Reference no: EM132894099
An investor in Exempted Co., asked you for advice on the propriety of Exempted's financial reporting for two of its investments. You obtained the following information related to the invenstments from Exempted's December 31, 2019 financial stataments:
1. 20% ownership interest in Jun Co., represented by 200,000 ordinary shares purchased on January 2, 2019 for 600,000
2. 20% ownership interest in Pol Co., represented by 20,000 ordinary shares purchased on January 2, 2019 for 300,000
3. On January 2, 2019, the carrying values of the acquired shares of both investments equaled their purchase price
4. Jun reported earnings of 400,000 for the year ended December 31, 2019 and declared and paid dividends of 100,000 during 2019
5. Pol reported earnings of 350,000 for the year ended December 31, 2019 and declared and paid dividends of 60,000 during 2019
6. On December 31, 2019, Jun's and Pol's ordinary shares were trading over-the-counter at 4 and 20 per share, respectively .
7. The investment in Jun is accounted for using the equity method
8. The investment in Pol is accounted fir as FVTOCI
You recalculated the amounts reported in Exempted's December 31, 2019 financial statements, and determined that they were correct. Stressing that the information available in the financial statement was limited, you advised the investor that, assuming Exempted properly appliedf generally accepted accounting principles, Exempted may have appropriately used two different methods to account for its investments in Jun and Pol, even though the investments represent equal ownership interests.
Problem 1. Carrying amount of investment in (1) Jun and (Pol)
a. 860,000; 458,000
b. 800,000; 358,000
c. 660,000; 400,000
d. 600,000; 400,000
Problem 2. Income in profit or loss from investment in (1) Jun and (2) Pol
a. 80,000; 70,000
b. 80,000; 12,000
c. 20,000; 70,000
d. 20,000; 12,000
Problem 3. Income in other comprehensive income on investment in (1) Jun and (2) Pol
a. 0; 0
b. 0; 100,000
c. 200,000; 100,000
d. 140,000; 42,000