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On January 1,2021, Krizelle Company acquired 30% of the outstanding ordinary shares of Arah Company for ₱6,000,000. This investment gave Krizelle the ability to exercise significant influence over Arah. The book value of the acquired shares was ₱5,000,000. The excess of the cost over book value was attributed to a depreciable asset which was undervalued on Arah statement of financial position and which had a remaining useful life of eight years.
For the year ended December 31,2021. Arah’ share capital outstanding is as follows:
10% cumulative preference share capital ₱3,000,000
Ordinary share capital 6,000,000
Arah reported net income of ₱2,500,000 for the year ended December 31,2021
CASE NO. 1: Assuming the cumulative preference share is accounted as equity by Arah and that Arah declared dividends of ₱450,000 on the preference shares answer the following:
1. What amount should krizelle record as investment income for the year ended December 31,2021?
On January 1, 2021, Drenz Co. acquired 30,000 ordinarily shares out of the 100,000 outstanding ordinary shares of Josiah Inc. for ₱5,000,000. Josiah’s assets and liabilities approximate their fair values except for inventories with carrying amount of ₱800,000 and fair value of ₱900,000 and machinery with carrying amount of ₱2,500,000 and fair value of ₱2,200,000. The remaining useful life of the machinery is 5 years. Josiah’s net asset has a book value of ₱10,000,000.
On December 31,2021. Josiah reported net income of ₱2,000,000 and declared and paid dividends of ₱800,000. On December 31,2022. Josiah reported net income of ₱4,500,000 and declared and paid dividends of ₱1,600,000.
5. How much is the carrying amount of the investment as of December 31,2022?
On January 1, 2021, Drenz Co. acquired 30,000 ordinarily shares out of the 100,000 outstanding ordinary shares of Josiah Inc. for ₱5,000,000. Josiah’s assets and liabilities approximate their fair values except for inventories with carrying amount of ₱800,000 and fair value of ₱900,000 and machinery with carrying amount of ₱2,500,000 and fair value of ₱2,200,000. The remaining useful life of the machinery is 5 years. Josiah’s net asset has a book value of ₱10,000,000.
On December 31,2021. Josiah reported net income of ₱2,000,000 and declared and paid dividends of ₱800,000. On December 31,2022. Josiah reported net income of ₱4,500,000 and declared and paid dividends of ₱1,600,000.
1. How much is the implied goodwill from acquisition?
2. How much is the net share in the profit or loss of the associate (investment income) in 2021?
3. How much is the carrying amount of the investment as of December 31,2021?
4. How much is the net share in the profit or loss of the associate (investment income) in 2022?
On January 4,2021, Tamara Bakery paid ₱30 million for 1 million shares of jade Company ordinary shares. The investment represents a 20% interest in the net assets of jade and gave Tamara the ability to exercise significant influence over Jade’s operations. Tamara received dividends of ₱1.00 per share on December 15,2021 and jade reported net income of ₱8 million for the year ended December 31,2021. The market value of Jade’s ordinary shares at December 31,2021 was ₱32 per share, on the purchase date, the book value of Jade’s net assets was ₱120 million and the fair market value of Jade’s depreciable assets with an average remaining useful life of six years exceeded their book value by ₱6 million. The remainder of the excess of the cost of the investment over the book value of net assets purchased was attributable to goodwill.
5. What amount should Tamara Company report on its December 31,2021, statement of financial position as its investment in Jade Co. Under fair value method?
On January 4,2021, Tamara Bakery paid ₱30 million for 1 million shares of jade Company ordinary shares. The investment represents a 20% interest in the net assets of jade and gave Tamara the ability to exercise significant influence over Jade’s operations. Tamara received dividends of ₱1.00 per share on December 15,2021 and jade reported net income of ₱8 million for the year ended December 31,2021. The market value of Jade’s ordinary shares at December 31,2021 was ₱32 per share, on the purchase date, the book value of Jade’s net assets was ₱120 million and the fair market value of Jade’s depreciable assets with an average remaining useful life of six years exceeded their book value by ₱6 million. The remainder of the excess of the cost of the investment over the book value of net assets purchased was attributable to goodwill.
4. Under the equity method, the carrying value of the Tamara Company’s investment in ordinary shares of Jade Co. on December 31,2021, should be
On January 4,2021, Tamara Bakery paid ₱30 million for 1 million shares of jade Company ordinary shares. The investment represents a 20% interest in the net assets of jade and gave Tamara the ability to exercise significant influence over Jade’s operations. Tamara received dividends of ₱1.00 per share on December 15,2021 and jade reported net income of ₱8 million for the year ended December 31,2021. The market value of Jade’s ordinary shares at December 31,2021 was ₱32 per share, on the purchase date, the book value of Jade’s net assets was ₱120 million and the fair market value of Jade’s depreciable assets with an average remaining useful life of six years exceeded their book value by ₱6 million. The remainder of the excess of the cost of the investment over the book value of net assets purchased was attributable to goodwill.
3. What amount of investment revenue should Tamara report on its income statement for the year ended December 31,2021, under the equity method?
On January 4,2021, Tamara Bakery paid ₱30 million for 1 million shares of jade Company ordinary shares. The investment represents a 20% interest in the net assets of jade and gave Tamara the ability to exercise significant influence over Jade’s operations. Tamara received dividends of ₱1.00 per share on December 15,2021 and jade reported net income of ₱8 million for the year ended December 31,2021. The market value of Jade’s ordinary shares at December 31,2021 was ₱32 per share, on the purchase date, the book value of Jade’s net assets was ₱120 million and the fair market value of Jade’s depreciable assets with an average remaining useful life of six years exceeded their book value by ₱6 million. The remainder of the excess of the cost of the investment over the book value of net assets purchased was attributable to goodwill.
2. What amount of investment revenue should Tamara report on its income statement for the year ended December 31,2021, under the fair value method?
On January 4,2021, Tamara Bakery paid ₱30 million for 1 million shares of jade Company ordinary shares. The investment represents a 20% interest in the net assets of jade and gave Tamara the ability to exercise significant influence over Jade’s operations. Tamara received dividends of ₱1.00 per share on December 15,2021 and jade reported net income of ₱8 million for the year ended December 31,2021. The market value of Jade’s ordinary shares at December 31,2021 was ₱32 per share, on the purchase date, the book value of Jade’s net assets was ₱120 million and the fair market value of Jade’s depreciable assets with an average remaining useful life of six years exceeded their book value by ₱6 million. The remainder of the excess of the cost of the investment over the book value of net assets purchased was attributable to goodwill.
1. How much is the implied goodwill from acquisition?
f the market for bread is described by the following equations Qd=210-0,6P and Qs=-96+1,1P what is the equilibrium price for bread?
Abey Ltd entered into a contract with Data Pro Ltd for the lease of twenty-four laptop computers. The contract was entered into on 1 April 20x1 for a 2-year period. Each item is of low value and Abey Ltd applies the low value exemption of IFRS 16 Leases. The benefit derived for Abey Ltd from the lease agreement is constant over the lease period.
The following amounts are payable to Data Pro Ltd per the lease agreement:
• From 1/4/20x1-31/03/20x2 $2 000 per month
• From 1/4/20x2-31/03/20x3$3 000 per month
Abbey Ltd has a 31 December year-end
Required:
Prepare the journal entries for the accounting records of Abey Ltd for the year ended 31 December 20x1, 20x2 and 20x3.
