Reference no: EM132794601
Question 1 - NORMAN Company - On January 1, 2020, NORMAN Company acquired a 10% interest in an investee for 3,500,000. The investment was accounted for as a passive investment and therefore accounted for using cost method. On January 1, 2021, the entity acquired a further 15% interest in the investee for 7,500,000. On such date, the carrying amount of the net assets of the investee was 40,000,000 and the fair value of the 10% interest was 4,700,000. The fair value of the net assets of the investee is equal to the carrying amount except for an equipment whose fair value exceeds carrying amount by 4,000,000. The equipment has a remaining life of 5 years. Also, the investee has outstanding 15% cumulative preference shares with P10 par value totaling to P10,000,000. The preferred dividends were not paid during 2020 and 2021.
The investee reported net income of 10,000,000 for 2021 and paid cash dividend of 5,000,000 on December 31, 2021.
Question 1: What amount of gain on re-measurement to equity should be recognized for 2021, if any?
Question 2: What is the implied goodwill arising from the acquisition?
Question 3: What is the total investment income to be reported by NORMAN during 2021?
Question 4: What is the carrying amount of the investment in associate on December 31, 2021?
Question 2 - JOVIT Corporation - On July 31, 2020, JOVIT Corporation purchased 30% of BALDIBALLIN' Company's outstanding ordinary shares and no goodwill resulted from the purchase. JOVIT appropriately carried this investment at equity and the balance in JOVIT's investment account was 2,400,000 on December 31, 2020. BALDIBALLIN' reported net income of 1,500,000 for the year ended December 31, 2020 and paid cash dividend totaling 500,000 on December 31, 2020.
How much did JOVIT pay for the 30% interest in BALDIBALLIN'?
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