Question

In: Accounting

On January 1, 20x1, Entity acquires 30% of Co. B, for P600,000. Co. B reports profit...

On January 1, 20x1, Entity acquires 30% of Co. B, for P600,000. Co. B reports profit of P200,000 and also declares
dividends of P50,000 in 20x1. How much is the carrying amount of the investment in associate, Dec 31, 20x1?
a)   P600,000   c)   P645,000
b)   P660,000   d)   P630,000

58   A Company acquired a 30% interest in B Company, for P400,000 on January 1, 2020. During the year, B Company
earned profits of P80,000 and paid no dividends. IN the year 2021, B Company incurred losses of P32,000 and
paid dividends of P10,000. In A Company's consolidated financial statements, at the end of 2021, what would
be the carrying amount of its interest in B Company, according to IAS 28, Investments in Associates ?
       a)   P438,000   c)   P414,400
       b)   P411,400   d)   P400,000

Conceptual Framework/ Accounting Overview/ Standards/Financial Statements…
59   Which of the following is one of the fundamental qualitative characteristics?
       a)   Faithful representation   c)   Reliability
       b)   Comparability   d)   Relevant

60   A concept that states that all the components of a complete set financial statement are interrelated.
       a)   Concept of Entity   c)   Accounting Process Concept
       b)   Concept of Articulation   d) Concept of Fair Presentation


PAS 29 - Financial Reporting in Hyperinflationary economies
61   Under constant peso accounting…
       a)   all items in the statement of profit or loss and other comprehensive income are restated.
       b)   some items in the statement of profit or loss and other comprehensive income are restated.
       c)   items in the statement of profit or loss and other comprehensive income are not restated.
       d)   items in the statement of profit or loss are restated but not in other comprehensive income

The gain or loss on net monetary position is computed as,
a)   the difference between the "net monetary items, end - historical" and "net monetary items, end - restated'.
   This amount is recognized in profit or loss.
b)   the difference between the "net monetary items, end - historical" and "net monetary items, end - restated'.
   This amount is recognized in equity.
c)   the difference between the "net monetary items, beg. - historical" and "net monetary items, end - restated'.
   This amount is recognized in profit or loss.
d)   the difference between the "net monetary items, beg. - historical" and "net monetary items, end - restated'.
   This amount is recognized in equity.

Solutions

Expert Solution

1) Carrying value of Investment in associates-Correct Option is C-645000

In its consolidated financial statements, an investor should use the equity method of accounting for investments in associates.

Equity method means a method of accounting by which an equity investment is initially recorded at cost and subsequently adjusted to reflect the investor's share of the net assets of the associate

Carrying Amount= Cost of Acquisition+Share of Profit in Associate- Dividend Paid

= P600,000+30% of P200000-30% of P50000= P645000

2)Similarily,Correct Option is B-411400

Carrying Amount= Cost of Acquisition+Share of Profit in Associatefor Year 2020-Share of Loss in Associate for Year 2021- Dividend Paid

=400000+30% of 80000-30%of 32000-30% of 10000

=P411400

59) Option A - Faithful Representation

60) Option B- Concept of Articulation

61) Option A-all items in the statement of profit or loss and other comprehensive income are restated.

IAS 29 requires the statement of comprehensive income (income statement items together with other comprehensive income) are restated for inflation observed during the period.

Net Monetory Gain

Correct Option is c) the difference between the "net monetary items, beg. - historical" and "net monetary items, end - restated'.
   This amount is recognized in profit or loss.


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