Reference no: EM132975124
Question - E Corporation purchased 50,000 ordinary shares of F Company on January 1, Year at P165.00 per share, which reflected carrying value as of that date. F Company had 200,000 ordinary shares outstanding at the time of purchase. Prior to this purchase, E Corp. had no ownership interest in F. F reported profit of P680,000 in Year 1 and P1,000,000 in Year 2. E received a cash dividend from F of P210,000 on August 1, Year 1 and P240,000 on December 31, Year 2. Because of significant influence acquired by E over F, the investment was accounted for using the equity method. Market values of each share on December 31, Year 1 and December 31, Year 2 were P160 and P175, respectively.
On January 2, Year 3, E sold 20,000 ordinary shares of F for P175 per share. On January 2, Year 3, E exercised its option to measure the remaining securities at fair value through other comprehensive income. F reported profit of P3,720,000 for the year ended December 31, Year 3 and paid E dividends of P120,000. Market value of F shares on December 31, Year 3 was P190 each. As a result of this sale, E lost its ability to exercise significant influence over F.
Required -
(a) Give the entries in the books of E to account for its investments in F during Year 1 through Year 3.
(b) Determine the amount at which the investment will be carried in the statement of financial position on December 31, Year 1, Year 2 and Year.
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