Chapter 11

Problem I
1.
• Contributions of cash by the operators
Cash 360,000
KK Company 180,000
Cerise Company 180,000
Contribution by joint operators.

• Use of cash and loan to buy machinery & equipment and raw materials
Machinery and equipment 96,000
Cash 60,000
Loans payable – machinery and equipment 36,000
Contribution by joint operators.

Materials 78,000
Accounts payable 78,000
Acquisition of materials.

• Labor incurrence
Payroll 86,400
Cash 84,000
Accrued payroll 2,400
Annual labor.

• Loans from the bank

Cash 72,000
Bank loans payable 72,000
Amount borrowed.

• Repayment of loan – machinery and equipment and other factory expenses

Loan payable – machinery and equipment 12,000
Cash 12,000
Partial payment of loan.

Accounts payable 50,400

Cash 50,400
Payment of trade creditors.

Factory overhead control – heat, light and power 156,000

Cash 156,000
Payment of manufacturing expenses such as heat, light
and power.

• Depreciation of machinery and equipment

Factory overhead control – depreciation 9,600
Accumulated depreciation 9,600
Depreciation of equipment.

• Transfer of materials, labor and overhead to Work-in-Process

Work-in-process 309,600
Payroll 86,400
 Materials 57,600
Factory overhead control – heat, light and power 156,000
Factory overhead control – depreciation 9,600
Allocation of costs to work-in-process

• Transfer of Work-in-Process to Finished Goods Inventory.

Finished goods 216,000
Work-in-process 216,000
Allocation to finished goods

• Transfer of Finished Goods Inventory to Joint Operators throughout the year

KK Company 96,000
DD Company 96,000
Finished goods 192,000
Delivery of output to joint operators.

2.
Cash
Contribution – Drei 60,000 Machinery and equipment
Work-in-Process
180,000
Labor
Contribution – Cerise 216,000
84,000 Laborto Finished Goods
86,400
180,000
Materials
Bank loan 12,000 Machinery and equipment
57,600
60,000
Factory Overhead – heat, etc. 50,400 Accounts payable
156,000 156,000 Factory overhead control
Factory
Balance,Overhead
12/31/x4 – depreciation
9,600
57,600
Balance, 12/31/x4
93,600
3.
a. Total assets, P282,000
b. KK’s investment, P84,000
c. DD’s investment, P84,000
December 31, 20x4
Assets
Current Assets
Cash P 57,600
Finished goods inventory 24,000
Work-in-Process inventory 93,600
Materials inventory 20,400
Total current assets P 195,600
Non-current Assets
Equipment P 96,000
Less: Accumulated depreciation 9,600 86,400
Total Assets P282,000

Liabilities and Net Assets

Current Liabilities
Accrued payroll P 2,400
Accounts payable 27,600 P 30,000
Non-current Liabilities
Bank loan payable P 60,000
Loan payable – machinery and equipment 24,000 __84,000
 Total Liabilities P 114,000
Net Assets 168,000
Total Liabilities and Net Assets P282,000

Joint Operator’s Equity

KK Company: Contributions – January 1, 20x4 P 180,000
Cost of inventory distributed ( 96,000) P 84,000

DD Company: Contributions – January 1, 20x4 P 180,000

Cost of inventory distributed ( 96,000) P 84,000
Total Joint Operator’s Equity P168,000

Problem II
1. Ayala Corp. shall account for its interest in the joint operation as follows:

Current assets (50% x P720,000) 360,000

Property, plant and equipment (60% x P1,200,000) 720,000
Expenses (60% x 720,000) 432,000
Liabilities (75% x P960,000) 720,000
Revenue (55% x P1,200,000) 660,000
Interests in Joint Operation 132,000
To recognize the share of Entity A in the assets, liabilities,
revenues and expenses as follows:

2. The assets, liabilities, revenue and expenses are recognized and combined with those of
Ayala’s own financial statements. The interest in joint operations at the end of the
reporting period is reduced to P228,000, computed as follows:

Interests in Joint Operation P 360,000

Less: Share in assets, liabilities, revenues and expenses 132,000
Interest in operation, ending balance P 228,000

Problem III
1. The joint operator, Entity A account for their interests in the joint operation as follows:
Entity X—in 20x4

Profit or loss (construction costs) 4,800,000

Cash/Accumulated depreciation/Trade payables 4,800,000
To recognize the construction costs incurred in 20x4

