,000
560,000

Acquisition, January 1 2,560,000

Add: Share in net income (0.40 x 1,600,000) 640,000
Total 3,200,000

Less: Share in cash dividend (0.40 x 1,000,000) 400,000

Amortization:
Equipment (320,000/4) 80,000
Building (240,000/12) 20,000

Carrying Amount 2,700,000

PROBLEM 17 - 15:
ANSWER: A, 2,400,000
SOLUTION:
Net income 5,000,000
Preference dividend (0.10 x 2,000,000) (200,000)
Net income to ordinary shares 4,800,000

Share in net income (1/2 of 4,800,000) 2,400,000

PROBLEM 17 - 16:
ANSWER:
SOLUTION:

PROBLEM 17 - 17:
ANSWER 1: A, 560,000
SOLUTION:
Acquisition Cost 2,560,000
Net assets acquired (40% x 5,000,000) 2,000,000
Excess of cost over carrying amount 560,000

Attributable to equipment (40% x 800,000) 320,000

Attributable to building (40% x 600,000) 240,000
560,000
ANSWER 2: B, 540,000
SOLUTION:
Share in net income (40% x 1,600,000) 640,000
Amortization of excess:
Equipment 320,000/4 (80,000)
 Building 240,000/12 (20,000)
Investment Income 540,000

ANSWER 3: B, 2,700,000
SOLUTION:
Acquisition cost 2,560,000
Investment income 540,000
Share in cash dividend (40% x 1,000,000) (400,000)
Carrying Amount - 12/31/16 2,700,000

PROBLEM 17 - 18:
ANSWER 1: B, 480,000
SOLUTION:
Share in net income for 2021 (40% x 3,000,000) 1,200,000
Amortization of excess - Inventory (400,000)
Amortization of excess - Plant and equipment (3,200,000/10
(320,000)
yrs)
Net Income for 2021 480,000

ANSWER 2: A, 1,080,000
SOLUTION:
Share in net income for 2022 (40% x 5,000,000) 2,000,000
Amortization of excess - Plant and equipment (320,000)
Amortization of excess - Land (600,000)
Net Income for 2022 1,080,000

ANSWER 3: C, 15,360,000
SOLUTION:
Acquisition cost 15,000,000
Investment Income 2021 480,000
Cash dividends for 2021 (40% x 1,000,000) (400,000)
Investment Income 2022 1,080,000
Cash dividends for 2022 (40% x 2,000,000) (800,000)
Carrying Amount - Dec. 31, 2022 15,360,000
MULTIPLE CHOICE THEORY
1. A
2. C
3. B
4. D
5. D
6. B
7. D
8. B