Pinta Company purchased 40% of Snuggie Corporation on January 1, 20y4 for P150,000. Snuggie Corporation's balance sheet at the time of acquisition was as follows: Cash Accounts Receivable Inventory Land Buildings & Equipment Less: Acc. Depreciation Total Assets P30,000 Current Liabilities Bonds Payable 120,000 80,000 Common Stock 150,000 300,000 Additional Paid in Capital Retained Earnings (120,000) P560,000 Total Liabilities and Equities P 40,000 200,000 200,000 40,000 80,000 P560,000 During 20y4, Snuggie Corporation reported net income of P30,000 and paid dividends of P9,000. The fair values of Snuggie's assets and liabilities were equal to their book values at the date of acquisition, with the exception of Building and Equipment, which had a fair value of P35,000 above book value. All buildings and equipment had a remaining useful life of five years at the time of the acquisition. The amount attributed to goodwill as a result of the acquisition in not impaired

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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  1. What will be the balance in the investment account on December 31, 20y4 under the equity method of accounting?

A. 152,000

B. 150,000

C. 159,200

D. 155,600

Pinta Company purchased 40% of Snuggie Corporation on January 1, 20y4 for P150,000. Snuggie
Corporation's balance sheet at the time of acquisition was as follows:
Cash
Accounts Receivable
Inventory
Land
Buildings & Equipment
Less: Acc. Depreciation
Total Assets
P30,000
120,000
80,000
Current Liabilities
Bonds Payable
Common Stock
150,000 Additional Paid in Capital
300,000 Retained Earnings
(120,000)
P560,000 Total Liabilities and Equities
P 40,000
200,000
200,000
40,000
80,000
P560,000
During 20y4, Snuggie Corporation reported net income of P30,000 and paid dividends of P9,000. The fair
values of Snuggie's assets and liabilities were equal to their book values at the date of acquisition, with the
exception of Building and Equipment, which had a fair value of P35,000 above book value. All buildings
and equipment had a remaining useful life of five years at the time of the acquisition. The amount attributed
to goodwill as a result of the acquisition in not impaired.
Transcribed Image Text:Pinta Company purchased 40% of Snuggie Corporation on January 1, 20y4 for P150,000. Snuggie Corporation's balance sheet at the time of acquisition was as follows: Cash Accounts Receivable Inventory Land Buildings & Equipment Less: Acc. Depreciation Total Assets P30,000 120,000 80,000 Current Liabilities Bonds Payable Common Stock 150,000 Additional Paid in Capital 300,000 Retained Earnings (120,000) P560,000 Total Liabilities and Equities P 40,000 200,000 200,000 40,000 80,000 P560,000 During 20y4, Snuggie Corporation reported net income of P30,000 and paid dividends of P9,000. The fair values of Snuggie's assets and liabilities were equal to their book values at the date of acquisition, with the exception of Building and Equipment, which had a fair value of P35,000 above book value. All buildings and equipment had a remaining useful life of five years at the time of the acquisition. The amount attributed to goodwill as a result of the acquisition in not impaired.
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