Cash 8,400,000
Profit or loss (construction revenue) 8,400,000
To recognize the construction costs incurred in 20x4

Entity Y—in 20x4

Profit or loss (construction costs) 7,200,000

Cash/Accumulated depreciation/Trade payables 7,200,000
To recognize the construction costs incurred in 20x4

Cash 8,400,000
Profit or loss (construction revenue) 8,400,000
To recognize the construction costs incurred in 20x4

Problem IV
The joint operator, Entity K account for their interests in the joint operation as follows:

January 1, 20x4 (P12,000,000 / 5 = P2,400,000)

Property, plant and equipment (interest in an aircraft) 2,400,000
Cash 2,400,000
To recognize the purchase of an ownership-interest in a
jointly controlled aircraft.

In 20x4
Cash 12,000
Profit or loss (rental income) 12,000
To recognize income earned in renting to others the use
of the aircraft in 20x4.

Profit or loss (aircraft operating expenses) 180,000

Cash 180,000
To recognize the costs of running an aircraft in 20x4.

Profit or loss (depreciation expense) 120,000

Accumulated depreciation (interest in an aircraft 120,000
To recognize depreciation of an ownership-interest in a
jointly controlled aircraft in 20x4: P12,000,000/20 years
= P600,000/5 operators = P120,000
share for each joint operator.

Problem V
1. The following are the summaries of the above transactions for a joint operation in the
form of a partnership:

Investment in
Event Joint Operation AA BB CC
Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr.
a. P 12,000 P12,000
b. 120,000 120,000
P
6,000 6,000
c. 180,000 120,000 P60,000
d. P588,000 P204,000 P312,000 P72,000
e. 3,600 3,600 3,600 10,800
6,000 6,000
f. * ________ ___3,000 ___3,000 ________ ________ ______ _______ _______
P
P318,000 P597,000 P210,600 P252,000 P315,600 P 60,000 P81,600 16,800
NI** _297,000 ________ ________ __112,200 ________ _147,000 _______ 31,800
P597,000 P597,000 P210,600 P364,200 P315,600 P195,000 P81,600 P48,600
Cash**
*
Settle-
ment _______ ________ _153,600 ________ ________ _120,600 _______ _33,000
Totals P597,000 P597,000 P364,200 P364,200 P315,600 P315,600 P81,600 P81,600
* purchases, P300,000; cost of goods sold, P294,000; ending inventory P6,000 x 50% =
P3,000.

**NI – Net Income Allocation

AA BB CC Total
Allowance for cleaning-up operations P P
 3,000 3,000
Commission:
Aljon: 40% of P204,000 P81,600 81,600
P124,80
Elerie: 40% of P312,000 0 124,800
Mac: 40% of P72,000 28,800 28,800
10,20 40,80
Balance (75%: 25%) 30,600 0 _______ 0
P112,2 P135,00 P31,80 P279,00
Total 00 0 0 0
**Total credits of P597,000 – Total debits of P318,000 = P279,000, net income.

2. The cash settlement entry (refer to No. 1 for the computation of settlement) would be as
follows:
AA, capital 153,600
BB, capital 120,600
CC, capital 33,000

Therefore, BB will pay P120,600 and CC will pay, P33,000 to AA as final settlement for the
joint operations.

Problem VI
Schedule of Determination and Allocation of Excess

Date of Acquisition – January 1, 20x4

Cost of investment
Consideration transferred P2,016,000
Less: Book value of stockholders’ equity of Son:
Common stock (P3,600,000 x 30%) P 1,080,000
Retained earnings (P1,080,000 x 30%) 324,000 1,404,000
Allocated excess (excess of cost over book value) P 612,000
Less: Over/under valuation of assets and liabilities:
Increase in inventory (P240,000 x 30%) P 72,000
Increase in land (P960,000 x 30%) 288,000
Increase in building (P600,000 x 30%) 180,000
Decrease in equipment (P840,000 x 30%) ( 252,000)
Increase in bonds payable (P120,000 x 30%) ( 360,000) 252,000
Positive excess: Goodwill (excess of cost over fair value) P 360,000

The over/under valuation of assets and liabilities are summarized as follows:

Anton Co. Anton Co. (Over) Under
Book value Fair value Valuation
Inventories (sold in 20x4) P1,200,000 P1,440,000 P 240,000
Land 1,080,000 2,040,000 960,000
Buildings – net ( 10 year remaining life) 1,800,000 2,400,000 600,000
Equipment – net ( 7 year remaining life) 1,440,000 600,000 ( 840,000)
(1,320,000
Bonds payable (due January 1, 20x9) ( 1,200,000) ) ( 120,000)
Net P4,320,000 P5,160,000 P 840,000

