The document details the financial analysis of investments in associates for the years 2011 and 2012, including calculations of net income, unrealized profits, and investment adjustments. It outlines the investor's share of profits and adjustments to carrying amounts based on provided financial data. The summary includes specific figures related to net income calculations, equipment sales, and investment income for both years.

1. CHAPTER 14
INVESTMENT IN
ASSOCIATE
Problem 16-19

2. Requirement 1
Net Income for 2011
2,000,000 Investor’s
Unrealized profit on sale of equipment share in
Sold on 1/1/2011 (800,000-500,000) (300,000) the
Realized profit on equipment sold on
profit of
1/1/2011 (10% x 300,000) 30,000
Adjusted Net Income the
1,730,000 Associate
Investor’s Share (40% x 1,730,000) 692,000
for 2011

3. Requirement 2
Net income for 2012 3,000,000
Realized profit on equipment sold on
1/1/2011 (10% x 300,000) 30,000
Investor’s
Unrealized profit on sale of equipment on
7/1/2012 (900,000 – 500,000) (400,000)
share in
Realized profit on equipment sold on the
7/1/2012 (400,000 / 5 x ½) 40,000
Unrealized profit on ending inventory on profit of
12/31/2012 (2,800,000-2,000,000) (800,000)
Unrealized profit on sale of equipment on the
1/1/2012 (3,000,000-2,500,000) (500,000)
Realized profit on equipment sold on Associate
1/1/2012 (500,000/10) 50,000
Adjusted Net Income 1,420,000 for 2012
Investor’s Share (40% x 1,420,000) 568,000

4. Requirement 3
Investment in Associate 5,000,000
Cash 5,000,000
2011 Equipment 800,000
Cash 800,000
Journ Cash
Investment in Associate
320,000
320,000
al Investment in Associate 800,000
Investment Income 800,000
Investment Income 120,000
Entrie Investment in Associate 120,000
s Investment in Associate
Investment Income
12,000
12,000

5. Requirement 3 (Cont.)
Cash 3,000,000
2012 Sales
Cost of Goods Sold 2,500,000
3,000,000
Inventory 2,500,00
Journ Equipment 900,000
Cash 900,000
al Inventory 2,800,000
Cash 2,800,000
Entrie Cash 400,000
Investment in Associate 400,000
s Investment in Associate 1,200,000

6. Investment Income 680,000
Investment in Associate 680,000
(400,000 + 800,000 + 500,000) x 40%
Cont. To record unrealized profit
Investment in Associate 48,000
Investment Income 48,000
(30,000 + 40,000 + 50,000) x 40%
To record realized profit

7. Requirement 4
Carrying
Amount
of the Carrying amount –January 1, 2012
investme 5,372,000
nt in
associate Share in profit of associate – 2012
on 568,000
Decembe Cash Dividend – 2012 (40% x 1,000,000)
r 31,2012 (400,000)
Carrying Amount – December 31, 2012 5,540,000

8. END
BY: COSEJO, CUPCUPIN, DANIELES,
DE SAGUN & GARCIA