Reference no: EM132946316
Question - On July 1, 2018, Mountain Systems acquired 24,000 shares of Precision Services' 120,000 outstanding common shares at a cost of P1,000,000. The book value and fair market value of Precision's net assets on that date was P950,000. The following data pertain to Precision Services for 2018 and 2019:
|
|
2018
|
2019
|
|
Net Income
|
500,000
|
675,000
|
|
Dividends paid
|
150,000
|
250,000
|
On December 31, 2018, the associate sold inventory to Mountain Systems for P 500,000 with a cost of P 450,000. This inventories were sold by Mountain only in 2019.
In December 31, 2019, the associate sold inventory to Mountain Systems costing P350,000 for P 425,000. This inventories were only sold by Mountain Systems in 2020.
Required -
1. Determine the investor's share in the profit of the associate for 2016 and 2017.
2. Prepare journal entries on the books of Mountain Systems in relation to the investment in associate.
3. Determine the carrying amount of the investment in associate on December 31, 2017.