Reference no: EM132892374
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:
Problem 1. Give all necessary journal entries to account the Investment in Acca under equity method.
Problem 2. Determine the Investment in Acca for 2014 and 2015.
Problem 3. Determine the Share in associate's NI for 2014 and 2015.