Unrealized gross profit in ending inventory of entity

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Unrealized gross profit in ending inventory of Entity A (P50,000 x 20% x 60%) ( 6,000) Adjusted investment income of Entity A for 2018 594,000 Number 30 Answer A Initial measurement of Investment in Entity C (Entity B’s Book) 2,000,000 Add: Unadjusted investment income of Entity B for 2018 (P1,000,000 x 40%) 400,000 Add: Unrealized loss on sale of machinery (P20,000 x 40%) 8,000 Less: Realized loss on sale of machinery (P20,000/2 x 6/12 x 40%) ( 6,000)
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Less: 2018 dividend received from Entity C (P400,000 x 40%) ( 160,000) December 31, 2018 Investment in Entity C (B’s Book ) 2,242,000 Number 31 Answer A Transaction costs – Expense as incurred under Fair Value Model ( 20,000) Unrealized holding gain on change in fair value 60,000 Dividend income (P30,000 x 50%) 15,000 Effect on net profit under Fair Value Model 55,000 Fair value (10,000 x 56) 560,000 Acquisition cost 500,000 Unrealized gain 60,000 Number 32 Answer D Initial measurement of Investment under Equity Method (P500,000 + P20,000) 520,000 Add: Share in net income of Joint Venture (P100,000 x 50%) 50,000 Less: Dividend received from Joint Venture (P30,000 x 50%) ( 15,000) Investment on December 31, 2018 under equity method 555,000 Note: There is no impairment loss because fair value less cost to sell of P560,000 is higher than carrying amount. Number 33 Answer A Carrying amount of Investment under Cost Method (P200,000 + P10,000) 210,000 Page 7 Number 34 Answer C Share in net income of joint venture (P50,000 x 50%) 25,000 Impairment loss of Investment under equity method (15,000) Effect on net profit under Equity Method 10,000 Investment in Entity C (200,000 + 10,000) 210,000 Share in 2018 net income of Entity C (50,000 x 50%) 25,000 Share in cash dividend (50% x 10,000) ( 5,000) Carrying amount – 12/31/2018 230,000 Recoverable amount – value in use 215,000 Impairment loss 15,000 Number 35 Answer A 2018 2019 Sales 300,000 450,000 Collections ( 150,000) ( 150,000) Accounts written off ( 100,000) ( 150,000)
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Installment accounts receivable, 12/31/2019 50,000 150,000 Gross profit rates 30% 40% Deferred gross profit, 12/31/2019 15,000 60,000 Total (P75,000) Number 36 Answer B 2018 2019 2020 Total Collections 72,500 80,000 62,500 Gross profit rate: 2018: 60,000/240,000 25% 2019: 68,750/250,000 27.5% 2020: 84,000/300,000 _______ _______ 28% Realized gross profit 18,125 22,000 17,500 57,625 Number 37 Answer C 2018 sale 2019 sale Unrecovered cost: Unpaid balance 15,000 16,000 Less: Deferred gross profit 2018: 15,000 x 25% 3,750 2019: 16,000 x 27.5% _______ 4,400 Unrecovered cost 11,250 11,600 Value of repossess merchandise 6,000 9,000 Loss on repossession ( 5,250) ( 2,600) (7,850) Number 38 Answer B 2019 Sales 2020 Sales Deferred gross profit – December 31, 2020 9,000 72,000 Divide by GPR (GP/IS) 24% 30% Installment accounts receivable, December 31, 2020 37,500 240,000 Total balance of receivable on December 31, 2020 is (37,500 + 240,000) 277,500 Page 8 Number 39 Answer B Unadjusted installment sales 400,000 Add: Undervaluation of traded car (P150,000 – P50,000) 100,000 Adjusted installment sales 500,000 Less: Cost of production of car ( 300,000) Adjusted gross profit 200,000 Divided by Adjusted installment sales /500,000 Adjusted gross profit rate based on sales 40%
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Installment receivable 400,000 Down payment 25% x 400,000) (100,000) Trade in allowance ( 50,000 ) Installment receivable balance 250,000 Annual installment (250,000/5) 50,000 Down payment 100,000 Fair value of trade in 150,000 Annual payment – first year 50,000 Total collections 2018 300,000 Realized gross profit 2018 (40% x 300,000) 120,000 Number 40 Answer C Fair value of repossessed inventory 110,000 Less: Unrecovered cost of defaulted installment receivable (P200,000 x 60%) (120,000) Loss on Repossession ( 10,000) Number 41 Answer B Allocated revenue to construction of stall (P400,000 x 20/50) 160,000 Stand-alone selling price Fraction Construction of stall 200,000 20/50 Purchase of raw materials 250,000 25/50 Tradename 50,000 5/50 500,000 Number 42 Answer C
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