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In: Accounting

On January 5, 2019, PP Company acquired 20% of the outstanding ordinary shares of an investee...

On January 5, 2019, PP Company acquired 20% of the outstanding ordinary shares of an investee for P11,200,000. The carrying amount of the acquired net assets was P9,600,000. The excess of cost over carrying amount was attributed to patent (an intangible asset) which was undervalued on investee’s statement of financial position and which had a remaining useful life of ten years. For the year ended December 31, 2019, the investee reported net income of P2,880,000 and paid cash dividend of P960,000 on its ordinary shares.

a) How much was the investee’s total net assets? __________________________

b) Determine the investment income for 2019. __________________________

c) Determine the carrying amount of the investment in associate as of December 31, 2019. __________________________

d) Assuming that the company did not have significant influence over the investee, how much will be the carrying amount of the investment on December 31, 2019?

Solutions

Expert Solution

a.) Investee Total net assets $ 48,000,000 =9600000/20%
b.) Investment income for 2019 $ 544,000 =(2880000-(1600000/10))*20%
Working:
Amount $
Purchase Consideration 1,1200,000
Less: Net assets acquired     9,600,000
Attributed to Patent     1,600,000
c.) Carrying amount of Investment as of December 31,2019 $ 11,552,000 =11200000+544000-(960000*20%)
d.) Carrying amount of Investment as of December 31,2019 $ 11,200,000

ekkarill92 answered 2 years ago
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