ACCT 112 (INTERMEDIATE ACCTG 1) Quiz 9
Pendang
WRITE YOUR NAME BELOW:
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Instructions:
1. Pls. do NOT use erasable pen/pencil/ballpen such as Frixion
pen, and other similar writing devices.
2. Pls. use regular ballpen with BLACK or BLUE ink.
3. Pls. write your computations in a sheet of yellow paper
starting with #1.
4. Pls. properly number and label your computations. Ex.
Problem A, #1, followed by #2, etc.
5. Erasures are allowed in the computations, but not by using
correction tape/liquid/etc. Just mark an “X” or write one line
across the answer you want to change, then write the new
answer beside the crossed out answer.
6. Labels and computations may be shortened/abbreviated.
7. Pls. box your final answer. No points will be given if
instructions are not followed.
MULTIPLE CHOICE. THEORY
1. Which of the following is not an evidence of existence of significant
influence by an investor?
a. Representation on the board of directors
b. Material transactions between the investor and investee
c. Interchange of rank and file personnel
d. Provision of essential technical information
2. Which of the following is incorrect regarding the effect on carrying
amount of the investment?
Investor’s share in the
change in net assets amount of the
investment
a. Profit or loss Increase for share in loss
b. Dividends Decrease
c. Other comprehensive income Decrease for share in loss
d. Discontinued operations Decrease for share in loss
3. Potential voting rights are
a. Considered in the computation of share in profit or loss when such
rights are currently exercisable
b. Ignored in assessing the existence of significant influence when
such rights are not currently exercisable
c. Are considered only when assessing the existence of control over
the investee
d. Are not considered if management does not intend to actually
exercise or convert the rights
4. Which of the following is incorrect?
a. If the associate has outstanding cumulative preference shares that
are held by parties other than the investor, and classified as equity,
one-year dividends must be deducted before computing the share in
profits or losses.
b. If the associate has non-cumulative preference shares that are
held by parties other than the investor and classified as equity,
dividends are deducted only when declared, before computing the
share in profits or losses.
c. If the associate has outstanding cumulative preference shares that
are held both by the investor and other parties and classified as
equity, one-year dividends for other parties must be deducted before
computing share in profits or losses, and the investors share in
preference shares are then added.
d. If the associate has preference shares that are held by other
parties other than the investor, and classified as liability, dividends
are deducted only when declared before computing the share in
profits and losses.
5. In which of the following circumstances will the investor not be
likely to lose significant influence?
a. When the associate becomes subject to the control of a
government agency
b. When the investor acquires additional shares of the associate and
gains control over it
c. When the investor sells an insignificant part of his investment in the
associate and accounts for the remainder under the equity method.
d. When the investor sells 75% of his investment in the associate and
accounts for the remainder under fair value.
In God alone, I place my trust.
APRIL 30, 2024 Instructor: T.S.
TRUE OR FALSE. Write Black if your answer is True. Write Red if
your answer is False.
1. The equity method is used for investments in equity securities
when the investor exercises control over the investee.
2. Under the equity method, the investment account is periodically
adjusted to reflect the changes in the underlying net assets of the
investee.
3. When the investor loses significant influence over an associate, all
amounts recognized in other comprehensive income in relation to the
associate shall be accounted on the same basis as would be required
if the associate had directly disposed of the related assets.
4. For downstream sale of inventory, the recognition of the share in
the profits from the downstream sale is only when the inventory is
sold to third parties.
5. When the inter-entity transaction is upstream, the unrealized profit
relates only to the investor, thus the entire unrealized profit is
“eliminated” in the computation for the unrelated investor interest.
PROBLEM SOLVING. Pls. show supporting computations for
amounts not found in the problem.
A. ABC Co. owns 30% of XYZ Co.’s outstanding ordinary shares.
On January 1, 2023, XYZ Co. sold an equipment with carrying
amount of P100,000 and remaining useful life of 10 years to ABC for
P120,000. Gain of P20,000 was recorded by XYZ. Both companies
use the straight line method of depreciation. XYZ reported
P1,000,000 net profit on December 31, 2023 and P1,200,000 in
December 31, 2024.
Required: Provide the journal entries for
a) Share in profit in 2023 and
b) Share in profit in 2024
B. ABC Co. owns 30% of ABC Co.’s ordinary shares. The
balances as of December 31, 2023 are as follows:
Investment in associate P100,000
Trade accounts receivables – XYZ 150,000
Advances to associates 60,000
Loans receivable – secured 75,000
Investment in preference shares 50,000
XYZ reported a net loss of P700,000 in 2023. While in 2024, XYZ
reported a net loss of P300,000, and in 2025, XYZ reported a net
income of P400,000
Required: Provide the journal entries to record the share in the
loss for the following:
a) 2023
b) 2024
c) 2025
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