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PROBLEM 18-4 TRANSACTION

REQUIREMENT 1: SME X – COST MODEL
COSTS
2017
Jan. 1 Investment in Jointly Controlled Entity- A ₱ 100,000
Investment in Jointly Controlled Entity- B ₱ 150,000
Investment in Jointly Controlled Entity- C ₱ 280,000
Cash ₱ 530,000
To record acquisition of 25% interest to a jointly
controlled entity.

1 Investment in Jointly Controlled Entity- A *₱ 1,000

Investment in Jointly Controlled Entity- B **₱ 1,500
Investment in Jointly Controlled Entity- C ***₱ 2,800
Cash ₱ 5,300
To record transaction cost.

*100,000 x 1% = ₱ 1,000
**150,000 x 1% = ₱ 1,500
***280,000 x 1% = ₱ 2,800

2 Cash ₱ 2,500
Dividend Income (10,000 x 25%) ₱ 2,500
To record dividend received from Entity A.

Dec. 31 Dividend Receivable ₱ 20,000

Dividend Income (80,000 x 25%) ₱ 20,000
To record share of dividends declared by Entity B.

31 Impairment Loss ₱ 140,300

Investment in Jointly Controlled Entity- C ₱ 140,300
To record impairment loss on Investment.

Determined Fair Value of Investment in Entity C, Dec. 31 ₱ 150,000

Cost to sell (150,000 x 5%) (_____ _ 7,500)
Recoverable Amount, Dec. 31 ₱ 142,500
Carrying Amount of Investment in Entity C, Dec.31:
Cost ₱ 280,000
Transaction Cost (280,000 x 1%) 2,800 (__ 282,800)
Impairment Loss ( ₱ 140,300)
Checking for Possible Impairment:

Investment in Entity A:

Determined Fair Value of Investment in Entity A, Dec. 31 ₱ 130,000

Cost to sell (130,000 x 5%) ( 6,500)
Recoverable Amount, Dec. 31 ₱ 123,500
Carrying Amount of Investment in Entity A, Dec.31:
Cost ₱ 100,000
Transaction Cost (100,000 x 1%) 1,000 ( 101,000)
Increase ₱ 22,500

Investment in Entity B:

Determined Fair Value of Investment in Entity B, Dec. 31 ₱ 290,000

Cost to sell (290,000 x 5%) ( 14,500)
Recoverable Amount, Dec. 31 ₱ 175,500
Carrying Amount of Investment in Entity B, Dec.31:
Cost ₱ 150,000
Transaction Cost (150,000 x 1%) 1,500 ( 151,500)
Increase ₱ 124,000