PROBLEM EAST Corporation purchased 50,000 out of the 200,000 ordinary shares of FAR Corporation on January 1, 2020 at P165 per share given EAST the right to exercise significant influence over FAR Corporation. Any excess of fair value over carrying value was attributed to land. FAR Corp reported P680,000 profit in 2020 and P1,000,000 in 2021. Dividends were paid and EAST received P210,000 in 2020 and P240,000 in 2021. Market values at year end: 2020 P160 and 2021 P175. On Jan 2, 2022, EAST Corporation sold 20,000 of its shares at P175 and exercised the option to account for its remaining investment as an available for sale securities classified at FVOCI. FAR Corporation reported profit of P3,720,000 and gave EAST dividends of P800,000 to all its shareholders. Required: Entries in 2020, 2021, 2022. Give the a) investment balance as at December 31, 2021, and b) Effect on net income in 2021. Give the a) investment balance as at December 31, 2022, and b) effect on net income in 2022.

PROBLEM EAST Corporation purchased 50,000 out of the 200,000 ordinary shares of FAR Corporation on January 1, 2020 at P165 per share given EAST the right to exercise significant influence over FAR Corporation. Any excess of fair value over carrying value was attributed to land. FAR Corp reported P680,000 profit in 2020 and P1,000,000 in 2021. Dividends were paid and EAST received P210,000 in 2020 and P240,000 in 2021. Market values at year end: 2020 P160 and 2021 P175. On Jan 2, 2022, EAST Corporation sold 20,000 of its shares at P175 and exercised the option to account for its remaining investment as an available for sale securities classified at FVOCI. FAR Corporation reported profit of P3,720,000 and gave EAST dividends of P800,000 to all its shareholders. Required: Entries in 2020, 2021, 2022. Give the a) investment balance as at December 31, 2021, and b) Effect on net income in 2021. Give the a) investment balance as at December 31, 2022, and b) effect on net income in 2022.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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