On January 1, 2020, Chen Company acquired 10,000 shares of GHI Corporation for P600, 000. GHI Corporation has the following equity account on January 1, 2020. 10% Non-Cumulative Preference Shares, par value P100; Authorized shares, 100,000; Issued and outstanding, 50,000 shares - P 5,000,000 Ordinary Shares, P50 par value; Authorized shares, 500,000; Issued and outstanding, 75,000 shares Retained Earnings - 25,000,000 - 10,000,000 On January 1, 2021, Chen acquired an additional 5,000 shares of GHI Corporation for P300, 000. The acquisition resulted in 20% ownership, which is considered significant since Chen was able to get a seat in the board of directors of GHI Corporation. GHI Corporation has the following fair values of its shares as follows: 2020 - P65 per share 2021 - P72 per share GHI Corporation reported the following at year-end: Net Income Dividends 2020 2021 P5,000,000 6,500,000 P2,000,000 3,000,000 Requirements: 1. Prepare the necessary journal entries to record the above transactions? 2 What is the carrying value of the investment on December 31, 2020? December 31, 2021? 3. How much is the income from investment in 2020? 2021?

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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On January 1, 2020, Chen Company acquired 10,000 shares of GHI Corporation
for P600, 000. GHI Corporation has the following equity account on January 1,
2020.
10% Non-Cumulative Preference Shares, par value P100;
Authorized shares, 100,000; Issued and outstanding, 50,000 shares - P 5,000,000
Ordinary Shares, P50 par value; Authorized shares, 500,000;
Issued and outstanding, 75,000 shares
Retained Earnings
- 25,000,000
- 10,000,000
On January 1, 2021, Chen acquired an additional 5,000 shares of GHI Corporation for P300,
000. The acquisition resulted in 20% ownership, which is considered significant since Chen
was able to get a seat in the board of directors of GHI Corporation.
GHI Corporation has the following fair values of its shares as follows:
2020 - P65 per share
2021 - P72 per share
GHI Corporation reported the following at year-end:
Net Income
Dividends
2020
2021
P5,000,000
6,500,000
P2,000,000
3,000,000
Requirements:
1. Prepare the necessary journal entries to record the above transactions?
2. What is the carrying value of the investment on December 31, 2020? December 31, 2021?
3. How much is the income from investment in 2020? 2021?
Transcribed Image Text:On January 1, 2020, Chen Company acquired 10,000 shares of GHI Corporation for P600, 000. GHI Corporation has the following equity account on January 1, 2020. 10% Non-Cumulative Preference Shares, par value P100; Authorized shares, 100,000; Issued and outstanding, 50,000 shares - P 5,000,000 Ordinary Shares, P50 par value; Authorized shares, 500,000; Issued and outstanding, 75,000 shares Retained Earnings - 25,000,000 - 10,000,000 On January 1, 2021, Chen acquired an additional 5,000 shares of GHI Corporation for P300, 000. The acquisition resulted in 20% ownership, which is considered significant since Chen was able to get a seat in the board of directors of GHI Corporation. GHI Corporation has the following fair values of its shares as follows: 2020 - P65 per share 2021 - P72 per share GHI Corporation reported the following at year-end: Net Income Dividends 2020 2021 P5,000,000 6,500,000 P2,000,000 3,000,000 Requirements: 1. Prepare the necessary journal entries to record the above transactions? 2. What is the carrying value of the investment on December 31, 2020? December 31, 2021? 3. How much is the income from investment in 2020? 2021?
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