Problem 1

Journal Entries
Jan 1, 20x5 Investment in Associate ₱250,000
Cash ₱250,000
To record the initial investment in associate to Alex.

Dec 31, 20x5 Investment in Associate 51,000

Share in Net Income 51,000
To record the shares in the net income of Alex.

Impairment Loss 20,000

Investment in Associate 20,000
To record the impairmen in the investment of Alex.

Investment in Associate calculation

Investment in Associate
beg. Balance 01/02/20x5 250,000 20,000 impairment loss
share in net income 51,000 281,000 end. Balance 12/21/20x5
301,000 301,000

Problem 2
Year 1 Income 80,000
Interest x 30%
24,000 b

Journal Entries
a Jan. 2, 2019 Investment in Associate ₱200,000
Cash ₱200,000
To record the investment in associate to South Co.

b Dec. 31, 2019 Investment in Associate 24,000

Share in profit 24,000
To record share in profit.

Cash 15,000
Investment in Associate 15,000
To record share in dividend of South Co.

c June 20, 2020 Investment in Associate 30,000

 Share in profit 30,000
To record share in profit.

d July 1, 2020 Cash 150,000

Investment in Associate 119,500
Gain on sale of investment 30,500
To record the sale of share of 15% voting rights.

Investment in Associate 30,500

Gain from remeasurement to fair value 30,500
To remeasure the retained investment of 25% voting rights.

Assuming FVTPL Financial Assets-FVTPL 150,000

Investment in Associate 150,000
To reclassify the retained investment as financial asset at FVTPL.

Assuming FVOCI Financial Assets-FVOCI 150,000

Investment in Associate 150,000
To reclassify the retained investment as financial asset at FVOCI.

e Oct. 1, 2020 Cash 9,000

Dividend Revenue 9,000
To record the dividend revenue from South Co.

f Dec. 31, 2020

FVTPL Financial Asset-FVTPL 150,000
Investment in Associate 150,000
To record the fair value of P150 per share.

FVOCI Financial Asset-FVOCI 150,000

Investment in Associate 150,000
To record the fair value of P150 per share.

Investment Balance
a January 2, 2019
Investment in Associate
Investment 200,000
200,000
b December 31, 2019
Investment in Associate
Investment 200,000 15,000 Dividend
Share in profit 24,000
224,000 15,000
Dec. 31 209,000

c June 20,2020
Investment in Associate
Investment 200,000 15,000 Dividend
Share in profit 24,000
224,000 15,000
Dec. 31 209,000
Share in profit 30,000
239,000

d July 1, 2020
Before reclassification
Investment in Associate
Beg. Bal. 01/02/2019 200,000 15,000 Share in dividends
Share in the net profit 54,000 119,500 Sale of portion of voting stocks
gain from remeasurement to FV 30,500
284,500 134,500
End. Bal. 12/31/2019 150,000

After reclassification
FVTPL
Financial Asset at FVTPL
Beg. Bal. 07/01/2020 150,000
End. Bal. 07/01/2020 150,000

FVOCI
Financial Asset at FVOCI
Beg. Bal. 07/01/2020 150,000
End. Bal. 07/01/2020 150,000

e December 31, 2020

FVTPL
Financial Asset at FVTPL
 Beg. Bal. 07/01/2020 150,000
End. Bal. 12/31/2020 150,000

FVOCI
Financial Asset at FVOCI
Beg. Bal. 07/01/2020 150,000
End. Bal. 12/31/2020 150,000

Solutions
Problem 1
b profits x equity share
170,000 x 0.30
= 51,000

Problem 2
b 80,000 x 0.30
= 24,000

50,000 x 0.30
= 15,000

d carrying amount = 239,000 x 1/2

= 119,500