30%

2017 2017
Net income of the Asssociate 2,500,000
Percentage of ownership 30%
Share in the net income before adjustment 750,000.00
Unrealized profit on sale of equipment (100,000.00)
Realized profit on sale of equipment 20,000.00
Share in unrealized profit (Upstream) (15,000.00)
Adjusted share in the Net income 655,000.00 Q1). B

Sales Price 400,000.00

Cost of Inventory (300,000.00)
Unrealized profit on sale of equipment 100,000.00
Estimated useful life 5
Realized profit on sale of equipment 20,000.00

Sales Price 350,000.00

Cost of equipment (300,000.00)
Unrealized profit on sale of equipment 50,000.00
Percentage of ownership 30%
Share in unrealized profit (Upstream) 15,000.00

2018 2018
Net income of the Asssociate 4,000,000.00
Percentage of ownership 30%
Share in the net income before adjustment 1,200,000.00
Realized profit on sale of equipment 20,000.00
Realized profit in the ending inventory (Upstream) 15,000.00
Unrealized profit on the ending inventory (150,000.00)
Adjusted share in the Net income 1,085,000.00 Q2). B

Sales Price 350,000.00

Cost of Equipment (300,000.00)
Unrealized profit on sale of equipment 50,000.00
Percentage of ownership 30%
Realized profit in the ending inventory (Upstream) 15,000.00

Sales Price 550,000.00

Cost of Inventory (400,000.00)
Unrealized profit on the ending inventory(Downstream) 150,000.00

2017 Journal Entries

Investment in Associate 5,000,000.00
Cash 5,000,000.00

Cash 270,000.00
Investment in Associate 270,000.00
 Investment in Associate 655,000.00
Investment income 655,000.00

2018 Investment in Associate 5,000,000.00

Cash 5,000,000.00

Cash 600,000.00
Investment in Associate 600,000.00

Investment in Associate 1,085,000.00

Investment income 1,085,000.00

Carrying Amount of the investment as of December 31, 2017:

Acquisition cost 5,000,000.00
Investment income 655,000.00
Dividends received (270,000.00)
5,385,000.00 Q3). A

Carrying Amount of the investment as of December 31, 2018:

Acquisition cost 5,385,000.00
Investment income 1,085,000.00
Dividends received (600,000.00)
5,870,000.00 Q4). B

What if the company is a Small/Medium Entity? and uses the equity method
What is the carrying amount of the investment on 12/31/2018?

Carrying Amount of the investment as of December 31, 2018:

Acquisition cost 5,385,000.00
Investment income 1,085,000.00
Dividends received (600,000.00)
Amortization of Goodwill (80,000.00)
5,790,000.00 Q5). A

Goodwill 400,000
Estimated useful life 10
Amortized goodwill over useful life 40000
Recognize goodwill for the year 2017 & 2018 2
Amortization of Goodwill 80000
Source http://www.picpa.com.ph/attachment/292018161238886.pdf