y probl proBLEMS em 18-1 Multiple choice (IFRS) 1, An investor shall discontinue the use of the equity method when ‘ be ve to have significant influence over e eMuonE operates under severe long-term ©. Te ectnoae autvies of the inverter and ‘annaat are dissimilar. When an investment ceases to be an associate, the fair value of ” the investment at the date when it ceases to be an associate A. Is regarded as its cost on initial recognition as a financial asset. . Is regarded as its fair value on initial recognition as a B. financial asset. C. Is regarded as its fair value on initial recognition as a D. financial liability. Is regarded as its amortized cost on initial recognition as an investment. . On January 1, 2024, an entity purchased 10% of another entity's ordinary shares. The entity purchased additional shares bringing the ownership up to 40% of the investee's ordinary shares outstanding on August 1, 2024. During October 2024, the investee declared and paid a cash dividend on all of the outstanding ordinary shares. How much income from the investment shoyld be reported for the current year? A. 10% of investe's income from January 1 to July 31, 2024 plus 40% of investee's income from August 1 to December 31, 2024 , B. 40% of investee's income from August 1 to December 31, 2024 C. 40% of investee's income for 2024 ; D. Amount equal to dividends received from the investee 411. th ; 4. What is the accounting treatment wien ae oreateia statements of an associate are not “ sasened ame date as the financial statements © A. The associate shall prepare financial statements a; i ‘tor. the same date as that of the investor. The financial statements of the associate prepared yp to a different date would be used. ; Any major transactions during the time gap of the “ ted for. financial statements shall be accoun' for. D. A long as the gap is not greater than three rhonths, there is no problem. B. 5. An investor used the equity method to account for a 30% ownership in an investee. At year-end, the investor had a receivable from the investee. How should the receivable be reported? A. The total receivable should be reported separately. B. The total receivable should be included as part of the investment, without separate disclosure, C. Seventy percent of the receivable should be reported separately, with the balance offset against the peers payable * the investor. . The total receiva ‘ : investee's payable ts aro aproblem 18-2 (IFRS) 1, 2024, He on January * » Heaven Com , Or ary share of a aaociate fr poy fon ie all the identifiable assets and liabilities of the; n this date, yeoorded at fair value, © Associate were _analysis of the acquisition 300,000 was acquired. showed that goodwill of ‘The associate reported the following net income ahd dividend: 2024 2025 Net income | 3,000,000 4,000,000 Dividend paid 1,000,000 1,500,000 In December 2024, the associate sold inventory to He: Company for P900,000. The cost of the inventory Was 600,000. This inventory- remained unsold by Heaven Company on December 31, 2024. However, it was sold by Heaven Company in 2025. In December 2025, the associate sold inventory to Heaven Company for P750,000. The cost of the inventory was P500,000. The inventory remained unsold by Heaven Company on December. 31, 2025. Required: 1. Determine the investor's share in the net income of the associate for 2024. 2. Determine the investor's share in the net income of the associate for 2025. 3. Prepare journal entries for 2024 and 2025 on the baths of Heaven Company in relation to the investment in associate. | 4. Determine the carrying amount of the investment 1n associate on December 31, 2025.Problem 18-3 (IFRS) ; i asso Glorious Company acquired 40% interest 1n _ ciate, Alt, Company, for P5,000,000 on January |) on ; At the acquisition date, there were ne aipabie sears fair value and carrying amount of ide and i ities. liabilities P2,000,000 for 2024 i of Alta Company reported net income and P3,000,000 for 2025. 