A summary or depreciation and amortization adjustments is as follows:

Over/ 30% Current
Account Adjustments to be amortized Under thereof Life Year(20x4)
P
Inventories (sold in 20x4) 240,000 P 72,000 1 P 72,000
 Land 960,000 288,000 - -
Buildings – net ( 10 year remaining life) 600,000 180,000 10 18,000
( 840,000 ( 252,000
Equipment – net ( 7 year remaining life) ) ) 7 (36,000)
( 120,00 ( 36,000
Bonds payable (due January 1, 20x9) 0) ) 5 ( 7,200)
P
Net 840,000 P 252,000 P 46,800

The following are entries recorded by the parent in 20x4 in relation to its investment in joint
venture:
January 1, 20x4:
(1) Investment in DD Company 2,016,000
Cash 2,016,000
Acquired 30% joint control in DD Company.

January 1, 20x4 – December 31, 20x4:

(2) Cash 216,000
Investment in DD Company (P720,000 x 30%) 216,000
Record dividends from DD Company.

December 31, 20x4:

(3) Investment in DD Company 432,000
Investment income (P1,440,000 x 30%) 432,000
Record share in net income of DD Company.

December 31, 20x4:

(4) Investment income 46,800
Investment in DD Company……………………. 46,800
Record amortization of allocated excess of inventory,
equipment, buildings and bonds payable.

Thus, the investment balance and investment income in the books of TT Company is as
follows:

Investment in Joint Venture (DD Company)

Cost, 1/1/x4 216,000 Dividends – Son (720,000x
2,016,000 80%)
NI of Anton 46,800 Amortization
(1,440,000 x 30%)
432,000
Balance, 12/31/x4
2,185,200

Investment Income
Amortization NI of Son
46,800
432,000 (P1,440,000 x 30%)
385,200 Balance, 12/31/x4

To check the balance of Investment in Joint Venture (DD Company):

DD Company’s Stockholders’ Equity, 12/31/20x4:
P3,600,00
Common stock 0
 Retained earnings
P
Retained earnings,1/1/20x4 1,080,000
Net income – 20x4 1,440,000
1,800,00
Dividends – 20x4 ( 720,000) 0
Book value of stockholders’ equity of DD P5,400,00
Company,12/31/20x4 0
Multiplied by: Interest in Joint Venture 30%
P1,620,00
Book value of Interest in Joint Venture 0
Add: Unamortized allocated excess – 30% thereof
P252,000 – P46,800, amortization) 205,200
360,00
Goodwill 0
P2,185,20
Investment in Joint Venture (DD Company) – equity method 0

Multiple Choice Problems

1. a
Books of X
Inv. in JO X, capital Journal entry for settlement should
be:
Z, capital………………………..
6,500
4,000 6,500 2,500 X, capital……………………
2,500
2,500 Y, capital……………………
4,000

Books of Y
Inv. in JO Y. capital

2,500 6,500 4,000

4,000

Books of Z
Inv. in JO Z, capital

2,500 6,500
4,000

6,500

2.
Total credits - Investment in Joint Operations…………………………………P 25,810
Total debits - Investment in Joint Operations…………………………………. 19,750
Net income or total gain (credit balance)…………………………………….P 6,060

3. d
Jose, capital
8,500 investment
1,212 share in net income (P6,060 x
2/10)
9,712
4. a – The 20,000 shares should be valued at market value, thus, P800,000 (20,000 shares
x P40 per share)

5. b
Jose, capital
20,000 shares at P40/share P 198,000 (4,500 x P44) – Sales
P800,000
Expenses 125,000 (5,000 x P25)
3,000
13,600* (13,600 x P1) - Cash dividend
4,700
168,000 (6,000 x P28) - Sales
266,000 (7,600 x P35)
P807,700 P 770,600
Joint operation loss P
37,100

*
9/30 Shares issued (6,000 + 10,000 + 4,000) 20,000
10/20 Sold (4,500)
11/ 1 Stock dividend (20,000 – 4,500) x 20% 3,100
11/15 Sold (5,000)
Balance of shares outstanding before cash dividend 13,600

Therefore, Roxas share would be P11,130 (P37,100 x 6,000/20,000 shares)

