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On January 2, 2020, Dove, Inc. acquired a 25% interest in the outstanding voting ordinary shares...

On January 2, 2020, Dove, Inc. acquired a 25% interest in the outstanding voting ordinary shares of Cabot Enterprises for a cost of P900,000. This investment provides Dove with the ability to exercise significant influence over Cabot and classified the investment as investment in associates. The acquisition cost of the investment is in excess of the book value by P140,000; the excess is attributable to goodwill which is to be amortized over 20 year. During 2020, Cabot Enterprises reported net income of P312,000 and paid total cash dividends of P220,000. At December 31, 2020, the balance account Investment in Associates in Cabot should have a carrying value of?

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Asset Value Useful life Amortisation
Goodwill 140000 20 7000
Net income 312000
Less: differential amortisaton 7000
Net income after differential amortisation 305000
Share of Dove 76250
Dividends 220000
Share of Dove 55000
Carrying value of Investment in Associate
Cost of investment 900000
Add: Net income after differential amortisation 76250
Less: Dividends received -55000
Carrying value 921250

If 140000 is apportioned only to parent company i.e. if 14000 is the share of only parent company

Asset Value Useful life Amortisation
Goodwill 140000 20 7000
Net income 312000
Share of Dove 78000
Less: differential amortisaton 7000
Net income after differential amortisation 71000
Dividends 220000
Share of Dove 55000
Carrying value of Investment in Associate
Cost of investment 900000
Add: Net income after differential amortisation 71000
Less: Dividends received -55000
Carrying value 916000

ekkarill92 answered 1 year ago
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