Of the amount paid for the investment, how much is attributable to goodwill? How much is the amortization of purchase differential during the current year? What amount should be reported as investment income for the current year? What is the carrying amount of the investment in associate at year-end?
Of the amount paid for the investment, how much is attributable to goodwill? How much is the amortization of purchase differential during the current year? What amount should be reported as investment income for the current year? What is the carrying amount of the investment in associate at year-end?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
At the beginning of the current year, Boyet Company bought 40% of Aubrey Company’s outstanding
ordinary shares for P3,500,000. The company also paid P700,000 to a business broker who helped find a
suitable business and negotiated the purchase.
The carrying amount of Aubrey Company’s net assets at the purchase date totaled P9,000,000.
The difference was attributed to plant which had a carrying amount of P1,100,000 and a fair value of
P2,000,000 and to inventory which had a carrying amount of P250,000 and a fair value of P350,000. The
plant has 18-year life. All inventory was sold during the current year.
During the current year, the investee reported net income of P1,200,000 and paid a P200,000 cash
dividend.
- Of the amount paid for the investment, how much is attributable to
goodwill ? - How much is the amortization of purchase differential during the current year?
- What amount should be reported as investment income for the current year?
- What is the carrying amount of the investment in associate at year-end?
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