6. c
Investment in Joint Operations
Share in net loss P400,000 Investment (10,000 shares x
P40)
P37,100 x (10,000/20,000)
P18,550
P381,450

7. b
Unrealized loss due to decline in the value of shares at the time of
investment P68,000
(P62 – P40) x 4,000 shares
Share in joint operation (P37,100 x 4/20) __7,420
Reduction of loss by cash dividend (P13,600 x 4/20) P98,140

8. a
Investment in Joint Operations
before net income or loss 15,000 25,000 ending inventory
10,000 net income

9. a (A- P10,000 x 50% = P5,000; B – P10,000 x 30% = P3,000; C – P10,000 x 20%)

10. a
Joint Operations Anson, Capital
Purchases 20,000 77,000 Sales (?) Unsold merchandise 600 20,000
 Contr/Invest 20,000 18,600
Profit(50%)
Expenses 800
1,800 600 38,600

42,600 77,000 38,000

to Alas
34,400 (P16,000+
P18,400)
2,800 (P600 + P2,200)
Unsold merchandise

37,200 Net profit

11. c – refer to No. 10 computation.

12. a
Investment in Joint Operations Santo, capital
Purchases 7,200 sales 10,000 Contribution/Invest
10,000
Freight-in 5,120 unsold 910 Share in NI
240
Freight-out (P10,000 + P240) x
260 1/2
10, 12,320 10,910
500
1,820

13. a – refer to No. 12 for computation

14. c
Investment in Joint Operations
before sale 3,500 Sales
6,500
Net loss
3,000

N, capital O, capital
1, 14,500 1, 6,500
100 100
13,400 5,400
Distribution of Loss:
M N O Total
Salary P 300 P - P - P 300
Balance, equally (1,100) (1,100) (1,100) (3,300)
P ( 900) P(1,100) P(1,100) P(3,000)

15. a – refer to No. 14 for computation

16. a

Investment in Joint Operations

Purchases 48,700 Sales
45,000
16,800
18,000
 Interest expense 40 Dividend
80
100
50
6 65,640
3,130
2,510 Net income
2,510

McKee, capital Nelson, capital

48,7 45,000 16, 18,000
00 800
80 50
40 1,225 share in NI 100 1,225 share in NI
2,40 2,405
5
17. a – refer to No 16 for computation
Nelson, capital 2,405
McKee 2,405

18. b
Investment in Joint Operations
Purchases 800 sales
950
Expenses 600
150
1,400
1,100
300 Net income

Bar, capital Car, capital

950 150
800 600
270 30
1,220 180
800 600
420 due to Due from
420
The entry for the settlement would be as follows (Car will pay Bar P420):
Bar, capital 420
Car, capital 420

Distribution of net income

Bar Car Total
Commission on net purchases:
20% x P950 P190 P190
Commission on sales:
25% x P800 200 200
25% x P600 P150 150
Balance, equally (120) (120) (240)
P270 P 30 P300)

19. b – refer to No. 18 for computations.

20. c
Investment in Joint Operations Tan, capital
15,000 before P/L 27,000
10,500 unsold merchandise unsold merch. 4,500 share in NI (1/3 x
10,500 P13,500)
Salary – Reyes 25,500 net income 10, 31,500
12,000 500
13,500 21,000

21. b
Revenues
Total cash receipts (P78,920 + P65,245) P144,345
Less: Cash investments (P30,000 + P20,000) 50,000
Cash sales P 94,345
Add: Proceeds from sale of remaining assets 60,000
Total Revenue P154,345
Less: Expenses (P62,275 + P70,695) 132,970
Net income P 21,375

22. c
Benin, capital Sucat, capital
Receipts 30,000 Contribution Receipts 20,000 Contribution
78,920 65,425
62,275 Disbursement 70,695 Disbursement
12,825 Share in NI (3/5) 8,550 Share in NI
(2/5)
78, 105,100 65, 99,245
920 425
26,180 33,820
23. d
N’s books: it shows P5,000 receivable from P, and P3,000 payable to O; thus, N should
receive net cash of P2,000:
O, capital 3,000
Cash 2,000
P, capital 5,000

O’s books: it shows P5,000 receivable from P, and P2,000 payable to N; thus, O should
receive net cash of P3,000:
N, capital 2,000
Cash 3,000
P, capital 5,000

