Reference no: EM132938123
Question 1 - Vicky and Val formed Jayme Corporation through a joint venture agreement. Vicky contributed land and Val contributed P300,000 and a condominium office unit. The land Vicky contributed was purchased in year 2000 for P 500,000. The current fair market value of the land is P 1,500,000. The condominium unit contributed by Val was purchased in 2005 for P1,000,000 and carrying value of P800,000. Its current market value is P 1,200,000. (remaining life of 10 years)
Jayme Corporation reported net income of P 200,000 and P600,000 in years 1 and 2. Dividends, shared equally by Val and Vicky, amounted to P 100,000 each year. The land contributed by Vicky was sold in year 2 for P1,700,000.
Required -
(1) Give all necessary journal entries in the books of Vicky and Val.
(2) Determine the amount of "Share from Jayme's Net Income" to be reported in the 2014 and 2015 income statement of Vicky and Val Company, respectively.
(3) Determine the carrying value of "Investment in Jayme Company" to be reported in the 2014 and 2015 balance sheet of Vicky and Val Company, respectively.
Question 2 - On January 1, 2015, Irene Associates purchased 300,000 of the 1,000,000 outstanding common shares of stock of Amaya Corp. Irene issued a 5 year promissory note for P1,500,000. The note pays interest of 8% annually every December 31. The investment will be accounted for by the equity method. On that date, Amaya's net identifiable assets (book and fair value) were P4,000,000.
Required -
1. Give the journal entries to record the acquisition.
2. Determine goodwill or negative goodwill in the purchase of Amaya Corp.
Question 3 - On January 1, 2015, Ian Company purchased 300,000 of the 1,000,000 outstanding common shares of stock of Aina Corp. Ian issued a five- year non-interest bearing note for P1,500,000. The market interest rate for similar note is 8%. The investment will be accounted for by the equity method. On that date, Aina's net assets (book and fair value) were P4,000,000.
Required -
1. Give the journal entries to record the acquisition.
2. Determine goodwill or negative goodwill in the purchase of Aina Corp.
Question 4 - On January 1, 2015, Igfried Company purchased 300,000 of the 1,000,000 outstanding common shares of stock of Achelle Corp. Igfried issued 100,000 P10 par value common stock currently trading at P13 per share. Igfried paid P 25,000 for the issuance of the stocks. The investment will be accounted for by the equity method. On that date, Gillen's net assets (book and fair value) were P4,000,000.
Required -
1. Give the journal entries to record the acquisition.
2. Determine goodwill or negative goodwill in the purchase of Achelle Corp.
Question 5 - On July 1, 2014, Icca Corporation purchased 30% of the outstanding common shares of stock of Acca Company. Icca issued a 5 year promissory note for P1,500,000. The note pays interest of 8% annually every December 31. The investment will be accounted for by the equity method. On that date, Acca's net identifiable assets has a book value of P3,800,000. However, the appraisers are still gathering data for the determination of the net book value of Acca's net identifiable asset. A provisional amount of P4,000,000 was assigned. The difference is attributable to a fixed asset with a remaining useful life of 10 years.
On January 1, 2015, it was determined that the fair market value of Acca's recorded net asset totals P4,200,000.
Acca reported net income of P150,000 and P225,000 in 2014 and 2015, respectively.
Required -
1. Give all necessary journal entries to account the Investment in Acca under equity method.
2. Determine the Investment in Acca for 2014 and 2015.
3. Determine the Share in associate's NI for 2014 and 2015.