Shaun Company reports a net income of P280,000 each year and pays an annual cash dividend of P100,000. The company holds net assets of P2,400,000 on January 1, 20x1. Ón that date, Jared Company purchases 40% of the outstanding stock for P1,200,000, which gives it the ability to have joint control with Glassman Company over Shaun. At the purchase date, the excess of Jared's cost over its proportionate share of Shaun's book value was assigned to goodwill. REQUIRED: 5. How much is the net investment income each year? 6. On December 31, 20x2, what is the investment in Shaun Company balance (equity method) in Jared's financial records?

Shaun Company reports a net income of P280,000 each year and pays an annual cash dividend of P100,000. The company holds net assets of P2,400,000 on January 1, 20x1. Ón that date, Jared Company purchases 40% of the outstanding stock for P1,200,000, which gives it the ability to have joint control with Glassman Company over Shaun. At the purchase date, the excess of Jared's cost over its proportionate share of Shaun's book value was assigned to goodwill. REQUIRED: 5. How much is the net investment income each year? 6. On December 31, 20x2, what is the investment in Shaun Company balance (equity method) in Jared's financial records?

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

ChapterA2: Investments

Section: Chapter Questions

Problem 11MCQ

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Shaun Company reports a net income of P280,000 each year and pays an annual cash dividend of P100,000. The company holds net assets of P2,400,000 on January 1, 20x1. Ón that date, Jared Company purchases 40% of the outstanding stock for P1,200,000, which gives it the ability to have joint control with Glassman Company over Shaun. At the purchase date, the excess of Jared's cost over its proportionate share of Shaun's book value was assigned to goodwill. REQUIRED: 5. How much is the net investment income each year? 6. On December 31, 20x2, what is the investment in Shaun Company balance (equity method) in Jared's financial records? Shaun Company reports a net income of P280,000 each year and pays an annual cash dividend of P100,000. The company holds net assets of P2,400,000 on January 1, 20x1. Ón that date, Jared Company purchases 40% of the outstanding stock for P1,200,000, which gives it the ability to have joint control with Glassman Company over Shaun. At the purchase date, the…
Kross Company purchases an equity investment in Penno Company at a purchase price of $2.5 million, representing 40% of the book value of Penno. During the current year, Penno reports net income of $300,000 and pays cash dividends of $100,000. At the end of the year, the fair value of Kross’s invest- ment is $2.65 million. What amount of income does Kross report relating to this investment in Penno for the year? Explain.
On January 1, 2020, Lovely Company paid P1,200,000 for 40,000 ordinary shares of Lonely Corporation which represent 25% investment in the net assets of Lonely. Lovely has the ability to exercise significant influence over Lonely. Lovely received a dividend of P3 per share from Lonely in 2020. The reported profit of Lonely for the year ended December 31, 2020 was P640,000. The balance of Lovely’s investment in Lonely at December 31, 2020 should be a. 1,480,000 b. 1,360,000 c. 1,240,000 d. 1,200,000
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Senpai Company acquires 15% of Kohai Company's common stock for P600,000 cash and carries the investment using the cost model. A few months later, Senpai purchases another 60% of Kohai Company's stock for P2,592,000. At that date, Kohai Company reports identifiable assets with a book value of P4,680,000 and a fair value of P6,120,000, and it has liabilities with a book value and fair value of P2,280,000. The fair value of the 25% non-controlling interest in Kohai Company is P1,080,000. Compute the amount of goodwill, using full-goodwill or fair value basis approach: O P480,000 O P360,000 O None of the given None
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On January 1, 2020, Elite Company paid P 18,000,000 for 50,000 ordinary shares of Craze Company which represent a 25% interest in the in the net assets of Craze. The acquisition cost is equal to the carrying amount of the net assets acquired. Elite has the ability to exercise significant influence over Craze. Elite received a dividend of P35 per share from Craze in 2020. Craze reported net income of P9,600,000 for the year ended December 31, 2020. In the December 31, 2020 statement of financial position, what amount should be reported as investmentin Craze Company?a. 22,150,000b. 20,400,000c. 18,650,000d. 18,000,000
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On January 1, 2019, Matcha Company purchased 25% of the outstanding ordinary shares of Milk Tea Company at P165 per share. Milk Tea Company had 200,000 ordinary shares outstanding at the time of purchase. Matcha received cash dividend from Less of P210,000 on August 1, 2019 and P240,000 on December 31, 2020. Milk Tea Company reported profit of P680,000 in 2019 and P1,000,000 in year 2020. Market values of each share on December 31, 2019 and December 31, 2020 were P160 and P175, respectively. On January 2, 2021, Maia Corp sold 20,000 shares of its equity investment at Millie Corp for P175 per share. Because of the decrease in ownership shares in Millie Corp, Maia exercised its option to measure the remaining securities at fair value through other comprehensive income on January 2, 2021. For year 2021, Millie Corp reported profit of P3,720,000 and paid Maia Corp, dividends of P120,000. Market value of Millie Corp shares on December 31, 2021 was P180 per share.What is the carrying…
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