The following transactions appear on the Investment in Paniqui account of Tarlac Corporation: Date Particulars Debit Credit
Question:
The following transactions appear on the Investment in Paniqui account of Tarlac Corporation:
Date Particulars Debit Credit
01/02/20 Purchased 10,000 shares 2,000,000
12/31/20 Purchased 15,000 shares 3,180,000
04/30/22 Sold 12,500 shares @231 2,887,500
Your audit revealed the following additional information:
➢ On January 2, 2020, Tarlac, Inc. acquired a 10% interest in Paniqui Corp. by paying P2,000,000 for 10,000 ordinary shares.
➢ On December 31, 2020, Tarlac paid P3,180,000 for 15,000 additional ordinary shares of Paniqui, which represents a 15% interest in Paniqui. Tarlac Corp.'s accounting manual requires the use of fair value as deemed cost approach' to account for step acquisitions.
➢ The acquisitions on January 2 and December 31 were made at prices proportionate to the value assigned to Paniqui's net assets, which equaled their carrying amounts.
➢ Tarlac uses the average method in recording disposals of its investments.
➢ From Paniqui's financial statements, you were able to obtain the following information:
2020 2021 2022
Profits 2,000,000 3,000,000 1,500,000
Dividends paid on July 1 1,000,000 1,500,000 600,000
➢ Closing market quotation for the shares of Paniqui:
December 31, 2020 212
December 31, 2021 216
December 31, 2022 220
Required:
Prepare the necessary adjusting journal entries as of December 31, 2022.
