Reference no: EM132892647
Question -
(A) At the beginning of the year, ABC Corp. purchased 40% of the outstanding ordinary shares of an investee. It paid P2,500,000. The net assets of the investee were valued P6,000,000 but was only carried in the books at P5,000,000. The difference is attributable to an equipment that has 5 years remaining useful life. During the year, the investee reported P800,000 net income, paid P500,000 dividends and made upstream sale to ABC resulting to a gross profit of P50,000. ABC still have 30% of the inventory from the upstream sale. What should ABC report as investment income?
(B) On Jan. 1, 2020, ABC purchased 30% of the outstanding shares of an investee for P7,500,000. As of this date, the investee has an equipment recorded at P2,000,000 less than its fair value. The equipment was bought exactly two years ago and originally has a total useful life of 10 years. For the year, the investee reported net income of P3,000,000, actuarial gains of P500,000, unrealized holding loss of P300,000 through OCI, and dividends declared and paid during November of P2,000,000. For the whole year, the equity of the investee included P20,000,000 par value from ordinary shares and P10,000,000 par value from the 8%, noncumulative, nonparticipating preference shares. What should be reported as the investment in associate as of the end of the year? You may use parenthetical solutions.
(C) On April 30,2020, ABC Corp. purchased bonds with a face value of P1,400,000 and interest rate of 9% to be paid annually every Dec. 31 until the end of 2024. It paid P1,360,000 plus accrued interest plus transaction fee of P10,000. What is the journal entry to record the purchase if ABC accounted it as a FA-FV-PL? Use Accrued Interest Receivable in your answer. You may use parenthetical solutions. In the google form, provide the total cash outflow relating to the acquisition.
(D) On Jan. 1, 2021, ABC purchased bonds for the purpose of both collecting the contractual cashflows and selling the investment. The bonds have a total face value of P6,000,000, interest rate of 8% payable every August 1, and a remaining term of 4 years and 7 months. It paid P6,145,000 inclusive of accrued interest and transaction fee of P50,000. As of the end of the year, the bonds have a fair value of P5,960,000. What is the compound journal entry to update the carrying value of the investment and the balances of the related accounts on Dec. 31, 2021? In the google form, provide the interest income to be recorded on that same day.
(E) On Jan. 1, 2021, ABC acquired a 10%, P5,000,000, bonds that matures on Jan. 1, 2025. The interest is collectible every July 1 and Jan 1. It paid P4,689,510 for the acquisition resulting to an effective interest rate of 12%. What is the interest income for the year 2021?
(F) On Jan. 1, 2021, ABC paid P3,050,000 for a serial bond that has a face value of P3,000,000, term of 5 years, and nominal rate of 9%. ABC made the investment to collect the contractual cashflows which are to be received every Dec. 31, 2021. ABC additionally paid the broker a fee of P25,550. The resulting effective interest rate from the acquisition is 8%. What is the compound journal entry to record the interest collected and principal amount collected as well as the interest earned on Dec. 31, 2021? In the google form, provide the correct balance of the investment after collecting the cashflows on that same day.