P’s books: it shows P2,000 payable to N and P3,000 payable to O; thus, in final
settlement, P should pay a total of P5,000; P2,000 and P3,000 to N and O, respectively:
N, capital 2,000
O, capital 3,000
Cash 5,000

24.
The Investment in Basket Co. as of December 31 is as follows:
Acquisition cost, January 1, 2013 P 500,000
Add (deduct):
Share in net income (P90,000 x 40%]
36,000
Share in dividends (P30,000 x 40%) ( 12,000)
Amortization of allocated excess ( 16,400)
Investment balance on December 31 P 507,600
 Cost of investment P 500,000
Less: Book value of interest acquired [40% x (P1,400,000 – P500,000)] 360,000
Allocated excess P 140,000
Less: Over/undervaluation of assets and liabilities:
Increase in building (P140,000 x 40%)
56,000
Increase in trademark (P210,000 x 40)
84,000

Amortization of allocated excess:

Building: P56,000 / 7 years P 8,000
Trademark: P84,000 / 10 years
8,400

25. b
The joint arrangement is a joint venture because it needs unanimous consent to all
parties involved. The parties recognize their rights to the net assets of Harrison Company
as investments and account for them using the equity method.

The Investment in Basket Co. as of December 31 is as follows:

Acquisition cost, January 1, 2013 P 500,000
Add (deduct):
Share in net income (P90,000 x 40%]
36,000
Share in dividends (P30,000 x 40%) ( 12,000)
Amortization of allocated excess ( 16,400)
Investment balance on December 31 P 507,600

Cost of investment P 500,000

Less: Book value of interest acquired [40% x (P1,400,000 – P500,000)] 360,000
Allocated excess P 140,000
Less: Over/undervaluation of assets and liabilities:
Increase in building (P140,000 x 40%)
56,000
Increase in trademark (P210,000 x 40)
84,000

Amortization of allocated excess:

Building: P56,000 / 7 years P 8,000
Trademark: P84,000 / 10 years
8,400
Total P 16,400

26. b – refer to No. 25 for further discussion.

The Income from Investment in Basket Co. on December 31 is as follows:
Share in net income (P90,000 x 40%] P
36,000
Amortization of allocated excess ( 16,400)
Income from Investment on December 31 P 19,600
27. d
The joint arrangement is a joint venture because it needs unanimous consent to all
parties involved. The parties recognize their rights to the net assets of Harrison Company
as investments and account for them using the equity method.

The Investment in Goldman Co. as of December 31, 2015 is as follows:

Acquisition cost, January 1, 2013 P 600,000
Add (deduct):
Share in net income [(P140,000 x 3 years) x 40%] 168,000
Share in dividends [(P50,000 x 3 years) x 40%]
(60,000)
Amortization of allocated excess ( 0)
Investment balance on December 31 P 708,000

Cost of investment P 600,000

Less: Book value of interest acquired (40% x P1,200,000) 480,000
Allocated excessP 120,000
Less: Over/undervaluation of assets and liabilities
0
Goodwill P 120,000

There is no indication as to impairment of goodwill.

28. d
To determine whether a contractual arrangement gives parties control of an arrangement
collectively, it is necessary first to identify the relevant activities of that arrangement.
That is, what are the activities that significantly affect the returns of the arrangement?

When identifying the relevant activities, consideration should be given to the purpose
and design of the arrangement. In particular, consideration should be given to the risks
to which the joint arrangement was designed to be exposed, the risks the joint
arrangement was designed to pass on to the parties involved with the joint arrangement,
and whether the parties are exposed to some or all of those risks.

In many cases, directing the strategic operating and financial policies of the
arrangement will be the activity that most significantly affects returns. Often, the
arrangement requires the parties to agree on both of these policies. However, in some
cases, unanimous consent may be required to direct the operating policies, but not the
financial policies (or vice versa). In such cases, since the activities are directed by
different parties, the parties would need to assess which of those two activities
(operating or financing) most significantly affects returns, and whether there is joint
control over that activity. This would be the case whenever there is more than one
activity that significantly affects returns of the arrangements, and those activities are
directed by different parties.

Based on the ownership structure, even though Wallace can block any decision, Wallace
does not control the arrangement, because Wallace needs Zimmerman to agree —
therefore joint control between Wallace and Zimmerman (since their votes and only their
votes, together meet the requirement). Because they are the only combination of parties
that collectively control the arrangement, it is clear that Wallace and Zimmerman must
unanimously agree.

