Strategic Cost Management
Strategic Cost Management
1. c
2. d
3. a
4. c
5. a
6. b
7. c
8. d
9. d
10. c
Problem 3: EXERCISES
1.
1,105,000 12/31/20x1
2.
Goodwill 700,000
*Alternative Solution
d. Compute for the carrying amount of the investment on Dec. 31, 20x1.
01/01/20x1 4,000,000
Share in profit, gross 600,000 250,000 cash dividends
Overvaluation 200,000 100,000
4,450,000 12/31/20x1
3.
Journal Entries:
20x1 entries
Jan. Investment in associate 6,000,000
Cash 6,000,000
1, 20x1 to record the purchase of investment
Dec. 31, Cash (1.2M×30%) 300,000
20x1 Investment in associate(squeeze) 300,000
Share in profit of associate (2M×30%) 600,000
to record the cash dividends and the share in the associate's
profit (compound entry)
Dec. 31, Share in profit of associate[(20M-16M) ÷10yrs] ×30%] 120,000
20x1 Investment in associate 120,000
to record the depreciation of undervalued building
20x2 entries
July Investment in associate (1M×30%) 300,000
Share in profit of associate to record share in associate 300,000
1, 20x2 profit for the six month ended June 30, 20x2
b. Compute for the total effect of the investment in Cam shares in Melo Co.'s 20x2 profit or loss.
4.
Case 1:
Answers:
July 1, 20x2 Cash 800,000
Loss on sale of investment 400,000
Investment in associate(2.4M×1/2) 1,200,000
to record sale
July 1, 20x2 Translation of foreign operation 1,000,000
Gain on reclassification - P/L 1,000,000
to record the reclassification adjustment of the
OCI to P/L
Case 2:
Case 3:
Analysis:
*The carrying amount of the investment on Dec. 31, 20x1 id P1,700,000, equal to the year-end fair
value.
July 1, 20x2 Investment in associate (15,000×P140) 2,100,000
Cash 2,100,000
to record the purchase of additional share
Carrying amount
Purchase cost of additional shares acquired 2,100,000
Reclassification date fair value existing inventory 1,400,000
Carrying amount of investment in associate - 7/1/x2 3,500,000
*Del, Inc. reported loss of P200,000 in 20x3. In addition, Wat incurred constructive obligation of
P240,000 in favor of Del and made payments of P160,000 on behalf of Del.
> The P200,000 loss will not be recognize because the balance of the interest in associate is
already reduced to zero. The 'should have been' share of P40,000 (200,000 loss in 20x3 ×20%) is
disclosed as loss not recognized. The cumulative balance of "losses not recognized" is P1,000,000
(P60,000 in 20x2 + P40,000 in 20x3).
1. c
2. a
3. a
4. d
5. c
6. d
7. b
8. a
9. c
10. a
11. b
12. d
13. a
14. a
15. c
16. a