Reference no: EM132756892

On July 1, 2018, Karen Company acquired 25% of the outstanding ordinary shares of Klaire Corporation at a total cost of P7,000,000. The underlying equity of the shares acquired by San Luis was only Php 6,000,000. Klaire Company is willing to pay more than the book value for the following reasons:

1. Klaire Company owned depreciable plant assets (10-year remaining economic life) with a current fair value of P600,000 more than their carrying amount.
2. Klaire Company owned land with current fair value of P3,000,000 more than its carrying amount.
3. There are no other identifiable tangible or intangible assets with fair value in excess of book value. Accordingly, the remaining excess, if any, is to be allocated to goodwill.Klaire earned net income of P5,400,000 evenly over the year ended December 31, 2018. On December 31, Klaire declared and paid a cash dividend of P1,050,000 to ordinary shareholders. Market value of Klaire Company shares at December 31, 2018 is P7,500,000. Both companies close their accounting records on December 31.

Required:

Problem 1: Based on the above and the result of your audit, determine the following:

1. Total amount of goodwill of Klaire Company based on the price paid by Karen Company?
2. Net investment income from Investment in Klaire Company?
3. Carrying amount of investment in Klaire Company as of December 31, 2018