The appropriate method for the joint venture is the equity method. The Income from
Investment in Gold Co. on December 31, 2015 is as follows:
 Share in net income (P140,000 x 40%) P
56,000
Amortization of allocated excess ( 0)
Income from Investment on December 31, 2015 P 56,000

29. d
No joint control — multiple combinations of parties could be used to reach agreement
and collectively control the arrangement (i.e., Wallace and Zimmerman or Wallace and
American could vote together to meet the requirement). Since there are multiple
combinations, and the contractual agreement does not specify which parties must agree,
there is no unanimous consent.

It should be noted that since there is no joint control as indicated per problem and the
presence of 50% ownership holding is presumed to give significant influence of Wallace
over Goldman, unless it can be clearly demonstrated that this is not the case. Therefore,
Goldman Company is considered as an associate instead of a joint venture.

The appropriate method for Investment in Associates is the equity method. The Income
from Investment in Gold Co. on December 31, 2015 is as follows:
Share in net income (P140,000 x 40%) P
56,000
Amortization of allocated excess ( 0)
Income from Investment on December 31, 2015 P 56,000

30. d
No joint control – multiple combinations could be used to reach agreement.

It should be noted that since there is no joint control as indicated per problem and the
presence of 35% ownership holding is presumed to give significant influence of Wallace
over Goldman, unless it can be clearly demonstrated that this is not the case. Therefore,
Goldman Company is considered as an associate instead of a joint venture.

The appropriate method for Investment in Associates is the equity method. The Income
from Investment in Gold Co. on December 31, 2015 is as follows:
Share in net income (P140,000 x 40%) P
56,000
Amortization of allocated excess ( 0)
Income from Investment on December 31, 2015 P 56,000

31. a – downstream transaction (refer also to consolidation for corollary analysis)

Gross Profit Markup: P36,000/P90,000 = 40%
Inventory Remaining at Year-End P20,000
x: Markup 40%
Unrealized profit in ending inventory P 8,000
x: Ownership 30%
Intercompany Unrealized profit in ending
inventory P 2,400

Multiple Choice Problems – SME for Joint Ventures

1. a
2. a
3. a
4. a
5. c
6. a
7. a
8. a
9. c
10. a
11. a
12. c
13. a
14. a
15. b
16. c
Cost of investment in entity Z:
Purchase price…………………………………………………………………….. P
28,000
Add: Transaction costs (1% x P28,000)………………………………………
280
Costs…………………………………………………………………………………. P
28,280
Less: Fair value on December 31, 20x4……………………................................P 15,000
Less: Costs to sell (5% x P15,000)…………………………………………….. 750
14,250
Impairment loss……………………………………………………………………….. P
14,030

17. d
No entry required only the decrease or increase in fair value is recognized to profit
and loss.

18. a
Cost of investment in entity Z:
Purchase price…………………………………………………………………….. P
28,000
Add: Transaction costs (1% x P28,000)………………………………………
280
Initial costs………………………………………………………………………….. P
28,280
Less: SME A’s share of entity Z’s loss for the year (25% x P20,000)……......
5,000
Costs of investment, December 31, 20x4…………………………………….
P23,280
Less: Fair value on December 31, 20x4…………………….................................P 15,000
Less: Costs to sell (5% x P15,000)…………………………………………….. 750
14,250
Impairment loss……………………………………………………………………….. P
9,030

19. b
Cost of investment in entity Z………………. ……………………………………………… ..P
28,000
Less: Fair value on December 31, 20x4………………….....................................................
15,000
Decrease in fair value on December 31, 20x4……………………………………………P
13,000

20. a
Entity X:
Cost of investment in entity X………………. …………………………………………… P
10,000
Less: Fair value on December 31, 20x4…………………...............................................
13,000
Increase in fair value on December 31, 20x4………………………………………… P
13,000

Entity Y:
 Cost of investment in entity Y………………. …………………………………………… P
15,000
Less: Fair value on December 31, 20x4…………………...............................................
29,000
Increase in fair value on December 31, 20x4………………………………………… P
14,000

21. d – refer to paragraphs PFRSs for SMEs paragraphs 15.10 and 15.11
20x4: P101,000 because recoverable amount – fair value less costs to sell of
P98,000 is less than the cost of P101,000.
20x5: P101,000 because it is less than recoverable amount.
20x6: P86,000 because recoverable amount of P86,000 is less than cost of
P101,000.

22. e – PFRSs for SMEs paragraphs 15.12, 15.14 and 15.15