1. On January 1, 20X1, Entity A and Entity B, both public entities, incorporated Entity C by investing P3,000,000 and P2,000,000 for a capital interest ratio of 60:40. The contractual agreement of the incorporating entities provided that the decisions on relevant activities of Entity C will require unanimous consent of both entities. Moreover, Entity A and Entity B will have rights to the net assets of Entity C. The financial statements of Entity C provided the following data for 20X1: Entity C reported a net income of P1,000,000 for 20X1 and paid cash dividends of P400,000 on December 31, 20X1. During 20X1, Entity C sold inventory to Entity A with a gross profit of P50,000. 80% of those inventories were resold by Entity A to third persons during 20X1. The remainder was resold to third persons during 20X1. On July 1, 20X1, Entity C sold a piece of machinery to Entity B at a loss of P20,000. At the time of sale, the machinery has remaining useful life of two (2) years. Required: Determine the following: The investment income to be reported by Entity A for the year ended December 31, 20X1. b. The balance of Investment in Entity C to be reported by Entity B on December 31, 20X1. а.

1. On January 1, 20X1, Entity A and Entity B, both public entities, incorporated Entity C by investing P3,000,000 and P2,000,000 for a capital interest ratio of 60:40. The contractual agreement of the incorporating entities provided that the decisions on relevant activities of Entity C will require unanimous consent of both entities. Moreover, Entity A and Entity B will have rights to the net assets of Entity C. The financial statements of Entity C provided the following data for 20X1: Entity C reported a net income of P1,000,000 for 20X1 and paid cash dividends of P400,000 on December 31, 20X1. During 20X1, Entity C sold inventory to Entity A with a gross profit of P50,000. 80% of those inventories were resold by Entity A to third persons during 20X1. The remainder was resold to third persons during 20X1. On July 1, 20X1, Entity C sold a piece of machinery to Entity B at a loss of P20,000. At the time of sale, the machinery has remaining useful life of two (2) years. Required: Determine the following: The investment income to be reported by Entity A for the year ended December 31, 20X1. b. The balance of Investment in Entity C to be reported by Entity B on December 31, 20X1. а.

SWFT Comprehensive Volume 2019

42nd Edition

ISBN:9780357233306

Author:Maloney

Publisher:Maloney

Chapter24: Multistate Corporate Taxation

Section: Chapter Questions

Problem 31P

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On January 1, 20x1, Entity A, a public entity, and Entity B, a public entity, incorporated C, which has its fiscal and operational autonomy. The contractual agreement of the incorporating entities provided that the decisions on relevant activities of Entity C will require the unanimous consent of both entities. Entity A and Entity B will have the rights to the net assets of Entity C. Entity A and Entity B invested P2,000,000 and P3,000,000 respectively, equivalent to 40:60 capital interest of Entity C. the financial statement of Entity C provided the following data for its two-year operation: Dividends declared 225,000 Net income (loss) 450,000 (P4,500,000) 20x1 20x2 REQUIRED: Compute the balance of investment in Entity C to be reported by: 9. Entity A on December 31, 20x2 10. Entity B on December 31, 20x2
On January 1, 20X1, Entity A and Entity B, both public entities, incorporated Entity C by investing P3,000,000 and P2,000,000 for a capital interest ratio of 60:40. The contractual agreement of the incorporating entities provided that the decisions on relevant activities of Entity C will require unanimous consent of both Moreover, Entity A and Entity B will have rights to the net assets of Entity C. The financial statements of Entity C provided the following data for 20X1: Entity C reported a net income of P1,000,000 for 20X1 and paid cash dividends of P400,000 on December 31, During 20X1, Entity C sold inventory to Entity A with a gross profit of P50,000. 80% of those inventories were resold by Entity A to third persons during The remainder was resold to third persons during 20X1. On July 1, 20X1, Entity C sold a piece of machinery to Entity B at a loss of P20,000. At the time of sale, the machinery has remaining useful life of two (2) Determine the following: The investment…
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