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
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
