1. Mary Corporation acquired 70 percent of Phoenix Company’s stock on
October 1, 20×5. At the acquisition date, Phoenix had the following account
balances.
Book Value Market Value Remaining Life
Cash and Receivables P 40,000 P 40,000 3 months
Inventory 100,000 130,000 5 months
Plant Assets (net) 350,000 350,000 10 years
Cost of Goods Sold 160,000
Operating Expenses 50,000
Liabilities 200,000 215,000 5 years
Common Stock 20,000
Retained Earnings 230,000
Sales 250,000
Phoenix has net income of P110,000 and pays dividends of P10,000 during 20×5.
Assuming there is no goodwill impairment, what is the amount of investment
income (using equity model) on Mary Corporation’s financial records for 20×5?
2. Hi Rise Enterprises acquired 70 percent of Low Rent Company on January 1,
20×5 for P500,000. At that date, Low Rent’s inventory and plant assets (net)
had market values in excess of book values in the amounts of P55,000 and
P200,000, respectively. The estimated remaining life of the inventory and plant
assets were four months and eight years, respectively. Assume that Low Rent
has 20×5 income and dividends of P110,000 and P30,000, respectively and 20×6
income and dividends of P130,000 and P40,000, respectively. What is the
amount of the Investment in Low Rent account balance at December 31, 20×6
using equity method?
3. Metro Corporation acquired 80 percent of Local Company on January 1, 20×5
for P320,000. At that date Local had inventory and plant assets with market
values greater than book values in the amount of P35,000 and P75,000
respectively. The inventory and plant assets were assigned a remaining life of
six months and five years respectively. Assuming that Local has 20×5 income
and dividends of P100,000 and P40,000, respectively and 20×6 income and
dividends of P140,000 and P50,000, respectively, what is the Investment in Local
account balance (using cost method) at December 31, 20×6?
4. Perry Corporation acquired 80 percent of Sammy Company’s stock on
January 1, 20×5. At the acquisition date, Sammy had the following account
balances.
Book Value Market Value Remaining Life
Cash and Receivables P 30,000 P 30,000 3 months
Inventory 100,000 120,000 5 months
Plant Assets (net) 250,000 290,000 8 years
Liabilities 150,000 160,000 5 years
Common Stock 10,000
Retained Earnings 220,000
Sammy has income of P80,000 and pays dividends of P20,000 during 20×6.
Assuming there is no goodwill impairment, what is the amount of income
allocated to the non-controlling interest for 20×6?
5. Ace Corporation acquired 70 percent of Base Company’s stock on
September 1, 20×5. At the acquisition date, Base had the following account
balances.
Book Value Market Value Remaining Life
Cash and Receivables P 70,000 P 70,000 3 months
Inventory 160,000 190,000 5 months
Plant Assets (net) 400,000 520,000 10 years
Cost of Goods Sold 300,000
Operating Expenses 90,000
Liabilities 350,000 380,000 5 years
Common Stock 20,000
Retained Earnings 180,000
Sales 470,000
Base has net income of P150,000 and pays dividends of P30,000 during 20×5.
Assuming there is no goodwill impairment, what is the amount of income
allocated to non-controlling interest for 20×5?
6. Powell Enterprises acquired 80 percent of Sullivan Company on January 1, 20×5
for P250,000. At that date, Sullivan’s inventory and plant assets (net) had
