Reference no: EM133180310

Question - On January 2, 2015 Shin Ga Industries acquired 150,000 ordinary shares for 15% interest in Heaven Corp. by paying P8,000,000. On this date, the fair values of Heaven Corp.'s net assets total P40,000,000; the value of all assets and liabilities are fairly stated. In addition, Shin Ga paid P20,000 commission in relation to the acquisition of investment. This investment is held for trading.

Heaven Corp. publicly trades its equity securities in the Philippine Stock Exchange; hence, the prices of its equity securities are readily available. The following information pertains to Heaven Corporation:

During 2016, Heaven Corp. declared 10% stock dividend.

On January 2, 2018, Shin Ga acquired additional 275,000 ordinary shares, which represents 25% interest, of Heaven Corporation for P27,000,000. On the same date, the fair value of Heaven's net assets amounted to P95,000,000. Inventory, which remained unsold until the following year, was carried in the books at P500,000 lower than its fair value, machinery with fair value of P1,500,000 higher than the carrying amount and life of 4 years.

During 2018, Heaven Corp. sold inventories, costing P500,000, to Shin Ga for P750,000. Half of the investment remained unsold at the end of the year.

On July 1, 2019, the associate also sold equipment costing P1,500,000 for P1,080,000. The equipment has an accumulated depreciation of P200,000 and remaining life of 5 years.

On January 2, 2020, the company sold 235,750 ordinary shares from its investment in Heaven Corporation. It was sold for P22,000,000.

Requirements -

1. Prepare journal entries to record the above transactions relevant to the investment starting 2018 to 2020.

2. Compute for the balance of the appropriate investment account at the end of each year.