7 tes at ss Gridend of 0,000 and 1,000,000 repenive’ Oa January 1 2024 A ay or 400,000. Glo Company applied a 10% straight line depreciation. Oeil & love Canpany, The caring amount of equipment is P500,000 at the time of sale. The remaining life of the equipment is 5 years and Glorious Company used the straight line depreciation. On December 1, 2025, Alta Company sold an inventory to Glorious Company for P2,800,000. The inventory had a cost of P2,000,000 and was still on hand on December 31, 2025. Required: 1. Determine the investor's share j : ; ein associate for 2024. the net income of the 2. Determine the investor’ . . associate for 2025, Stor's share in the net income of the 3, , : Prepare journal entries on the books of Glorious Company for 2024 and ; associate, 2025 in relation to the investment in Determine , the carryi . . associate on December $1, 20u"* of the investment i?problem 18-4 (IFRS) 1, 2024, Di on January » Diamond ¢ cary shares of an associ OMpANY acqui ony abilities of the wociat for P1,000,000- On nh 40% of the joquisition showed that goodwill opr MONS at dak i saoets he investee reported net income of i 000 was aquired, 9,000,000 for 2025, * of P8,000,000 for 2024 and , ane In December 2024, the investee sold inve: Inthe investor for, P5,000,000. Inventory ren Costing P8,000,000 investor on December 31, 2024 but was sold Heer unsold by the oO. On January 1, 2024, the inyestee sold an equi gnvestor with carrying amount of P6,000- 000 fae Berne ee The remaining life of the equipment is 5 yeats, PB,500,000. ecemnber 31, 2025, th 108 ald cai On D e associate paid cash dividerid of 9,000,000. Required: 1. Prepare journal entries for 2024 and 2025. 9, Determine the carrying amount of the i : associate on December 31, 2025. p tavestiment iB Problem 18-5 (IFRS) . ary 1, 2024, Outlander Company acquired a 25% an associate for P8,000,000.0n this date, the 's of the investee's identifioable assets and value. On Janua interest In carrying amount liabilities equaled fair During 2024, Outlander Company sold inventory to the for P2,000,000. The inventory had acarrying amount of P1,600,000. The entity used the perpetual method. On December 31, 2024, the inventory remained unsold by the associate but the associate sold the inventory 2025. The investee reported the following net income and divi associate idends pajd for 2024 and 2025: 2024 2025 Net inco: 4,000,000 7,000,000 Dividends paid 00,000 2,000,000 Required: cis 1 be i . 9024 and 2025. : Prepare journal entries for yesxtment if 2. Determine the carrying amount of the 1? associate on December 31, 2025. ALSProblem 17-6 (IFRS) thur Company acquired 4 40% intorens, jp 700,000 « he following wha On January 1, 2024, ( Film Company for PI, 1 arash Film Company reported roholders' equity oy January 1 and December oh uary 1 December 4) Jan 00,000 3,000, Share capital ; . 80 2 000 ote Revaluation surplus pity Retained earning? 1,000,000 1,500,000 he identifiable assets and On the date of acquisition, all t] I Ff corded at fair’ value. liabilities of ‘Film Company were, re Film Company reported net income of P900,000 and paid dividends of P400,000 to shareholders during 2024, The revaluation surplus is the'result of the revaluation of land recognized by Film Company on December 31, 2024. Additionally, d ided by Film C iN 7 t 3 P y Peay the diminishing balance method whereas Chu: e i x Company used Had Film Company used the straight line, the accumulated depreciation would be i fate is S845 e increased by P200,000: The [Link] Required; 1. Prepare j ® journal entyi transactio entries for 2024 i n8 relating to the tnveshment in anstiolete me 2. Determi ermine the . associate on Dane ttYi28 Amount of the investment in December 31, 2024,? oblem 18-7 (IFRS) 0 January I» ro Thterly ‘st in an investe om jgverest € at a cost of P3,200°) Acquired a 30% equity of the investee bei 4 000, h The inti he d 000,000, consisting of p ate of goguic:.: F000, 000 retained earnings, 4,000,000 5 areratiton was , . ani iL the identifiable assets and liabili i a ded at fair value except for int east the investee were value of P3,000,000 greater than eatrying. a eee ee jemaining useful life of the equipment is tien ™ Qn December 31, 2024, Interlude C i costing P2,000,000-0n hand which tad beer ey the investee. A profit of P600,000 had been wads pn ihe a le. During 2024, the investee reported net i and paid dividend of P1,500,000. et income of P4,000,000 ‘The shareholders' equity of the investee 1 9024 showed the following: on December 31, Share capital 4,000,000 Retained earnings 3,500,000 _ Retained earnings appropriated 1,000,000 Revaluation surplus 2,000,000 The revaluation surplus arose from a revaluation of land made ~on December 31, 2024. The retained earnings appropriated arose from a transfer of unappropriated retained earnings to retained earnings appfopriated for contingencies. Required: 1. Determine the goodwill arisin 2. Determine the investment income for 2024. entries on the books of Inter g from the acquisition. Jude 3. Prepare journal - Company for 2024. 