Download Solution Chapter 11 PDF

TitleSolution Chapter 11
TagsBook Value Goodwill (Accounting) Balance Sheet Corporations Investing
File Size261.0 KB
Total Pages15
Document Text Contents
Page 14

The appropriate method for Investment in Associates is the equity method. The Income from

Investment in Gold Co. on December 31, 2015 is as follows:

Share in net income (P140,000 x 40%) P 56,000

Amortization of allocated excess ( 0)

Income from Investment on December 31, 2015 P 56,000



31. a – downstream transaction (refer also to consolidation for corollary analysis)

Gross Profit Markup: P36,000/P90,000 = 40%

Inventory Remaining at Year-End P20,000

x: Markup 40%

Unrealized profit in ending inventory P 8,000

x: Ownership 30%

Intercompany Unrealized profit in ending

inventory P 2,400



Multiple Choice Problems – SME for Joint Ventures

1. a

2. a

3. a

4. a

5. c

6. a

7. a

8. a

9. c

10. a

11. a

12. c

13. a

14. a

15. b

16. c
Cost of investment in entity Z:

Purchase price…………………………………………………………………….. P 28,000

Add: Transaction costs (1% x P28,000)……………………………………… 280

Costs…………………………………………………………………………………. P 28,280

Less: Fair value on December 31, 20x4……………………................................P 15,000

Less: Costs to sell (5% x P15,000)…………………………………………….. 750 14,250

Impairment loss……………………………………………………………………….. P 14,030


17. d
No entry required only the decrease or increase in fair value is recognized to profit and

loss.


18. a
Cost of investment in entity Z:

Purchase price…………………………………………………………………….. P 28,000

Add: Transaction costs (1% x P28,000)……………………………………… 280

Initial costs………………………………………………………………………….. P 28,280

Less: SME A’s share of entity Z’s loss for the year (25% x P20,000)……...... 5,000

Costs of investment, December 31, 20x4……………………………………. P23,280

Less: Fair value on December 31, 20x4…………………….................................P 15,000

Less: Costs to sell (5% x P15,000)…………………………………………….. 750 14,250

Impairment loss……………………………………………………………………….. P 9,030

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