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Sunday, November 14, 2010

Valix Finacc vol 1 Problem 11-26 to 30

Financial Accounting Volume 1 2008 Valix-Peralta
Chapter 1 Problem 11-26 to 30


Problem 11-26  Answer  A


Acquisition cost                                                                                                         4,000,000
Share in net income (10% x 5,000,000)                                                             500,000
Share in cash dividend (10% x 1,500,000)                                                                  (   150,000)
Carrying value                                                                                                           4,350,000

Problem 11-27  Answer  D

 

Acquisition cost (squeeze)                                                                                         1,720,000
Share in net income (25% x 1,200,000)                                                             300,000
Share in cash dividend (25% x 480,000)                                                                     (   120,000)
Carrying value – December 31                                                                                 1,900,000

Problem 11-28 Answer  D


Acquisition cost                                                                                                         2,500,000
Less: Book value of net assets acquired (30% x 5,000,000)                                         1,500,000
Excess of cost over book value                                                                                 1,000,000
Less: Amount attributable to undervaluation of land (30% x 2,000,000)                      600,000
Goodwill                                                                                                                      400,000

                                                                                                              149

Acquisition cost                                                                                                         2,500,000
Add: Share in net income (30% x 1,000,000)                                                                 300,000
Balance, December 31                                                                                              2,800,000

The excess of cost attributable to the land is not amortized because the land is
nondepreciable. The goodwill is not amortized.

Problem 11-29  Answer  B


Acquisition cost – January 1                                                                                       1,000,000
Acquisition cost – December 31                                                                                 3,000,000
Total cost                                                                                                                    4,000,000
Share in net income (10% x 8,000,000)                                                               800,000
Carrying value                                                                                                            4,800,000

 

Problem 11-30 Answer  C


Investment income in 2008 (30% x 6,500,000)                                                             1,950,000  

Investment income in 2007 (10% x 6,000,000)                                                              600,000
Less: Dividend income recorded in 2006 (10% x 2,000,000)                                          200,000
Understatement of income                                                                                         400,000

Investment in associate                                                                      400,000
        Retained earnings                                                                                               400,000

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