4. Determine the carryin! associate on December 31, 2024. g amount of the investment in 417Problem 18-8 (IFRS) da 10% red a 10% intereg « On January i : ry 1, 2024, Fame Company acqut t an investee for P5,000,000. ‘The investment, was accounted at fair value through other comprehensive Income. 0, 900 on Decembe, The fair value of the investment was Poo 31, 2024 December 31, and P6,000,000 on Dec vived a further 20% interey On January 1, 2026, the entity ac ‘ in the nvgetee for 11,000,000. On such date, the carrying amount of the net assets of the investee W! ; 000,000, The fair value of the net, assets of eek ag eal carrying amount, except SF, 57499,000. The equipment had remaining life of 5 years. . income of P9,000,000 for 2026 ang pad iviend por 000 i December 31, 2028: No dividends Were paid in 2024, 2025 and 2026 by the investee. Required: : 1. Prepare journal entries for 2024, 2025 and 2026. 2. Determine the carrying amount of the investment in associate on December 31, 2026. Problem 18-9 (AICPA Adapted) On January 1, 2024, Mega Conan, acquired 10% of the outstanding ordinary shares of Penny Company for P4,000,000. The investment was appropriately accounted for under cost method. On January 1, 2025, Mega Company gained the ability to exercise significant influence over financial and operating control by acquiring an additional 20% of Penny Company's outstanding ordinary shares for P10,000,000. The fair value Penny Company's net assets equaled carrying amount. The fair value oF the 10% i 1, 2028 was POON DOG interest on January For the years ended De b investee reported the dlewing SUMS ak 209%, OH rats 2024 2025 ividend paid 2 Required: 1. Prepare journal entries for 2024 and 2025. 2. Determine th i ' @ carrying a ‘ in associate on December 41, oe of the investment 418problem 18-10 (IFRS) 1, 2024, Forensic C i in January 1, = sic Company acquired a 10% jpterest i” an investee for P3,000,000, The investment was unted for using the cost method, nuary 1, 2026, the entity acquire inte Onis se hee P68. 750,000, quired a further 15% interest ch date, the carrying amount of the net assets f thi On See was P36,000,000 and the fair the 10% invert wa 4. 800,000. he fair value of the 10% The fair value of the net assets of the investee is equal to carrying amount except for an equipment whose fair value exceeds carrying amount by P4,000,000. The equipment had a remaining life of 5 years. The investee reported net income of P8,000,000 for 2025 and paid dividend of P5,000,000 on December 31, 2025 in su Required:. 1, Prepare journal entries for 2024 and 2025. 2. Determine the carrying amount of the investment in associate on December 31, 2025. Problem 18-11 (AICPA Adapted) Grant Company acquired 30% of East Company's voting share capital for P8,000,000 on January 1, 2024. During 2024, East Company earned P5,000,000 and paid dividend of P2,000,000. East Company reported earnings of P6,000,000 for the 6 months ended June 30, 2025 and P8,000,000 for the year ended December 31, 2025. On July 1, 2025, Grant Company sold half of the investment in East Company for P6,000,000 cash. East Company paid dividend of P2,500,000 on October 1, 2025. The fair value of the retained investment is P6,500,000 on July 1, 2025 and P5,900,000 on December 31, 2025. ent is to be held as financial asset at The retained investm as fi her comprehensive income. fair value through ot! Required: Prepare journal entries for 2024 and 2025. 419= Problem 18-12 (AICPA Adapted) long. On January 1, 2024, Jam Company sepestod pe Ong term, investments the following unquoted equity Dale Company, 6,000 ordinary shares ( 1% ee _ 1600 90 Ever Company, 10,000 ordinary shares © 2%in t 10, 00 Fox Company, 26,000 ordinary shares (10% inter ,000,009 1. On May 1, 2024, Dale Company issued a 10% share dividend. On November 1, 2024, Dale Company paid a cash divideng of P20 per share. 3. On January 1, 2024, Jam Company paid P5,000,000 for 50,000 additional ordinary shares of Fox Company which represented a 20% investment in Fox Company. The fair value of all of Fox Company's identifiable assets net of liabilities was equal to their carrying amount of P20,000,000. . Jam Company's initial 10% interest of 25,000 ordinary shares of Fox Company was acquired on J anuary 1, 2023 for P2,000,000. The 10% interest was accounted for under cost method. On January 1, 2024, this 10% existing interest had a fait value of P2,400,000. , 4. Fox Company reported net income of P6,000,000 for 2024, and paid dividend of P20 per share 6n December 81, 2024 Required: 4. Determine the January 1, 2024, i noe journal entries for 2024, © equity investments on December 31, 2024 goodwill arising from acquisition 0"