Sub: Intermediate Accounting

Problem 17-12 (AICPA Adapted)

At the beginning of current year, Bliss Company purchased 10% of Red Company's outstanding ordinary shares for P4,000,000.

Bliss Company is the largest single shareholder in Red Company and Bliss Company's officers are a majority on Red Company's board of directors.

Red Company reported net income of P5,000,000 for the current year and paid dividends of P1,500,000.

What amount should be reported as investment in associate at year-end?

a. 4,350,000

b. 4,500,000

c. 4,000,000

d. 3,850,000

Problem 17-13 (AICPA Adapted)

On July 1 of current year, Miller Company purchased 25% of Wall Company. No, "excess" resulted from the purchase.

Miller Company appropriately carried this investment at equity and the carrying amount of the investment was P1,900,000 at year-end.

Wall Company reported net income of P1,200,000 for the current year and paid cash dividend of P480,000 at year-end,

What amount did Miller Company pay for the 25% interest in Wall Company?

a. 2,320,000

b. 2,020,000

c. 1,870,000 d. 1,720,000

Problem 17-14 (TAA)

At the beginning of current year, Magic Company purchased 40% of the outstanding ordinary shares of an investee paying P2,560,000 when the carrying amount of the net assets of the investee equaled P5,000,000.

The difference was attributed to equipment which had a carrying amount of P1,200,000 and a fair market value of P2,000,000, and to building with a carrying amount of P1,000,000 and a fair market value of P1,600,000.

The remaining useful life of the equipment and building was 4 years and 12 years, respectively.

During the current year, the investee reported net income

of P1,600,000 and paid dividends of P1,000,000.

What is the carrying amount of the investment in associate at year-end?

a. 2,550,000

b. 2,700,000

c. 2,800,000

d. 3,050,000

Problem 17-15 (AICPA Adapted)

Hannah Company owned 20% of Love Company's preference share capital and 50% of the ordinary share capital.

Love Company's share capital outstanding comprised the following at year-end:

10% cumulative preference share capital 2,000,000

Ordinary share capital 7,000,000

Love Company reported net income of P5,000,000 for the current year.

What amount should be recorded as investment income for the current year?

a. 2,400,000 b. 2,500,000

c. 2,600,000

d. 2,700,000