Reference no: EM132943751

Questions -

Q1. On July 1, 2009, Les Co. acquired 50,000 newly issued shares of Claypool Co. at P10 per share. Before the acquisition, Claypool had 100,000 ordinary shares outstanding. In 2009, Claypool reported profit of P5,000,000 profit, P2,000,000 of which was earned during the first half of 2009. On December 31, 2009, Claypool declared its 9% annual cash dividends.

a. How much is the investment income to be recognized by Les Co. in 2009?

b. How much is the balance of the investment in associate account on December 31, 2009?

c. Provide the journal entries in 2009.

Q2. On January 1, 2009, Steve Co. acquired 20,000 shares out of the 100,000 outstanding shares of Bailey Co. for a total cost of P200,000. During the year, Bailey reported profit of P1,000,000 and declared P200,000 cash dividends, If Steve Co. incorrectly accounted for the investment at cost (and recognized dividends as revenue) rather than equity method, what is the correcting entry to be made in 2010?