Morton Ltd. owns 60 percent of the voting shares of Salt Inc. and 40 percent of the voting shares of Backy Inc. In addition, Salt Inc. owns 15 percent of the shares of Backy Inc. Briefly explain how Morton Ltd. should classify and account for its investments in Salt Inc. and Backy Inc.
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Morton Ltd. owns 60 percent of the voting shares of Salt Inc. and 40 percent of the voting shares of Backy Inc. In addition, Salt Inc. owns 15 percent of the shares of Backy Inc. Briefly explain how Morton Ltd. should classify and account for its investments in Salt Inc. and Backy Inc.
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- Wixi Co. has the following equity investments in FSN, DELL, and ATI. (1) Which of these companies are subsidiaries of Wixi? (2) How are individual assets and liabilities of a parent and its subsidiary(ies) reported on a balance sheet? FSN stock: Wixi owns 70% of the voting common stock and has controlling influence. DELL stock: Wixi owns 5% of the voting common stock and has insignificant influence. ATI stock: Wixi owns 30% of the voting common stock and has significant influence.ABC Inc. holds 17% of the common shares of XYZ Ltd. ABC is able to appoint three members of XYZ’s 12-member Board of Directors. ABC is also a supplier of raw materials to XYZ. XYZ is a private company and the remaining 83% of XYZ’s common shares are widely held. Assume that ABC reports under ASPE, what are the reporting options for its investment in XYZ? A. Equity method B. Equity method or costC. Equity method, cost, or consolidation D. Fair value through profit or loss (FVTPL) or cost.Jacobson Company is considering an investment in the common stock of Biltrite Company. What are the accounting issues surrounding the recording of income in future periods if Jacobson purchases: a. 15% of Biltrite’s outstanding shares. b. 40% of Biltrite’s outstanding shares. c. 100% of Biltrite’s outstanding shares. d. 80% of Biltrite’s outstanding shares.
- Gardner Corp. owns 80% of the voting common stock of Lockhart Co. Lockhart owns 70% of Canning Co. Gardner and Lockhart both use the initial value method to account for their investments. The following information is available from the financial statements and records of the three companies: Separate company net income before investment income Dividend income from investment in subsidiary Deferral of intra-entity gains Amortization expense related to excess fair value over book value of investment Gardner Lockhart Corp. Co. $900,000 $650,000 $150,000 250,000 120,000 110,000 80,000 What amount should be reported for consolidated net income? 40,000 Canning Co. 20,000 25,000 Separate company net income includes intra-entity gains before the consolidating deferral but does not include dividend income from investment in subsidiary.The shareholders of ABC Corporation would like to know the valuation of their ownership in the entity. Relative valuation based on its two closest competitors will be made. The price-book value ratio will be used. X Inc. Y Co. Market value of ordinary shares 5,980,000 7,020,000 Book Value of ordinary shares 5,200,000 6,000,000 ABC has a book value of ordinary shares at P5,800,000. This includes aninvestment property that provides additional income. It has a book value ofP420,000 but a market value of P650,000. Also, a material error in theaccounts payable was identified and it resulted to a P300,000understatement. After considering these, the remaining and corrected bookvalue can be valued using relative valuation. What is the total relative valueof ABC ordinary shares?Swanson Ltd. holds 15% of the common shares of Virginia Inc. Swanson is able to appoint three members of Virginia’s 12-member board of directors and is a supplier of raw materials to Virginia. The remaining 85% of Virginia’s common shares are widely held. Virginia is a private company. Assuming that Swanson reports under ASPE, what are the reporting options for its investment in Virginia? Question 4 options: a) Swanson must use the fair value method. b) Swanson must use the consolidation method. c) Swanson can use the cost or fair value method. d) Swanson can use the cost or equity method.
- Accenture purchases 55% of the voting common stock of JBL. After the purchase, Accenture has a controlling influence over JBL. (1) Which method does Accenture use to account for its investment in JBL? (2) What type of financial statements does Accenture prepare after the acquisition?Eduardo, a large entity, owns 50% and 20% of Letecia Corporation’s ordinary and preference shares, respectively. Letecia’s shares outstanding at December 31, 2021 follow: Ordinary share, P5,000,000 10% non-cumulative preference share, P1,200,000 Letecia reported net income of P750,000 for the year ended December 31, 2021. What amount should Eduardo report as total revenue related to its investment in Letecia Company for the year ended December 31, 2021?4. Assume that the entity is a medium-size and the company policy is to account this type of investment at fair market value, how much investment income should be reported by Jessa Company for 2021? Chevy Company owns 50% of another entity’s preference share capital and 40% of its ordinary share capital. The investee’s share capital outstanding at December 31, 2021 include P5,000,000 of 10% cumulative preference share capital and P10,000,000 of ordinary share capital. The investee reported net income of P6,000,000 for 2021. No dividend was declared for both preference and ordinary share in 2021
- Which of the following statements are true?I. Lechon Corporation has a 25% interest in Mang Tomas Company. Catsup, Inc. is a subsidiary of Mang Tomas. Lechon and Catsup are related parties.II. Rico Corporation is a venturer of Zubuchon Company. CNT, Inc. is a subsidiary of Zubuchon. Rico and CNT are related parties.III. Bergs Corporation is a venturer of Mechado Road Joint Venture and a 25% interest investor of Dinuguan Fourth Floor Company. Mechado Road and Dinuguan Company are related parties. IV. Ersao Company and Burger King Company are under the common control of Foodie Corporation. Ersao and Burger King are related partiesDetermine the following asset balances that would appear in the consolidated financial statements of Portland and its 80% owned subsidiary:1) Current Assets2) Land3) Building and Equipment4) Goodwill5) Investment in Sidney Corporation6) Ordinary shares7) Retained earnings8) Minority interest9) Goodwill and minority interest assuming that Sydney’s shares are traded in the stock marketat P 20/share.Best Appliances owns 90% of the voting stock of Wratchet, Inc. Which of the following is true? a. The financial statements of Best would be consolidated into Wratchet. b. Wratchet would be considered the parent entity. c. Best would be considered the parent entity. d. Both a and c are correct.