Reference no: EM132984215
Problem - On January 1, Year 1, Richmonde Corporation acquired 10% of the outstanding voting shares of Pen, Inc. for P900,000. These shares were designated as equity investments at fair value through other comprehensive income.
On January 2, Year 2, Richmonde gained the ability to exercise significant influence over financial and operating policies of Pen by acquiring an additional 20% of Pen's outstanding shares for P2,600,000. The two purchases were made at prices proportionate to the value assigned to Pen's net assets, which equaled their carrying amounts. For the years ended December 31, Year 1 and Year 2, Pen reported the following:
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Year 1
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Year 2
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Dividends paid
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P2,000,000
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P3,000,000
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|
Profit for the year
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6,000,000
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6,500,000
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The fair values of the investments on December 31, Year 1 and December '31, Year 2 were P1,380,000 and P5,100,000, respectively.
REQUIRED -
(a) Prepare journal entries to record the above data.
(b) Determine the investment carrying value at December 31, Year 2.