Reference no: EM132774060

On January 4, 2020, Training Company paid P1,296,000 for 40,000 ordinary shares of Boxing Co. The investment represents a 30% interest in the net assets of Boxing Co. and gave Training the ability to exercise significant influence over Boxing's operating and financial policy decisions. Training Company received dividends of P1 per share on December 4, 2020, and Boxing reported net income of P640,000 for the year ended December 31, 2020. The market value of Boxing's ordinary shares at December 31, 2020 was P32 per share. The book value of Boxing's net assets was P3,200,000.

The following additional information was provided:

• The fair value of Boxing's depreciable assets, with a remaining useful life of 8 years, exceeded their book value by P320,000.
• The remainder of the excess of the cost of the investment over the book value of net assets purchased was attributable to goodwill.

Problem 1. What amount of the investment cost is attributable to goodwill?

Problem 2. What amount of investment revenue should be reported in Training Company's income statement for the year ended December 31, 2020?

Problem 3. What is the carrying amount of the investment in Boxing Co. shares on December 31, 2020?

Problem 4. Assuming that the 40,000 shares represent 10% interest in the net assets of Boxing Co. instead of 30% interest, what amount of investment revenue should be reported in Training's income statement for the year ended December 31, 2020?

Problem 5. What is the carrying amount of the investment in Boxing's ordinary shares at December 31, 2020?