Problem 1

On October 1, 2020, M Company purchased 30,000 ordinary shares of J at 180 per share. At the time of
purchase, J Company has 100,000 ordinary shares outstanding.

9 months ending September 30, 2020, J Company earned profit amounting to 2,960,000. At year-end December
31, 2o20, J Company’s profit is 4,800,000. Dividends of J paid to M is 120,00.

For the year 2021, J’s profit is 2,800,000. Dividends amounting 1,700,000 of ordinary shares shareholders.

On January 2, 2022, M sold 20,000 of ordinary shares for 250 per share. Year-ended December 31, 2022, profit
of J is 4,000,000. Dividends paid to M, 40,000. Market value if ordinary shares at this time is 2,300,000.

a. What is the carrying amount of investment at December 31, 2021?

b. What is the gain or loss of 20,000 shares on January 2, 2022?
c. Amount of investment to be reported on statement of financial position at December 31, 2022?

Problem 2

On July 1, 2020, J Company purchased 10,00 shares of R for 510,000 plus broker’s fee of 5,100. The shares
represent 25% of ordinary shares of R.

R reported a profit of 850,000 evenly earned for the year-ended December 31, 2020. Dividends of 320,000.

On January 1, 2021, J sold ½ of the investment for 275,000 less broker’s fee of 2,750. J does not have the
intention to dispose the remaining securities. Year-end December 31, 2021 R’s profit is 980,000. Dividends is
450,000.

Market value of R’s shares for 2020 is 55, and for 49 for 2021.

a. How much is the investment to be reported in the statement of financial position on July 1, 2020?
b. What is the carrying amount of the investment at December 31, 2020?
c. Gain or loss on sale on January 1, 2021.
d. Carrying amount of remaining equity investment at December 31, 2021.

Problem 3

On March 31, 2020, G Company purchased 120,000 ordinary shares for 1,700,000 representing 30% equity
interest and an underlying equity of 1,400,000 on L net assets. Excess cannot be attributed to any tangible
assets. March 1, June 1, September 1, and December 1, 2020, paid quarterly dividends of 0.50 per ordinary
share.

Profit of 1,200,000 evenly earned throughout the year. On December 31, 2020, ordinary shares are selling at 16.

a. Company’s investment income for 2020.

b. Carrying amount of investment on December 31, 2020.
c. Assuming the excess is attributed to an equipment with useful life of 5 years, straight line method, what
is the carrying amount at December 31, 2020?