Reference no: EM132649602
Questions -
Q1) DISCONTINUANCE OF EQUITY METHOD
Marianne Company purchased 300,000 shares of Sexy Co. ordinary shares on January 1, 2015 at P100 per share, which reflected book value as of that date. At the time of purchase, Sexy Co. has 1,000,000 ordinary shares outstanding. Marianne had no ownership interest in Sexy prior to this purchase. Sexy reported net income of P4,000,000 for the year ended December 31, 2015, and declared and paid dividends of P2,500,000.
On January 1, 2016, Marianne sold 160,000 ordinary shares of Sexy for P120 per share and reclassified the remaining stock as financial asset at FVTOCI. The quoted market price of such investment on January 1, 2016 was P122 per share. Sexy reported a net income of P6,000,000 for the year ended December 31, 2016 and declared and paid dividends of P2,000,000. The fair value of Sexy ordinary shares at December 31, 2016 was P125 per share.
REQUIRED: Provide the journal entries in 2016, 2017, and 2018.
Q2) INTER-COMPANY SALE OF INVENTORY
On January 1, 2015, Drenz Co. acquired 25% interest in the ordinary shares of Josiah, Inc. for P3,000,000 which reflected book value as of that date. On November 20, 2015, Drenz Company sold inventory costing P50,000 to Josiah Co. for P100,000, 60% of which was still unsold on December 31, 2015. Josiah Company reported net income and paid dividends for 2015 and 2016 as follows:
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2015
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2016
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Net income
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1,000,000
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1,500,000
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Dividend declared
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400,000
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700,000
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REQUIRED:
A. What is the share in the net income (or loss) of the associate in 2015?
B. What is the share in the net income (or loss) of the associate in 2016?