On January 1, 2020, Entity A acquired 90% of outstanding ordinary shares of Entity B at...

 

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On January 1, 2020, Entity A acquired 90% of outstanding ordinary shares of Entity B at a price of P900,000. Entity A paid P20,000 costs related to acquisition of shares. At the acquisition date, the net assets of Entity B is reported at P950,000. All the assets of Entity B are properly valued except for a machinery which is undervalued by P150,000. The machinery has a remaining useful life of 5 years. For the year ended December 31, 2020, Entity B reported net income of P200,000 and declared dividends in the amount of P30,000. Based on the data given by the qualified appraiser, the fair value of Investment in Entity B on December 31, 2020 is P1,000,000 while the cost to sell is 5%. Entity A voluntarily prepares its separate financial statements. If Entity A elects cost method to account its Investment in Entity B in its separate financial statements, what is the book value of the Investment in Entity B on December 31, 2020? 2. What is the net effect in profit or (loss) for year 2020 if Entity A elects cost method to account its Investment in Entity B in its separate financial statements? 3. If Entity A elects fair value model at profit or (loss) to account its Investment in Entity B in its separate financial statements, what is the book value of the Investment in Entity B on December 31, 2020? 4. What is the net effect in profit or (loss) for year 2020 if Entity A elects fair value model through profit or loss to account its Investment in Entity B in its separate financial statements? 5. If Entity A elects equity method to account its Investment in Entity B in its separate financial statements, what is the book value of the Investment in Entity B on December 31, 2020? 6. What is the net effect in profit or (loss) for year 2020 if Entity A elects equity method to account its Investment in Entity B in its separate financial statements? On January 1, 2020, Entity A acquired 90% of outstanding ordinary shares of Entity B at a price of P900,000. Entity A paid P20,000 costs related to acquisition of shares. At the acquisition date, the net assets of Entity B is reported at P950,000. All the assets of Entity B are properly valued except for a machinery which is undervalued by P150,000. The machinery has a remaining useful life of 5 years. For the year ended December 31, 2020, Entity B reported net income of P200,000 and declared dividends in the amount of P30,000. Based on the data given by the qualified appraiser, the fair value of Investment in Entity B on December 31, 2020 is P1,000,000 while the cost to sell is 5%. Entity A voluntarily prepares its separate financial statements. If Entity A elects cost method to account its Investment in Entity B in its separate financial statements, what is the book value of the Investment in Entity B on December 31, 2020? 2. What is the net effect in profit or (loss) for year 2020 if Entity A elects cost method to account its Investment in Entity B in its separate financial statements? 3. If Entity A elects fair value model at profit or (loss) to account its Investment in Entity B in its separate financial statements, what is the book value of the Investment in Entity B on December 31, 2020? 4. What is the net effect in profit or (loss) for year 2020 if Entity A elects fair value model through profit or loss to account its Investment in Entity B in its separate financial statements? 5. If Entity A elects equity method to account its Investment in Entity B in its separate financial statements, what is the book value of the Investment in Entity B on December 31, 2020? 6. What is the net effect in profit or (loss) for year 2020 if Entity A elects equity method to account its Investment in Entity B in its separate financial statements?

Answer rating: 100% (QA)

To answer your questions lets analyze each scenario separately 1 Book value of the Investment in Entity B on December 31 2020 Cost Method When using t... View the full answer